Financial resources (definition and importance)

The financial resources of a company, refer to the money that is available to be spent in cash, credit channels and liquid securities at a given time. Before starting a business, it is necessary to have sufficient financial resources insured so that operations can be carried out efficiently and as many times as necessary.

These resources are obtained through banks or an investor. Small companies mostly find it difficult to acquire bank loans, unlike large companies, which can obtain financing through individual or capital investors and also through equity funds and investment.

Venture capital funds can also invest in companies, although if they are small they require a large amount of requirements such as ownership interest, a fixed rate of return, and your participation in decisions managerial.

In the accounting system, these resources are reflected in the assets that circulate in the balance of the accounts, invoices or promissory notes that are pending payment that can be discounted. Outside of accounting, they are also found in the balances in unavailable lines of credit, which has been a common source to make payments for liquidity needs that arise in a way unforeseen.

Types of financial resources

Financial resources can be classified as follows:

Own resources

These resources are also known as patrimony, they are those that belong to the company completely, among them are:

• Investors: Some companies have the participation of shareholders or partners who provide the capital so that the company can obtain the benefits of the shares.
• Cash: It is all the money that a company contains to be used in various investments.
• Profits and reserves: It is the money that is generated by the commercialization of goods and services.

Foreign resources

They are the resources that do not come from the company's own capital, but are subject to external financing, therefore, they are payments that the company compulsorily contains. These supplements that have the capital of the company are:

• Issuance of securities: These are bonds, public securities and shares, among others.
• Loans from suppliers and creditors: It refers to the financial resource of the products and services that have the liquidity capacity that the company has that is due to a creditor or supplier.
• Bank or private credits: Companies in order to maintain themselves and make new investments, use the credits that provided by the banks and at the same time they are rewarded by making the payment of the interest that the banks establish.

Sources for the financial resources process

These business resources come from different sources, such as the ones shown below:

• The main source is derived from the various basic activities of the organization, which can be traced through the marketing of products or services offered to the market. In this sense, consumers provide a certain amount of money determined by the company in exchange for products or services.
• They are generated by financial loans, in order to find greater liquidity or to face new investments by organizations that resort to bank loans in exchange for a defined interest.
• Governments frequently provide various financial aids to organizations to carry out carry out hiring of personnel, administrative protection and renewal of equipment, among other
• The administration of the financial resources of a bank, involves the organized flow of funds to avoid various situations that are not favorable in the financing of the various productive activities, which check the outflows of the funds that can be financed so that high costs of financing.

Tips to improve the management of financial resources

It is important to monitor the management of resources in general, from sales and invoices to the development of risks and financial costs. To improve such management, the following tips should be taken into account:

• Improve the cash cycle to reduce the time that money lasts unproductively, in the course of payment to suppliers and the collection that must be made to customers.
• Take financial development beyond the accounting sense and create a treasury system that is responsible for monitoring collections and payments.
• Consolidate bank accounts in order to prevent commissions from doubling and thus be able to better control balances.
• Next, analyze the flow of cash, so that any situation that generates a deficiency that prevents properly maintaining the development of operations can be detected in time.
• Use technology profitably to reduce procedures that can eradicate errors, lower costs, and increase treasury system throughput.
• Establish collection procedures for overdue portfolio, so collection can proceed more quickly to customers and the additional costs that arise for the time that elapses until the moment of the pay.
• Make an analysis of the quality of the clients, in order to make the necessary modifications to the sales conditions, depending on the importance and payment compliance.
• Investigate financial options and their conditions before making any type of commitment.

Importance of financial resources

These resources are usually one of the most important within a company, this is because they are one of the means fundamental that lead to make various investments to meet the objectives of the organization.

In the same way, they allow the financing of the company, this means that without the financial resources it is impossible for the organization survives for the sustenance of the same, therefore, thanks to this the good development and growth of the companies.