When it comes to running a company, you need to have a solid understanding of the key functional areas involved. Every healthy organization operates like a living organism and there are functional areas which ensure that it achieves all its objectives.
These key functions encompass a range of areas affecting things like employee training, the acquisition process, company size, management styles, marketing strategies, customer service, employee relations, supply chain management, company policies, distribution channels, effective project management, organizational structure, production planning and much more.
Whether you are a new entrepreneur or have been running a business for quite some time now, it is crucial that you know these 7 functional areas of business. To provide you with insight into the core of your organization, we’re presenting this informative piece. We’re confident it will help you better understand the underlying processes that keep your business growing.
1. Strategy
One of the most important functional areas of a business is strategy. Every organization needs to have a clear strategy in order to ensure that it moves in the right direction. Top management teams spend a great deal of time working on the development of a strategy that makes sense for their market. It is normally headed by the CEO or COO. Then, corporate policies are created and conveyed to all staff members through in-depth training and follow up, and through company communications and initiatives. These policies dictate just about everything, such as paying rent, handling business licenses, ordering office supplies, marketing, and even recruitment.
No matter the size of your business, there is great need to develop a strategy that takes all major areas of your business into account. It can best be described as a clear set of goals, actions, and plans that outline how an organization aims to compete in a specific market. In fact, entrepreneurs need to present a strategy to creditors so they can get the funding they need. It is impossible to run a business without a proper strategy.
Your strategy needs to be evaluated from time to time to ensure that everything is going according to plan, as much as anyone can ensure that in a complex world. A good strategy allows you to follow a path while remaining adaptive and agile enough to navigate changes, market fluctuations, shifting demand, and unforeseen events.
2. Finance
Another integral functional area of a business is finance. It is impossible to run a company without funds and preferably, good money management. Organizations need to have some form of financing. You must monitor cash flow and strategize so that you use your resources wisely. This functional area requires a great deal of time and focus.
To get your finances in order, you must have a dedicated account and finance department, or just as good, an experienced bookkeeping service provider. It is essential for maintaining books and accounts. You need to be on top of all accounting tasks to avoid issues down the road. If you want to prevent a situation where you are unable to pay bills, where you miss taxes, or default on loans, you must take your finances seriously and put together the support and resources necessary to this function.
3. Marketing and Sales
Regardless of which product or service you provide, you have to generate demand if you want to increase sales. In order to do so, you have to get the word out about your offerings. This is where marketing and sales come into place. They go hand in hand and allow you to maximize your earning potential. It is in your best interest to create a dedicated staff for handling client communication, including complaints and feedback.
Through marketing functions, you get to provide the best customer experience and keep everyone coming back for more. The marketing department works with other departments to achieve its objectives, using the latest technologies, social and digital marketing practices, savvy advertising practices, and substantial analysis.
Generally, marketing and sales are combined as one informs the other. The marketing department manages brands, develops company messaging, creates the look, feel, and voice of your brand(s), establishes communication pathways across several channels, and works to not only build, but keep customers for the long haul.
On the other hand, the sales department will focus on selling your products or services. This involves different levels of sales, sales management, and sales and customer support. Both marketing and sales personnel will allow you to keep up with the latest market trends and practices.
4. Production and Operations
The production and operations department oversees the production of goods or services. Regardless of what you sell to your target audience, you must have a functional department that is responsible for production.
For instance, if you offer physical products, the production department would handle the manufacture of these goods and ensure quality standards throughout. As for businesses that offer a service, there will need to be a person or team responsible for managing operations on several levels.
Also, the production department has to manage inventory and place supply orders before inventory runs out. No matter how complex it might be to run an organization, the production and operations department will work to increase efficiency and productivity levels. Your team will monitor equipment and perform the necessary repairs. In order to look after production, you need to train existing staff and hire new workers to keep your manufacturing system working.
5. Research and Development (R&D)
Businesses cannot expect to continue developing and growing without research and development. It provides vital information and insight, enabling you to make improvements to existing products or services and come up with new offerings. In fact, research also helps reduce costs and increases efficiency. Research and Development requires a solid investment of time and money, but it’s worth it. Organizations that take R&D seriously, adapt quickly, innovate continually, and meet their customers’ needs.
As the world of business continues to get more competitive, you simply cannot overlook research. You have to find new ways to do things and come up with things that no other company offers or offers quite like you. There is a lot that goes into research. You have to look beyond your current boundaries and take advantage of new technologies and creative thinking. This will ensure you overcome current limitations, meet business goals, and continue to grow as markets and consumer habits change.
6. Employment and Human Resources
If you want your organization to be successful, you need to recruit the right people and ensure they stick around. This is where the employment and human resources department comes into focus. Unless you’re running the entire organization on your own, you require dedicated staff to manage, equip, and enable your people to have the support system they need to remain successful.
A dedicated human resources department will ensure everyone works toward the desired outcome. It will structure company policies as well as maintain consistency so that communications are clear and every staff member is treated equally. Human resources helps manage the application process, organizes personnel files, deals with employee concerns, and works to improve communication between individuals and between departments.
7. Insurance and Risk Management
Lastly, insurance and risk management are key functional areas that business owners must never overlook. Every company faces risks and has to focus on safeguarding itself from financial losses. There are various factors to keep in mind, such as accidents, theft, natural disasters, cybersecurity threats, various liabilities related to materials, production, and facilities, along with the safety and function of your products or viability and consistency of your services.
Insurance is vital, as it can help minimize financial losses caused by these threats. The insurance and risk management department will strive to protect your business from significant financial risks. They will pursue the best insurance plans to shield your main vulnerabilities. Also, it will prepare the company for difficult situations with training and information to help individuals refine their choices, behaviors, and habits to minimize risk to themselves and the organization. Is arguably one of the most important departments in your business.
Conclusion
Every key function of your organization holds secrets to maximizing the quality of your business activity, achieving your goals, meeting your business plans, and keeping all departments in top form. It is imperative you understand the differences between departments and that you equip and develop each function so that every pillar in your business remains a strong part of your foundation.
Success takes firm ground to build on. It also takes creativity and an agile approach. Investing in each functional area of your organization will keep you right where you need to be to meet every challenge.
Sound Accounts helps business owners make better decisions and achieve more with excellent bookkeeping management, uniquely tailored for each organization. Connect with us today to discover the difference Sound Accounts can make in your business, and find out how to qualify for 6 months of free QuickBooks.
For more information on the functional areas of business, check out our frequently asked questions below.
FAQ
What is a functional area of business?
In the simplest terms, a functional area of a business is a key department that every organization needs and can’t operate without. Some examples include finance, marketing, R&D, and human resources.
How do functional areas work together within a business?
The functional areas of a business are like parts of a human body. And just like the human body, each one performs a unique function while every part needs the other parts to function together as one.
What is the importance of business functions?
Business functions are crucial as they enable an organization to compete with major players, meet their goals, and remain relevant in changing markets. They also help business owners reduce risk, avoid errors, make the most of your finances, build brands, communicate effectively, and stay relevant.
Why is IT necessary to evaluate different areas of business operations?
We live in a modern and digital world, one that requires us to make the most of available data. IT has become an integral component in analysis and decision-making. It allows organizations to evaluate the performance of every department and customer behavior.
Technology is constantly evolving, and new tools are emerging all the time. It’s important to use technology, sound financial management, and bookkeeping to lead your organization with clarity and confidence.
