WHY FINANCE STRUCTURE IMPORTANT
how important is finance structure?
Finance Structure for us for a project is a refinement of whether or not a project (usually an investment project) is implemented successfully. The definition of success here is very tentative depending on the aspect of the project being undertaken, most private investments can be said to be successful when the main goal is where economic benefits can be achieved.
Finance Structure uses a cost and benefit analysis system including all benefits and social costs and social benefits. In general, the Finance Structure in a project involves 3 aspects, namely the economic benefits of the project for the project owner, the economic benefits of the project for investors, and social benefits for the community around the project.
With investments involving large capital expenditures, a Finance Structure is needed to be careful not to let the project fail after investing large funds but it turns out to be unprofitable, usually the project will be stopped or sold to other parties. result in a project being unprofitable (failed), namely:
To minimize various failures in projects, often large projects increasingly require Finance Structure data with increasingly complex variables so that to maintain it, the study is usually carried out in two stages, namely the preliminary stage and the overall stage. In the Finance Structure, the things that need to be known are:
The complexity of the elements that affect the project, each project is influenced and affects various other elements, both external and internal, the more complex the elements, the Finance Structure must be carried out carefully and carefully.
The basic aspects of the Finance Structure include:
Finance Structure uses a cost and benefit analysis system including all benefits and social costs and social benefits. In general, the Finance Structure in a project involves 3 aspects, namely the economic benefits of the project for the project owner, the economic benefits of the project for investors, and social benefits for the community around the project.
With investments involving large capital expenditures, a Finance Structure is needed to be careful not to let the project fail after investing large funds but it turns out to be unprofitable, usually the project will be stopped or sold to other parties. result in a project being unprofitable (failed), namely:
- Without due diligence or check and re-check
- Planning error.
- Errors in estimating the available market.
- Errors in estimating the appropriate technology used.
- Errors in estimating the continuity of raw materials.
- Error in estimating the workforce.
- External causes such as changes in political, economic, social situations, natural disasters and speculation.
To minimize various failures in projects, often large projects increasingly require Finance Structure data with increasingly complex variables so that to maintain it, the study is usually carried out in two stages, namely the preliminary stage and the overall stage. In the Finance Structure, the things that need to be known are:
- The scope of project activities.
- The way the project is done.
- Evaluation of the aspects that determine the success of the entire project.
- Facilities needed by the project.
- The results of project activities and costs to be borne.
- The consequences are both beneficial and detrimental.
- Risk analysis from various aspects.
- The steps of the plan starting from the schedule of each activity until the investment project is ready to run.
- There are several main factors that affect the intensity of the Finance Structure:
- The amount of funds invested, the larger the project, the greater the funds required. For example, a coal dredging project requires more funds than a car showroom construction project.
- The level of project uncertainty, the more difficult it is for us to estimate sales income, costs, cash flows and others, the more careful we must be in carrying out the finance structure.
- Planning When is the Return on Investment in the project
The complexity of the elements that affect the project, each project is influenced and affects various other elements, both external and internal, the more complex the elements, the Finance Structure must be carried out carefully and carefully.
The basic aspects of the Finance Structure include:
- Market Aspect which includes the main concept of the goal/market to be achieved, methods of announcement and demand forecasting, dominant company competitive strategy, and marketing mix optimization strategy.
- Technical Aspect which covers the technical aspects of the project and technical analysis.
- Management Aspect which includes project development management and management in operations.
- Financial Aspect which includes the need and source of funds, project cash flow, investment assessment criteria, investment risk, limited funds and the relationship between projects and the cost of capital (cost of capital).
- Economic Aspect which includes economic analysis and Feasibility study report writing.
Before we discuss further about what Finance Structure is. We give you an analogy like this;
When planning a long trip, we are required to check and consider the condition of the vehicle we will be driving, such as the battery, tires and fuel needed to keep our engine running smoothly and safely to our destination.
Likewise, certain factors are very important to run your business smoothly, and your Finance Structure is the most important thing in convincing Investors. Just like the importance of the "engine" in your car. So, in this post, we'll define financial structure, explain why it's important, and how it will help you achieve your goals.
When planning a long trip, we are required to check and consider the condition of the vehicle we will be driving, such as the battery, tires and fuel needed to keep our engine running smoothly and safely to our destination.
Likewise, certain factors are very important to run your business smoothly, and your Finance Structure is the most important thing in convincing Investors. Just like the importance of the "engine" in your car. So, in this post, we'll define financial structure, explain why it's important, and how it will help you achieve your goals.
finance structure
Don't forget, investors want their funds to be safe, comfortable, profitable and clean. For this reason, you need to organize a financial structure that is right for you.
The term "FINANCE STRUCTURE" refers to the right mix of debt and equity that drives your business operations. In other words, it is a delicate balance of long-term and short-term liabilities combined with shareholders' or owners' equity as shown on your balance sheet, in addition to the assets you own.
Returning to the travel analogy, think about all the important components that make up your company's “engine.” We're talking about the people, systems, processes, data, reporting, etc., that form the foundation of your business and sustain it – what I often refer to as your financial infrastructure. You need to develop a sound financial structure, to ensure that you have a reliable, high-quality fuel source to keep your engine running strong.
So, financial structure is important because it is an indicator of your company's ability to run smoothly and efficiently without running out of steam. The right balance will ensure that you can get the type of fuel you need when you need it without incurring excess costs or risks. Therefore, if your financial structure is skewed and hampering your ability to achieve your goals, you need to fix it.
It should be noted that there is a difference between “financial structure” and “capital structure”, although people often use these terms interchangeably. When someone says they want to develop an optimal capital structure, they are only referring to the long-term debt and equity a company has. The financial structure, on the other hand, includes short-term loans and long-term liabilities. So, financial structure is a general term, and capital structure is a part of it.
The term "FINANCE STRUCTURE" refers to the right mix of debt and equity that drives your business operations. In other words, it is a delicate balance of long-term and short-term liabilities combined with shareholders' or owners' equity as shown on your balance sheet, in addition to the assets you own.
Returning to the travel analogy, think about all the important components that make up your company's “engine.” We're talking about the people, systems, processes, data, reporting, etc., that form the foundation of your business and sustain it – what I often refer to as your financial infrastructure. You need to develop a sound financial structure, to ensure that you have a reliable, high-quality fuel source to keep your engine running strong.
So, financial structure is important because it is an indicator of your company's ability to run smoothly and efficiently without running out of steam. The right balance will ensure that you can get the type of fuel you need when you need it without incurring excess costs or risks. Therefore, if your financial structure is skewed and hampering your ability to achieve your goals, you need to fix it.
It should be noted that there is a difference between “financial structure” and “capital structure”, although people often use these terms interchangeably. When someone says they want to develop an optimal capital structure, they are only referring to the long-term debt and equity a company has. The financial structure, on the other hand, includes short-term loans and long-term liabilities. So, financial structure is a general term, and capital structure is a part of it.
|
|
WHAT IS YOUR "goals" ?
Before you start thinking about the appropriate "Finance Structure" for your company, you need to clarify its purpose? For example:
Once again, the road trip analogy applies here. If you want to reach your destination as quickly as possible, you can choose to drive a Ferrari.
In this case, you will need high-quality fuel (and in large quantities), so that your engine can work optimally.
However, if you prefer to relax and enjoy your commute, you'll probably be happier with a roomy, fuel-efficient minivan. When it comes to finances, you may want to minimize your debt even if it means it will take longer to achieve your goals.
- What is your company's vision in the next 5, 10, or 15 years?
- How is your business? How do you want to build your company?
- Or do the above goals sound completely unattainable because you are in dire straits and just want to find a way for the company to survive?
Once again, the road trip analogy applies here. If you want to reach your destination as quickly as possible, you can choose to drive a Ferrari.
In this case, you will need high-quality fuel (and in large quantities), so that your engine can work optimally.
However, if you prefer to relax and enjoy your commute, you'll probably be happier with a roomy, fuel-efficient minivan. When it comes to finances, you may want to minimize your debt even if it means it will take longer to achieve your goals.
GET STARTED
|
OUR PROGRAMSEvery investor needs to make sure at least 3 things; Is the proposed fund safe?, how the funds can be returned? and what are the benefits for investors?
|
|
ROAD TO FUNDINGEXCELLTRUST opens opportunities for entrepreneurs, companies, or project owners who needs funding and want to grow business in Indonesia.
|