June 7th, 2008
How to avoid poor finance management
Finance is the general term applied to the commercial service of providing funds and capital. It is also a branch of economics that studies the management of money and other assets. Private corporations in addition to the public sector use the term when they discuss their business assets. This of course requires the use of specialist trained in money matters often referred to as finance managers.
The responsibility these managers have is to improve company profits by using their own resources by providing funds to another which then must be paid back. The simple process of optimization is used to receive the most from these funds by reducing the cost of arranging the finance whilst at the same time ensuring returns are high. The fact is that it governs most of the worlds activities and poor finance management will immediately show up as conditions deteriorate in procurement, production and sales as it affects every sphere of business activities. The risks for a company are high if poor decisions are made and this is the reason finance managers do not last very long in this field. Financial investment should be taken seriously and therefore will need background on forex history.
A well know marketing and management guru Lee Iacocca said that finance managers always looked at the cost involved in a finance deal and not the future return. Unlike the sales managers who would like to invest in the future by product development, finance managers are rather skeptical of financing a project whose benefits lie in the future; even though their management governs future outcomes too. When arranging a business loan, many applicants forget that they are not to be used for personal matters; something that is ignored regularly. When money is lent under these circumstances, lenders feel quite aggrieved as they have lost control of where the money is being invested.
The aim is to educate businesses to act more responsibly when it comes to managing these issues and as a consequence their business. Small businesses are not however, restricted to using external finance companies because other sources do exist including their bank, friends and other types of private lender. 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 a strange attitude regarding lending money; they prefer to only arrange this facility to people that don't actually need money.