The question may appear as – What are Finance Functions? Explain them.
The important functions to which finance is closely related are as given below
:
1) Design Function
2) Supply Function
3) Production Function
4) Distribution Function
5) Personnel Function
All of which are elaborately explained in the following paragraphs.
1. Design Function
It is incorrect to say that the perfection of a design depends upon commercial success. Though commercial success has a definite place in the design function, it is important to understand that, irrespective of commercial success is short-circuited. Materials must be used economically and, in doing so, a complex costing procedure may be involved. Research, development and other exploratory work must be undertaken for projects. Similarly, detailed technical work is an essential pre-requisite for the execution of projects. It is well known that Research and Development personnel work in total ignorance of financial situation.
2. Supply Function
Though supply is an essential requirement of the material function, it is important to study the procurement cost to the organisation. The supply function no doubt ensures a smooth flow of goods through the manufacturing and marketing divisions; but, at the same time, one cannot lose sight of the fact that the cost of buying must be minimised. Administrative costs must be kept down. From this point of view the latest inventory control techniques, such as the Economic Order Quantity (EOQ) are employed with the basic idea of bringing expenditure under control. In other words, there are materials management techniques intended primarily to secure effective cost reduction and control.
3. Production Function
The production function reigns supreme in any business enterprise. The reason is that on production depends the gross revenue of the enterprise and marketing, and selling and other activities are supporting activities. If the production function is given free hand and allowed to work in isolation, the situation that may arise may well be disastrous. Costly plant and machinery and other fixed assets will be dumped upon the business enterprise, which it can ill afford to pay for. The latest Production Planning and Control techniques (PPC) must be used provided, of course, that they are within financial constraints. It is in the production function that a greater part of capital input is invested in the form of plant and machinery; for the same reason therefore, there has to be a tight financial control over the production function.
4. Distribution Function
The distribution function is an important function of marketing management. Decisions on the use of physical channels or distribution of the product are significant, for these decisions determine the efficiency or otherwise of an organisation. However, it should be remembered that no decisions pertaining to distribution function can be taken inadvertently. They will have to take into account the various methods of sales promotion, different credit policies, various modes of advertising, etc. It should be borne in mind that each aspect of the distribution function has a direct bearing on finance, and that, taking into consideration this fundamental fact; it must be backed by finance.
5. Personnel Function
It has recently engaged the attention of not only behavioral scientists but also practical managers. The latter has realized that no business enterprise can function without the support of its personnel. Henry Ford volunteered his property to be confiscated, but desired his men to stay back, as he was confident that he would generate many times the confiscated wealth in few years with the help of his men. Henry Ford’s confidence in his men was justified, for even practical managers have started firmly believing that, ultimately, everything boils down to men. The morale of the people must be kept high if the organisation wants to be successful.
The important functions to which finance is closely related are as given below
:
1) Design Function
2) Supply Function
3) Production Function
4) Distribution Function
5) Personnel Function
All of which are elaborately explained in the following paragraphs.
1. Design Function
It is incorrect to say that the perfection of a design depends upon commercial success. Though commercial success has a definite place in the design function, it is important to understand that, irrespective of commercial success is short-circuited. Materials must be used economically and, in doing so, a complex costing procedure may be involved. Research, development and other exploratory work must be undertaken for projects. Similarly, detailed technical work is an essential pre-requisite for the execution of projects. It is well known that Research and Development personnel work in total ignorance of financial situation.
2. Supply Function
Though supply is an essential requirement of the material function, it is important to study the procurement cost to the organisation. The supply function no doubt ensures a smooth flow of goods through the manufacturing and marketing divisions; but, at the same time, one cannot lose sight of the fact that the cost of buying must be minimised. Administrative costs must be kept down. From this point of view the latest inventory control techniques, such as the Economic Order Quantity (EOQ) are employed with the basic idea of bringing expenditure under control. In other words, there are materials management techniques intended primarily to secure effective cost reduction and control.
3. Production Function
The production function reigns supreme in any business enterprise. The reason is that on production depends the gross revenue of the enterprise and marketing, and selling and other activities are supporting activities. If the production function is given free hand and allowed to work in isolation, the situation that may arise may well be disastrous. Costly plant and machinery and other fixed assets will be dumped upon the business enterprise, which it can ill afford to pay for. The latest Production Planning and Control techniques (PPC) must be used provided, of course, that they are within financial constraints. It is in the production function that a greater part of capital input is invested in the form of plant and machinery; for the same reason therefore, there has to be a tight financial control over the production function.
4. Distribution Function
The distribution function is an important function of marketing management. Decisions on the use of physical channels or distribution of the product are significant, for these decisions determine the efficiency or otherwise of an organisation. However, it should be remembered that no decisions pertaining to distribution function can be taken inadvertently. They will have to take into account the various methods of sales promotion, different credit policies, various modes of advertising, etc. It should be borne in mind that each aspect of the distribution function has a direct bearing on finance, and that, taking into consideration this fundamental fact; it must be backed by finance.
5. Personnel Function
It has recently engaged the attention of not only behavioral scientists but also practical managers. The latter has realized that no business enterprise can function without the support of its personnel. Henry Ford volunteered his property to be confiscated, but desired his men to stay back, as he was confident that he would generate many times the confiscated wealth in few years with the help of his men. Henry Ford’s confidence in his men was justified, for even practical managers have started firmly believing that, ultimately, everything boils down to men. The morale of the people must be kept high if the organisation wants to be successful.
0 comments:
Post a Comment
Please give your comments in order to make the site better.