Business services are intangible activities that assist businesses yet do not involve the creation of a product or the delivery of tangible goods. Nevertheless, this industry is important to businesses because it provides support functions such as accounting, human resources, information technology and logistics, which enable companies to perform their trading activities more efficiently. The industry is also responsible for providing a range of other services, including advertising, warehousing and waste handling. Regardless of the type of business, nearly every company needs at least one of these services.
Business-to-business (B2B) services are provided between trade organizations. For example, a manufacturing company performs B2B transactions with the wholesalers that supply it with raw materials such as rubber hoses and tires. Likewise, an architect firm provides B2B services to other architectural firms with the design, blueprints and specifications for new facilities. These services are usually paid for with money from sales transactions between the service provider and the client.
Unlike products, which are stocked and sold as they are produced, services can only be used when they are needed. Therefore, it is essential for a service to have a constant flow of inflow and outflow. The inflow is the revenue generated from selling the service, and the outflow is the cost of producing it. In order to generate a profit, the inflow must be higher than the outflow. If the inflow is not sufficient, the business will not survive.
The business services sector includes activities such as consulting, real estate, insurance and waste management. This sector is a subset of the larger economic services sector and contributes about 11% of the economy in the United States. The sector is categorized as a tertiary industry, meaning that it provides additional value to the primary and secondary industries by creating new combinations of goods and services. In addition, the business services sector is a vital component of the knowledge economy.
These services are the backbone of any organization, and there is no company that does not need them at some point in their operation. For instance, a small business may require the help of an accountant to help with the preparation and filing of tax returns. The same can be said for the need for a lawyer, who is necessary to protect the interests of a company from lawsuits.
Insurance services are important for the business world as they offer coverage against losses from fires, theft and natural disasters. They are especially crucial for the service sector, where employees are frequently exposed to risky environments. Insurance services can also reduce the costs of employee benefits by covering their health and life expenses.
Other business services include human resource, legal and IT services. These services can help companies with the planning and execution of projects, as well as providing advice on corporate governance and strategy. They can also help with administrative tasks such as preparing payroll, establishing relationships with suppliers and customers, and managing data.