THE RELEVANCE OF FINANCIAL MANAGEMENT TO BUSINESS GROWTH
INTRODUCTION
The financial function has always been important in business
management. Irrespective of differences in structure, ownership and
size, the financial organization of the enterprise ought to be capable
of ensuring that the various finance functions: budgeting and
controlling are carried out with the highest degree of efficiency. The
profitability of any business depends largely upon the manner the
financial functions are performed and related to other business
function.
During the developing stage, financial management involves only
the obtaining of funds to finance the business, overtime, financial
function has increased in its scope to include not only the planning of
finance, but incorporate the management and control of the available
resources within the firm. This also involves the external generation,
flow and uses of funds and, the study and evaluation of the capital
market.
When talking of the capital market, its operations within the
economy cannot be over emphasized. Thus, the demand for and supply of
funds for business organizations, become a fundamental management
function. Therefore, financial management play an important role both
in increasing operational efficiency within the firm and allocating
funds to productive or investable sector within and outside the
organization.
These functions can only be achieved when there is proper planning
and controlling, coordinating and other elements of management
combined effectively with the finance function.
1.2 Historical Background
Jomfol Investment Company Nigeria limited was incorporated in
1989. The main business of the company as contained in the memorandum
and Articles of association amongst others is to carry on business as
farmers, farm developers Livestock and poultry business, fisheries
hatchery, producers and process or grains and all manners of crops,
manufacturer of Livestock feed and concentrates etc.
The nature of the business activities includes; - manufacture,
distribution and sales of poultry feeds and poultry raw materials and
other related activities.
The raw materials concerns in the providing these activities
includes; maize, soya beans, Soya cake, groundnut beans, and cake,
wheat brain, maize brain, sorghum, palm kernel cake, spent grain, Bone
meal, Fish meal, cottonseed cake, methionine, lysine, premixes, salt
etc.
Finance has a big impact on business growth, as such, balance is
important. Finance is one of the most important functions of any
business. Not only is finance a good indicator of the health of the
company overall, but it also holds an important role in managing
business growth.
Weather growth is attributable to a larger market capitalization,
and increase employee, a new location, a new product or service
offering, or a new demographic, finance is the enable of such
opportunities. Business success is about growth. There are still growth
opportunities in emerging markets and in the changing advantage of
these opportunities is a key goal of the whole management team,
including most importantly the financial managers and their teams.
Almost every organization requires professional financial
management, and this increasing need will prompt a steady growth in
demand for financial management graduates. From Chief Financial Officer
(CFO) to each controller, there are a wide range of career choices
available.
Effective financial management is critical for efficient business
operations, so well trained, experienced financial managers with a
strong grasp of the operations of all departments within their
organization are value for promotion to top management positions.
1.2 Objective of the Essay
- This essay attempts to provide an orderly framework for financial appraisal in small business management.
- It is aimed at inquiring on how Government has contributed to the progress of business activities.
- Inquire the possible causes of uncontrolled cash and
management of resources, the techniques methods of evaluation and
performance of financial policies, method being used in business
organizations.
1.3 Statement of Problem
Financial management is a feature, which govern the whole process
of organizational management. Emphasis is often on planning and control
used within an organisation to strengthen area of potential weakness or
to capitalize on more effective opportunity for the business. The
purpose of undertaking this study is to identify the important role
financial management practice can help in managing an organisation to
greater height.
All organisations, be it public or private need financing to
attain better positions. Hence, the problems of financing all business
may include: High Cost of capital. Since the acquisition of capital by
small business usually attract high financial interest rates these
exposes them to risk and the unsatisfactory profits is another
phenomenon which hinder small business from paying back.
Deficiencies in financial management are another problem
encountered by small business as managers or owners lack experience in
financial management. Only posses pool of expertise in production and
sales. Also is the weakness in financial planning as they are always
busy directing operations and satisfying customers having no time to
keep adequate data to facilitate financial projections.
Other problem includes the inability of small business to save,
plough back and obtains loans due to Nigeria factors and no collateral
securities.
1.4 Significance of Essay
A very good view at the appraisal of financing to small business
organization in previous times, has show that managers within an
organisation were more concerned with one matter or the other, and their
environmental forces at different periods.
It is significant to know that in management financial, it
requires the knowledge of certain functions which include: - Financial
and Management Accounting, Law, Economics, Quantitative methods (like
Mathematics and Statistics and Taxation). They are not part of Financial
Management but support it in that, they provide useful information or
give an understanding of the constraints within which the activity of
the financial management takes place.
The specific functions of financial management are to ensure that funds are:
- Made available at the right time,
- Made available for the right length of time,
- Obtained at the lowest cost and
- Used in the most effective way.
The consequences of bad financial management can be very serious, if the above functions are not met at times.
In order to ensure that there is good financial management, we
must develop sensible objectives, useful concepts, techniques for
analyzing situations and principles for the guidance of action. The
research will assist the management of the organization and provide a
clear defined target output for each department.
Finally, this project will broaden the research knowledge of the
topic and will serve as a platform for further development in these
area of study.
To this end the research will be significant to management of small business for the following purpose:
- Formulating the policies of the organization.
- Planning the activities of the organization in long term medium and short –term planning
- Controlling the activities of the organization.
- Decision making.
1.5 Scope of the Study
The scope of the study is limited to Jomfol investment company
Nigeria Limited. Being a private organization (i.e. small scale
business) that is funded by its sales revenue and other sources of
fund. It is also on how to bring about business growth in Nigeria via
appropriate financial planning and control.
1.6 Delimitation of Study
This essay is to examine the relevance of financial management to
business growth, particularly financial management of an organization
whether the organization is either a small firm or large organization,
it has various sections such as cash office, salaries and wages,
purchase and creditors, all financial activities are taken. However, the
areas covered in the essay summarized for easy reading and
understanding:
- Sources of finance
- Issue of financing the firm
- Objective and significance of financing
- Financial decision making (stages and process)
- Cash control and management of organization in Nigeria.
Limitation of Study
In the course of carrying out this research work, the researcher
encountered the following obstacles to which makes his work limited to
the areas covered.
- Time Constraint: Time assigned to
write and complete this essay is relatively small for the research to
broaden and cover the topic “the relevance of financial management to
business growth”.
- Financial Problem: The researcher of
this work is a self-sponsored student, hence, creating a great sense of
incapability for the researcher to transport himself to the places
where material can be collected, payment for browsing time and getting
valuable books on loan.
- Reluctance of the organization to release data, fact and
figures which could accompany the researchers to a successful
completion of the research work without leaving any part uncovered.
1.7 Definition of Terms
Business Firm: An organization engaged in the production of goods or services.
Budget: A statement of plans and expected results expressed in financial and quantitative terms.
Capital: money used to start a business or to produce more wealth.
Credit: The ability or right to buy in return for a later payment
Control: Correcting diverts to meet with actual plan.
Debt Capital: Borrowing or loan, capital invested in the business that must be repaid.
Depreciation: Allocation of cost of an asset which will be used over the asset service life.
Fixed Capital: Long term capital invested in the business
Forecast: An estimate of the form’s future sales or the probability of occurrence of future business.
Financial Institutions – Are business organisation that lend money.