Nov 09
2
We all use finance when we require additional money to fund a project for example. It can also be an expression used by specialists in the field when they look at how money is managed. It can be also defined as the management of funds and capital required by a business and private activities. Management of finance has also developed into a specialized branch within the financial sector and is carried out by finance managers.
Simply put these managers arrange money to be lent to businesses or private individuals using either money already available from company accounts or from external lenders. The whole basis of optimization is to enable the maximum return from your finance while ensuring the cost to arrange it stays at a minimum. Poor finance management is caused when managers neglect the rules and a deterioration occurs affecting markets around the world. The finance manager’s job is to maximize profits while keeping the risk to a minimum so you can understand why there is a high level of stress associated with this work.
The well known management expert Lee Iacocca said of finance managers that they only see the cost of the investment and not the possible return. The big difference between finance managers and sales managers is the direction they are facing; a sales manager is looking forward, towards the future. Many small business owners forget that the business loan they have arranged is not for personal use; a distinction which gets blurred regularly. Lenders are not very happy about this type of situation because they like to know exactly what they are funding.
By stopping business borrowing this way it is hoped they will start to see the importance of maintaining good practices which should help with investment later on. However, small businesses can finance their needs from other sources like friends or from banks and private lenders. Lenders prefer to use money from elsewhere because it lowers their risk but still allows for a healthy profit to be received by the finance company. It is a well know fact that by the very virtue of the fact you require money, banks see you as a risk.
