financialtreat – will explain about The Importance of Fund Management For Your Business! which you will find in the following article. let’s look at this article carefully!
Fund is a collection of money in a certain amount in the form of cash or non-cash. The word fund is commonly used in business to refer to the term money. Funds are also a major component of business analysis. And here you will know how important fund management is.
In a broader sense, funds can also mean venture capital in running a business. For example, in a printing business, the funds included in the group are cash, printing machines, screen printing machines, ink, paper, and glue. Let’s continue to follow fund management reviews for your business.
The Importance of Fund Management For Your Business!
Funds According to the Concept
Bambang Riyanto in his book entitled “Basics of Corporate Expenditure”, describes funds based on three concepts.
Quantitative Concept. Concept based on quantitative embedded funds. The funds referred to in this concept are gross working capital, which is the total of current assets.
Qualitative Concept. Part of current assets that can be used to finance the company without disturbing its liquidity. The funds referred to in this concept are net working capital, which is the excess of current assets over current liabilities.
Functional Concept. This concept states about the function of the funds of a business, where these funds are used to generate profits or profits.
Fund Management
In managing funds for profit or profit can be done in two ways, namely:
Short Term Fund Management. Management of short-term funds is intended to gain profits or profits in a short period of time. For example, the profit per month from a coffee shop business.
Long Term Fund Management. Long-term fund management means that the profit or profit that will be obtained can be taken for a long time. Generally, within a few years. The forms of fixed assets that can be used for long-term use of funds are land, buildings, and machinery.
Of the many ways that are done to develop and advance a business, one of the most influential ways is to do good fund management.
This aims to obtain many benefits, such as obtaining capital funds and assisting in the allocation of business taxes. However, not only that, the purpose of fund management also gives rise to the following benefits.
1. Monitor the use of funds
When funds are managed properly, they can be used effectively. The businessman will know what the funds are used for, how the cash flow of his business is, and the amount of debt and receivables. Therefore, in this case, monitoring the use of funds can produce information on funds that can be used as a benchmark in which direction the business will go.
2. Knowing the profit range in the next period
In the funds report there is a recording flow that shows expenses and income. If fund management is carried out properly, business people will know the range of profits in the next period.
This profit information in the next period can certainly be used to make an allocation and funding plan for the following month. In addition, it can predict sales targets in the next period as well as the required business budget.
3. Means of knowing how optimal the allocation of funds is
The second objective of fund management is to determine whether the allocation of funds is optimal or not. If the allocation of business funds is carried out optimally, the business will develop for the better.
If not, then business performance will decrease little by little. So, with good fund management, business people will know how to manage sales results and profits every month to be more efficient.
4. Assist with tax payments and reporting
The next purpose of fund management is to assist with tax payments and reporting. In practice, reporting and paying taxes is sometimes difficult because of the many regulations and procedures that must be followed. Therefore, the management of funds here aims to strengthen tax reporting to make it easier and more orderly.
5. Help determine the price
Setting prices is sometimes difficult to do, if you don’t have good fund management. Therefore, fund management must be carried out in order to help determine the price. All of this can be obtained from business fund information that contains capital plans, sales targets, profits to the cost of spending on production materials.
6. The main conditions for accepting investment
It is undeniable that the main requirement to receive investment or capital is to do good fund management. To get this capital of course requires more effort.
In addition to having to prepare business administrative requirements, business people must also ensure that the management and condition of business funds are in a healthy condition.
7. Can avoid embezzlement of funds
Lastly, fund management also aims to avoid embezzlement of funds. This is because in the fund information there is a detailed record, so if someone embezzles funds, it will gradually be discovered.
Therefore, fund data must be made in detail, complete with evidence documents such as receipts, notes, invoices, to shopping receipts.
Why is Fund Management Important for Business?
There are several things that make fund management important for a business. Among others are:
Knowing Capital Expenditure
With good fund management you will know when to make an income-generating asset purchase. All consideration of funds for capital expenditures must balance the amount of income that the asset will generate with the amount that it will spend.
If you manage your capital expenditures effectively, you won’t be putting too much pressure on your company by borrowing too much capital for assets that don’t provide enough income.
Managing Operational Cash
By managing your cash flow well, you will always have enough cash to pay for rent, utilities, telephone, insurance, payroll and supplies. For that, you have to look ahead and see when the age of the business receivable is due and compare it to the due date of the bills owed.
You can manage cash flow by shortening the amount of time you give customers to pay and renegotiating due dates with vendors. If you fail to manage cash flow effectively, you may not be able to pay your costs and keep your company operating.
Definition and function of fund management
Lower Cost
One of the responsibilities of fund management is to keep costs as low as possible. You can ask vendors for lower prices, reduce the number of employees, reduce electricity usage, or buy supplies in bulk.
If you don’t monitor and manage costs, your company must always increase sales dramatically to pay for the increased costs.
Help with Tax Planning
Fund management tasks include planning for taxes. This tax planning process can certainly help companies in making tax estimates so that you can allocate more funds to make tax payments obligations.
With the funds that have been allocated properly, the company can pay taxes on time so as to avoid delays that can cause more funds to be released for payment of tax penalties or sanctions.
Good fund management will help with good business fund planning. The company can also run smoothly because of good fund management.
Main Activities of Corporate Fund Management
Fund management has several main activities for a business, as follows:
Getting Company Funds
Obtaining company funds is an activity that aims to obtain a source of funds for the company. Whether it comes from internal company or from external company.
There are two sources of company funds, namely equity and debt. The two sources of funding are as follows:
Equity Funding (Own Capital)
Finally One source of funds from within the company is individual savings, friends and or relatives, other individual investors, large companies, venture capital companies and share sales.
This can also be said as internal company funds, namely funds that originate or are met from within the company. For example, retained earnings, namely the company’s net profit that was successfully obtained and reused to finance the needs or a main activity of the company’s fund management.
Read more financial management:
Funding from Debt (Loans)
The company’s own sources of funds can be obtained from friends or relatives, other individual investors, suppliers of raw materials, lenders in the form of assets, commercial banks, programs supported by the government, non-governmental organizations, large corporations and corporations. venture capital.
It is also referred to as the company’s external funds, i.e. funds that come from parties outside the company.
That’s an explanation of fund management. So I Hope this info provides additional insight, especially for those of you novice businessmen who want to start managing funds. And Good luck and good luck!