What are the Functions of Business?

Functions of Business

There are several Functions of Business to run successfully and gain more profits. So here we discuss important

Functions of Business.

1. Purchase Function

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.

2. Productivity Function

Production function involves heavy investment in fixed assets and in working capital. Naturally, a tighter control by the finance manager on the investment in productive assets becomes necessary. It must be seen that there is neither over-capitalisation nor under-capitalisation. Cost-benefit criteria should be the prime guide in allocating funds and therefore finance and production manager should work in unison.Functions-of-Business

3. Distribution Function

As goods produced are meant for sale, distribution function is an important business activity. It is more important because it provides 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 increased benefit to the enterprise in the form of higher profit and to the consumers in the form of lower cost.

As every aspect of distributory function involves cash outflow and every distributing activity is aimed at bringing about inflow of cash, both the functions are closely inter-related and hence should be carried out in close unison.

4. Accounting Function

All the accounting tools and control devices, necessary for appraisal of finance 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.

5. Personnel Function

A sound personnel policy includes proper wage structure, incentives schemes, promotional opportunity, human resource development and other fringe benefits provided to the employees. All these matters affect finance. But the finance manager should know that organisation 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 labour productivity should be considered in framing a sound personnel policy. Therefore, the relation between the finance and personnel department should be intimate.

6. Research and Development

In the world of innovations and competitiveness, expenditure on research and development is a productive investment and R and D itself is an aid to survival and growth of the firm. Unless there is a constant endeavour for improvement and sophistication of an existing product and introduction of newer varieties, the firm is bound to be gradually out marketed and out of existence.

On the other hand, heavily cutting down expenditure of R and D blocks the scope of improvement and diversification of the product. So, there must be a balance between the amount necessary for continuing R and D work and the funds available for such a purpose. Usually, this balance is struck out by joining efforts of finance manager and the person at the helm of R & D.