Business Classification, HR Functions, and Financial Cycles

Business Classification Criteria

Businesses can be classified according to several criteria:

• Economic Sector: Primary, secondary, and tertiary.
• Capital Ownership: Private, public, and mixed.
• Operational Area: Local, national, and multinational.
• Size: Micro-enterprise, small business, medium business, and large enterprise.
• Legal Form: Individual entrepreneur (sole proprietorship or community property) and corporate entities (civil societies, corporations, cooperatives).

Functions of the Human Resources Department

The Human Resources (HR) department has several key functions:

• Organize and Plan the Workforce: Align the workforce with the company's organization by designing jobs, defining responsibilities, and outlining staff duties.
• Recruit and Select: Find potential candidates and conduct the selection process.
• Formalize Contracts: Manage contracts and legal procedures for hiring.
• Train Employees: Train selected individuals to suit the company's needs.
• Develop and Promote: Implement development plans and promote employees, enabling career progression within the company.
• Evaluate and Monitor: Assess and monitor the performance of the workforce.
• Encourage Workers: Motivate workers to meet their objectives.
• Compensate Workers: Provide appropriate wage policies, incentives, and social security benefits.
• Manage Industrial Relations: Oversee relationships within the company and, when applicable, with unions.

Self-Financing Explained

Self-financing involves using funds generated internally by the company. These funds come from company profits that are not distributed to partners and are used for expansion or maintenance. There are two types of self-financing:

• Maintenance Self-Financing: Consists of retained profits (not distributed to shareholders) to maintain the company's productive and economic capacity, addressing asset deterioration. This includes depreciation and provisions.
• Enrichment or Expansion Self-Financing: Consists of retained earnings used to undertake new investments and enable company growth. This comprises reserves.

The Operating Cycle and Maturity Periods

The operating cycle is the process by which production factors are incorporated into the transformation process. This results in products that are stored until sold and shipped to customers, who are charged after a period. Funds are then recovered, and the cycle begins again.

The duration of this cycle is called the average period of economic maturity. It refers to the time elapsed from when a unit of currency is invested (cash outflow) to acquire productive assets until payment is received for the sale of products or services to customers (cash inflow).

In business practice, this period is often shorter because some of the money invested belongs to the credit cycle provided by suppliers (trade credit). The financial maturity period is the cycle in which the company funds itself without the help of suppliers. This is the time it takes from when suppliers are actually paid until customers are charged.