Wikipedia of Finance - e-learning course on Startup and Business Wikipedia Chapter - What is Business Management? Definition, Effects, Principles and Fundamentals of Business Process Management

What is Business Management? Definition, Principles, Fundamentals and its Effects


Company management is the organisation and coordination of corporate operations. Business owners oversee daily operations and encourage employees to produce as much as they can. A business manager may oversee or train new employees in addition to assisting a company in achieving its operational and financial objectives.

Managers and directors of an organisation have the authority and responsibility to direct operations and make decisions. Management can take many different forms, ranging from a single manager in a single organization to thousands of managers in numerous countries. In larger organizations, the chief executive officer, or CEO, is in charge of enforcing the rules that the board of directors established.

Business Management Definition

Business management is to use all known management tools and combining them in order to obtain the expected results for the achievement of all the goals that are imposed at the beginning of a particular business.

While it does not differ too much from what is perhaps the business, business management may be a little more complex to develop, and this is mainly due to a particular business does not have all the resources that company do have. Anyway, we must bear in mind that today, the success of the business management depends on purely and exclusively on accounting and financial information concerning the same. Since having a medium that ensures proper access to it is key members to take all decisions necessary to guide the management of business along the path that will take it to the achievement of different goals.

As stated above, carry out proper business management requires certain resources similar to those used in the management of companies. But, without a doubt, the most important of these is a system that allows you to manage the information required for a business to be able to carry out the management of the same.

On the other side it is significant that we accept in mind that the new dynamic that has the management of business, makes us a proposal about the need of considering information as an essential management tool, which leads us to the reasoning that the key to the success of a particular business is simply to use information systems that facilitate the management of information associated with the economic and financial movements of the business in issue.

Foreign business means that susceptible lawfully be made by the manager who is aware that is not their own. Which manages a foreign matter believing itself; it does not make business management. The management may consist of compliance of a legal act that can be done in two ways: When the manager is acting in its own name with the intention of benefiting the owner or when the manager is acting on behalf of the business owner.

Fundamentals of Business Process Management

  • The principle of human solidarity: It allows legal cooperation between people, even through it is not authorized.
  • Not Intervene in business or affairs of others: Business management is an exception to the principle of non-intervention in the affairs of others under the principle of human solidarity.

Conditions Required for Manager

Here are some of the important conditions or requirements for the person who is at the management role:

  • Who is unable to accept a mandate he is unable to oblige as business manager.
  • Management must be intentional; the manager must know that business is not your property.
  • Management should not prevent a legal mandate or application of the business owner.
  • The business should not be taken against the express will of the business owner.

Conditions Required for Business Owners

Here are some of the conditions or requirements for the person who is acting as a business owner:

  • There should be given consent, otherwise, you are in the presence of a contract of the mandate.
  • The business owner should not be opposed to the act of management.
  • It is not necessary to be able because not involved in management.

Obligations / Effects of Bad Business Management

Obligating Business Manager duties: Obligations of the administrator against third parties are born when the Manager acts in his own name. Being bound with respect to third parties with regards to the obligations arising from its management. If the Manager acting on behalf of the owner is not contractually obligated, against whom the third parties have a direct action.

Manager Obligations against the Owner: The manager is required to continue the management and carry it out until the owner is in a active state and must be subject to all the consequences of the same business.

Obligations of the Owner against Third Parties: The owner is obliged to fulfil its obligations to third parties contracted by the manager on his behalf, provided that he/she had done so without the prohibition of the owner unless the owner prohibition is contrary to law and public order or morality.

Owner Obligations against the Manager: The owner must indemnify the manager obligations contracted in connection with the management. The business owner must make a refund to the operator of the expenses that has been made in connection with the management. Including interest from and the day the manager made any such expenses.

Situations in which the Manager Terminated this Obligation:

  • When the owner takes care of your business.
  • When the owner dies.
  • When the heir of the owner takes the conduct of their business.

Basic Principles of Business Management and Organization

Even if the creator or transferee of business is not an expert in business management, should respect several rules of management essential to avoid placing the company in complicated situations. Here are the important principles of business management.

Management of Stocks

Wiki Finance pedia - e-learning course on Startup and Business Wikipedia Chapter - What is Business Management? Definition, Conditions or Requirement for management, Effects of bad Management

A company must operate with a level of optimal stock to prevent several difficulties. Having a low stock may cause inventory shortages which can have dramatic consequences for a company. 

On the contrary, too much stock entails additional costs for the company, shifts in cash and greater risk of loss in case of perishable products or old-fashioned products. 

Without experience in the field of activity exercised, the optimal stock is a difficult parameter to evaluate at the start of the business.

Knowledge of Costing

Knowledge of the cost of each of the main products and services, as well as its composition, is essential for the good management of the company. This knowledge is indispensable to work improving margins and profitability of the company. To secure consistent selling prices and to avoid taking bad decisions. Costing is an essential indicator for proper management of the company.

Limitation of Fixed Costs

At the launch of the activity, the situation of a company is often very fragile and it is usually only after a few years that one manages to get a solid foundation. Should, therefore, minimize fixed costs when starting the business and focus on variable costs (there are expenditures when there is an activity). If the company knows a hollow of activity, effort fear is performed more easily in the level of expenditure.

Management of Accounts Receivable

Accounts receivable tracking is important for a company, you have to be careful of the billing process until the recovery of receivables. Here are two important tips at the level of the follow-up of accounts receivable:

Charge the Customer as Soon as Possible

The invoice must be addressed to the customer as quickly as possible. At the latest with the delivery of the goods or on the basis of the performed delivery. A few days or weeks earned will have an immediate impact on the company’s cash flow. More customer is charged early, more maturity arrives quickly. The establishment of a deposit to the command is also positive for the company’s cash flow.

Establish Effective Monitoring of Client Payments

Once an overrun of maturity is established, the client must be restarted and should contact him to inform him of the situation in order to obtain an explanation (it can be a simple oversight). In the absence of responses to several reminders, notice to a client for payment must be sent and then use any more binding means: an injunction to pay, payment summons, etc.

Management of Supplier Relations

In most cases, your business will necessarily have to deal with suppliers in order to exercise its activity. The supplier then becomes an indispensable partner in carrying out the activity. Here are two important tips at the level of relations with suppliers:

Diversify the Sources of Supply

Indeed, you can shoot several advantages to your suppliers in competition. If required in order to obtain better offers in terms of delay in delivery, terms of settlement of purchase price unit or quality for example.

Monitor the Situation of Suppliers

A supplier is one business like any other which may encounter difficulties at any time. The company must be held informed of the situation of its suppliers in order to anticipate possible risks or sudden break which may be harmful to the business.

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