Finance is generally the key requirement in almost all the human kind activities. It is hence because of the high money requirement for various activities in the world that there has been finance. 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.
The second description of finance which is the most popular definition according to various accounting entities or banks is that finance is just money. 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. Traditional business financing approach is the first common method of financing your entire business.
In this business financing approach, the finance manager will generally raise funds and leave the funds to other business owners for investment purposes. This therefore means that the finance manager is used as a tool to raise funds in the business but will not participate in the decision making regarding to where these finances should be allocated or invested. Traditional business financing approach is therefore favorable for most sole trades as well as for partnership trades.
The second business financing approach is the modern business financing approach. It is in this case that the finance manager is required to keenly analyze different factors and business conditions before raising the business funds or even before using the funds. In the modern business finance approach that finance manager is required to keenly evaluate the cost of finance, return of finance, rate of inflation in the economy as well as risks of investment ventures.
Here, the finance manager is involved in the raising of funds as well as in deciding on where, when and how the funds are to be invested. Any kind of a decision that the finance manager makes or even the action he or she takes is guided by the financial principle procedures.