Finance is generally the key requirement in almost all the human kind activities. It is because of the fact that money is the kernel of almost every activity across the world that finance has been developed. Finance is generally wider term that means differently to different people. The first description of finance according to most of the business organizations and entrepreneurs is the general capital of a business as well as the various investments that the business has.
According to most of the banks or various accounting departments, finance simply means liquid cash or funds. By talking about money being finance, a large number of financial analysts have come forward to prove that finance is more about financial management. Financial management control simply means the various techniques that a finance manager especially in different business organizations uses to make sure that all the financial resources are properly controlled or managed and allocated in various business activities for the purposes of meeting all the current, daily and future needs of the business in orderly and maximally manner.
There are however two major approaches that can be used to finance any type of a business despite of its financial needs. The most common business financing approaches are discussed below. One major approach of financing your business is the traditional business financing approach.
In this business financing approach, the finance manager will generally raise funds and leave the funds to other business owners for investment purposes. In this case therefore , the finance manager even after helping to raise funds in the business is not allowed to participate in any kind of decision making regarding to where the funds are to be allocated. Traditional business financing approach is therefore favorable for most sole trades as well as for partnership trades.
Modern business financing approach is the other common method of financing your business. In this case, different factors in the business are properly analyzed before raising funds or even using the funds raised. Cost of finance, return of finance, rate of inflation in the economy as well as risks of investment ventures are some of the most common business conditions that are analyzed before raising and using finance by the business.
Modern business financing approach is different from traditional business approach since in the modern approach the finance manager will both be involved in raising of funds and in the financial decision making to know where, when and how the funds are to be invested. The financial manager’s decisions and actions here are also guided by the principles of the financial procedures.