The BusinessDictionary defines the term ‘business’ as an organisation or economic system where goods and services are exchanged for one another or for money. Inside this organisation is where different processes take place that is important for a business to run efficiently and smoothly.

These processes are being carried out by functional areas of business or what are also known as ‘business units’. Regardless of the size of business, business departments or units are tasked with functions that have a specific focus and a definitive path.

If you own a small business, you’ll most likely fill the roles of these business departments yourself — for the time being at least. But as your business grows, you will have so much to do that you’d want to delegate different tasks to employees who belong to the various functional areas of business.

Functional areas of business

Knowing the different functional areas of business is a basic knowledge that every entrepreneur needs to have. Without these business departments, a company will not only fail to implement its policies but also fail to operate successfully.

So what exactly are these areas of business and what do they do?

Human Resources (HR)

Recruiting people into the company is probably the most well-known task of this business department, and rightly so. However, there’s actually a lot to Human Resources than just filling in the headcount. They have to make sure that the people they recruit have the right skills, experience, and qualifications based on what the company needs.

Aside from recruitment and staffing, HR is also in-charge of major areas like compensation and benefits, training and learning, labour and employee relations, and organisation development. And since the success of any organisation lies in its people, Human Resources is considered as the most critical asset of a company.

Accounting and Finance

If Human Resources is the heart of a company, Accounting and Finance can be considered as its lifeblood since it takes care of all money matters. After all, a company will not be able to operate without cash even though it is possible to start a business with no money.

The two primary responsibilities of Accounting and Finance have to do with the money that is going in (Accounts Receivables) and money that’s going out (Accounts Payable). They are also the ones in charge of Payroll, making sure that all employees are paid accurately and on time.

Reporting and financial statements that can be used for budgeting, forecasting and other decision-making processes are also being handled by this department. If you plan on automating your business, accounting apps and software can help make your business more productive.

Marketing and Advertising

A business needs to have customers to grow, and for you to gain customers, you need to have effective marketing and advertising strategy set in place. This is where the Marketing and Advertising Department comes in. This business department plays a vital role not only in promoting your business as well as its mission and vision.

They take care of developing product packaging, pricing, as well as creative materials for the company’s target customers. To do this, the department may carry out research and do surveys to have a better understanding of what customers need.

Depending on your company, the responsibilities of the Marketing and Advertising Department may also include one or more of the following:

  • Defining and managing your brand
  • Social media management and monitoring
  • Content creation for your website
  • Serving as media liaison
  • Producing internal marketing communications for your employees


This is the functional area of business that turns inputs (raw materials) into finished products or outputs through a series of production processes. So if your running a t-shirt printing company, your Production Department will be the people who use the printing machines.

Of course, the products that are to be sold to your customers need to be of good quality and free from defects. As such, this department follows specific standards and targets for each section of the production process. Both the quality and quantity of products coming from the production line will and should always be monitored closely by the Production Department.

Information Technology

Almost all businesses nowadays make use of computers and information systems. The Information Technology (IT) Department is responsible for the architecture, hardware, software and networking of computers in a business.

Their main tasks include:

  • Providing various forms of support so employees can make the most effective use of IT resources that are relevant to the business
  • Managing information security to protect the IT infrastructure and corporate data from viruses, cybercriminals, and other threats.
  • Data management which includes the collection, storage, and distribution of data to employees who need to access them
  • Development and operation of the network to support effective communication and collaboration within the company
  • Website maintenance


The exact duties of the Operation Department vary from business to business. However, its goals, including that of the managers who run them, are generally the same. Mainly, it is the one responsible for overseeing, designing and controlling the process of production. They can also redesign business operations if necessary.

To ensure that the business is running efficiently, a well-run Operations Department does as much as it can using as little resources and time whenever possible. Operations Departments also aim to deliver the highest quality products or services.

Customer Service

The one who is in charge of interacting with customers is the Customer Service Department. It can include answering inquiries, processing of orders, and addressing customer concerns and complaints. Customer Service Representatives are the first line of contact with the public for many businesses.

That being the case, one of the primary responsibilities of this department is to establish and cement the relationship of your business to the public. A good Customer Service Department will be able to create, maintain, and retain the relationship of the business to its customers.

Keep in mind that being able to keep your customers is not always about having the best products or services to offer. Although these things also play a considerable role, some customers are actually willing to pay slightly more in exchange for excellent customer service.


The procurement of raw materials, machinery, equipment, and supplies are being handled by the Purchasing Department. Its tasks also vary depending on the type of business. In a manufacturing company, for instance, the Purchasing Department will take care of getting all the necessary materials for production.

On the other hand, it will make sure that there are enough products on the shelves or in the warehouses for retail companies. Whatever the case may be, this department sees to it that the materials needed are of the right quantity, the right price, and are available at the right time.

Legal Department

The Legal Department is responsible for providing legal services and advice to the company, its departments, and its employees. They act as the official or formal representatives on behalf of the company or the owner. This department also deals with legal matters concerning the company including:

  • Business development
  • Contract management
  • Real estate transactions
  • Customer claims against the company for product damages and defects
  • Litigation
  • Employment law
  • And a whole lot more

Business Development and Growth

Every business wants to have a plan of action ready. This means going after new clients, improving new areas of expansion and projecting growth. This task is assigned to the Business Development Team.

This team works very closely with the CEO and higher management and evolves growth strategies related to expansion, increasing revenues and fulfilling higher objectives. In order to scale your business, a specialized Business Development Team is a pre-requisite.

This team plans, coordinates and sets estimates for all the other teams in terms of their productivity, numbers, and way forward. It is important for every business to have a BD team that is not caught up in the day-to-day activities of the business. They are engaged no doubt, but not at an operational level.

Learning The Functional Areas of Business

Just as there are many different departments in a company, it is worth noting that not all business require all of them. Some companies may have only a few of the ones mentioned here while some may even have more. And as mentioned earlier, a small business owner is likely to be a one-man-show and do all of the tasks by himself.