10 January 2024

Understanding Business Finance vs Financial Management

When it comes to finance, two terms are often confused – Business Finance and Financial Management – each of which is key to long-term business success and sustainable growth.

Although on the surface these terms may seem interchangeable, they are quite distinct in terms of the roles they play in the corporate landscape.

On one hand, Financial Management is the strategic handling of a company’s monetary resources designed to bring about business growth. 

On the other hand, Business Finance involves the borrowing and allocation of funds to support business operations.

But there’s a lot more to it than that; the two concepts are heavily intertwined.

In this Business Finance vs Financial Management article, we’ll dive deeper to explore these terms and how a nuanced understanding of each can empower you to enhance your business’ financial health.

What is Financial Management? 

Financial management is an overarching umbrella term that describes how a business strategically handles all of its finances.

It’s not just about one action or another. Financial Management is a holistic approach of principles that a business sets out to define how to deal with a company’s resources. 

Think of Financial Management as a business’ master plan encompassing various elements, covering everything from:

  • funding, 
  • bonuses,
  • bank deposits, 
  • cash balances,
  • pricing strategies,
  • purchasing power, 
  • payment terms, and
  • sales initiatives.

Essentially, any action that involves a company’s finances comes under the term of Financial Management.

It is a standardised way of describing how businesses navigate their financial needs and responsibilities. Every business needs a clear set of Financial Management strategies so that all team members have consistent instructions about how to carry out all accounting and finance functions. Just like you wouldn’t guess your way through your company goals or your marketing campaigns, Financial Management provides business-optimised guidelines to ensure compliance and consistent practice.    

One part of a comprehensive Financial Management strategy is this article’s other term of discussion – Business Finance.

So, let’s take a look at exactly what we mean by that.

What is Business Finance? 

By comparison, Business Finance is one smaller component within the broader term of Financial Management.

Business finance refers to the money an organisation gathers by obtaining a loan, credit or from many other avenues.

Securing Business Finance can play a crucial step for businesses to fund their endeavours, whether it’s expanding operations, investing in new technologies, or weathering economic downturns. Business Finance can also allow companies to navigate cash flow challenges without compromising their long-term growth trajectory. Of course, this all depends on the specific situation, requirements and more.

What’s important here is that the decision to obtain business finance would ideally be made by following the parameters set out by the company’s Finance Management strategy.

Business Finance vs Finance Management

In the end, the best way to distinguish between Business Finance vs Finance Management is to realise that a component of a broader Finance Management strategy may be to seek Business Finance – one comes before the other.

But it’s also important to define different terms within the concept of Business finance.

There are two common types of Business Finance that you likely would have heard of.

Business Finance can be classified into:

  • “Corporate finance” for larger entities dealing with a turnover that exceeds $50 million, and 
  • “Business Finance” for smaller ventures managing revenue below this threshold.

The Importance of distinguishing between Business Finance and Finance Management

Being able to distinguish between Business Finance and Financial Management and act upon this understanding is crucial for businesses seeking long-term sustainable growth.

This is because effective Financial Management is the
backbone of sound decision-making; it ensures that your resources are utilised optimally and that your goals are met.

Without it, businesses may find themselves in dire straits, requiring desperate strategies and reactive measures to resolve their immediate problems. 

Furthermore, considering your Financial Management strategy may necessitate seeking Business Finance, understanding not just what these terms mean but the distinction between them is key to making the most out of your financial strategy.This is where a trusted financial support team becomes invaluable, guiding you through the intricate web of financial decisions and developing strategies that suit your business’s unique circumstances.

Finance Management vs Business Finance: we can help you get clear on both

Our team of finance specialists work with organisations across many industries and of all different sizes.

At Dexterous, we provide an outsourced, customisable finance department solution that works for you. 

We can leverage our financial expertise to guide you toward a Financial Management strategy that gets the most out of your business and helps you reach your goals. If Business Finance is a part of that strategy, we can help with that too.

But that’s not all…

Our expert finance team can manage your entire finance function on your behalf.

At Dexterous, we provide a comprehensive managed finance solution. 

This means that we leverage all the latest business tools, access global talent and manage your company’s finances with the local expertise of our Sydney team.

We also equip you with a strategic approach to Financial Management and Business Finance that will remain viable amidst the challenges of a potential recession.

Reach out to Dexterous and transform your finance department today. For more information, get in touch with us today or connect with us via LinkedIn.