Business Functions are a set of rules, operation and process or operation that is performed routinely to carry out a part of the mission of an organization. It also defined as any set of activities performed by the department that is initiated by an event, transform information, materials or business commitments, and procedures an output.
Important Business Functions
- Purchase Functions: In this function, the finance manager plays a key role in providing finance. In order to minimize cost and exercise maximum control, various material management techniques such as economic order quantity (EOQ), determination of stock level, perpetual inventory system, etc. are applied. The task of the finance manager is to arrange the availability of cash when the bills for purchase become due.
- Marketing Functions: The marketing function of a business concern with promoting goods and services and ensuring the availability of the customers for the business. Making the organization’s goods and services well-known in the target market as well as meeting the required standard of the target market is another role of the marketing function. Also, the marketing function has to come up with a strategy to increases the awareness of the organization’s product to the community such as promoting the products during community events, advertising the products using advertising media, printing
- Distribution Function: As goods produced are meant for sale, the distribution function is an important business activity. It is more important because it provides a continuous inflow of cash to meet the outflow thereof. So while choosing different distributing channels, media of advertisement, and sales promotion devices, the cost-benefit criterion should be the guiding factor. If cost reduction in distribution function is effected without compromising efficiency, it will lead to an increased benefit to the enterprise in the form of higher profit and the consumers in the form of lower cost.
- Accounting Function: All the accounting tools and control devices, necessary for the appraisal of fiscal policy can be correctly formulated if the accounting data are properly recorded. For example, the cost of raising funds, expected returns on the investment of such funds, liquidity position, forecasting of sales, etc. can be effectively carried out if the financial data so recorded are reliable. Hence, the relationship between accounting and finance is intimate and the finance manager has to depend heavily on the accuracy of the accounting data.
- Personnel Function: A sound personnel policy includes proper wage structure, incentives schemes, promotional opportunities, human resource development, and other fringe benefits provided to the employees. All these matters affect finance. But the finance manager should know that organization can afford to pay only what it can bear. It means that expenditure incurred on personnel management and the expected return on such investment through labor productivity should be considered in framing a sound personnel policy. Therefore, the relation between the finance and personnel department should be intimate.
- Financial Management and Economics: Financial management draws heavily on Economics for its theoretical concepts. The development of the theory of finance began as an offshoot of the study of economics. A finance manager has to be familiar with the two areas of economics, i.e. microeconomics and macroeconomics. It deals with the economic decisions of individuals and firms, whereas macroeconomics looks at the economy as a whole in which a particular business unit is operating.