How Do Big Businesses Deal With Their Finances?

If you’re a small business, then you already know that money management is key. Whether you sell goods or services, the ultimate bottom line is that you need to make a profit in order to continue to run. You will also know that in the first year, this is the hardest to make profit, and generally breaking even is the indicator of success for a start-up. However, this is totally different when it comes to big business, and how they manage their finances and cashflow. Money management is crucial in both small and large businesses, but the way they carry this out is often very different.

What Is A Large Business?

Within the Companies Act 2006, a large business is defined as a business with over 250 employees, and large businesses are often separated in terms of ownership and management. Large businesses will also have an established trading history, and potentially even some public visibility. They will operate in relatively stable markets. Whether a large business is owned by family or, in the more likely case, by a separate owner the financial structure will be similar.

Financial Structure

Often, a large business will have professionals managing their financial structure, while external professional advisers may review this structure in order to help the business to adapt to their new needs. Financing requirements may cover the management of short-term cash flow, and the structure of short term and long term debt. These professionals will deal with renewing expiring finance facilities, adjusting the structure between debt and equity and financing major equipment.

Finance Options For Large Businesses

If a large business offers tangible goods and services, then they are ideally suited to cashflow finance or invoice factoring. This is commonly used by businesses with high levels of tied up capital, but also used for growing businesses seeking to manage their working capital more. In addition to this, there is hire purchase or leasing, which is common in industries where expensive machinery is required. A finance professional within the business is likely to deal with this type of equipment and renewing any leases that are expiring.

On top of this, there are a range of bank loans and overdrafts which will also be managed by the in-house team with advice from external professional advisors. Bank loans are frequently used for larger, long-term purchases, and are a quick and straightforward way to secure funding. Overdrafts on the other hand are used to ease pressures on capital, but are generally a backup for unexpected payouts.

Stock Market Listing

One of the biggest things that a large company will consider is through a stock market listing. Not only can this raise capital and growth objectives, but it is also a way of attracting private investors into a business. While some people compare financial spread betting to investing in the stock market, the importance of investors when it comes to large business finances puts a new focus on the growth of a business and how it is likely to succeed in the future.