Finance and production are both integral part of the business because while production ensures that company does not run out of stock of finished goods because if there is no stock of goods than company will not be able to meet demand of consumers leading to loss of sales and we all know that without sales company will not be able to make profits while finance ensures that the company has enough capital and resources at all times so that company does not get into trouble to lack of capital. Finance and production are closely related to each other and that is the reason why one should know about the relationship between finance and production –
How Production is dependent on Finance
Production of goods requires raw material, machinery and labor and these three things require monetary expenditure which is a function of finance because finance basically involves making budgets for production of goods or service, allocating funds towards various expenses on production and so on. In simple words without finance function playing its part production function will be in trouble as finance is similar to fuel while production is similar to a vehicle and we all know that without fuel no vehicle can run and same is the case with production as no production can be done without finance.
How Finance is dependent on Production
Production is at the crux of any company producing goods and if the crux of the company has any problem than its effects can be seen all over the company and finance is no exception. Hence if production of goods does not happen properly than the company will not able to sell its production leading to fall in the sales which will affect the bottom line of the company which ultimately will weaken the finance department or function as it will have less money at its disposal. In simple words, although finance is like a fuel but just like fuel which is of no use without a vehicle if you want to move from one place to another in the same without production finance is of little use if the company wants to progress from one place to another.
As one can see from the above that both finance and production are closely related to each other and company should try to maintain balance between the two functions because if any one of the function is neglected than it will lead to problems not only for that function or department but for other function or department also leading to problems for the company as a whole.