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What is Finance - Part Three

Author: igsarticles | Posted: 06.09.2008 | Views: 20

We all use finance when we require additional money to fund a project for example. The term can also refer to another branch of the subject dealing with its management. If you prefer, it can also be a general term which encompasses the entire subject of managing and supplying money in the business and private sector. This of course requires the use of specialist trained in money matters often referred to as finance managers.

These managers arrange funds to be lent to individuals or business using their company's assets where possible and if not sourcing the money elsewhere. The term optimization is used to explain the procedure whereby finance is maximized by reducing costs and increasing the return. Bad debts are poor finance management where rules have not been followed; the result of this is depressed markets, low production and a cash crisis. It is for this very reason that finance managers are very careful with finance they agree too and where it is funded from.

One of the most famous management gurus Lee Iacocca referred to finance managers as Bean-Counters who almost look at the expense part with a rather pessimistic view. These managers are the opposite of sales managers who are forward, investment thinking individuals; whereas a finance manager will not recognize the fact that investment requires an approach that lies in seeing into the future to look for returns. Many small business owners forget that the business loan they have arranged is not for personal use; a distinction which gets blurred regularly. Most lenders will cancel the loan if they feel they have been deceived this way because they are unsure what the money is to be invested in.

This may cause some concern amongst small business owners but they should train themselves to be more focused on their business which should in turn create a better frame of mind for the future. An important area for businesses to receive finance is their own bank or failing that good friends or even relatives. 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. Banks have always been known as institutions that prefer to lend money to those that least need it which is why if you are already wealthy and require a loan it is often arranged at a preferential rate of interest.


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