What Is The Definition Of Finance Management?

The world economy relies on finance to exist; it provides funding where necessary which is usually repaid with a charge called interest. 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. When these funds are administered by a representative of a company, this specialized area is called finance management.

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 while at the same time ensuring returns are high. Because the world revolves around finance, when there is a problem with bad debts and depressed markets, production and sales start to decrease as it is a very fine line that is walked. This is why people who act as finance managers only have this type of work for a relatively short period because the potential risk to companies is high and so are the stress levels as a consequence.

It has been said by a number of people that finance managers can often be 'time' short sighted as they rarely look a the long term 'bigger picture'. Finance managers are the pessimists whereas sales managers are the optimists who look to the future and not to the past! When arranging a business loan, many applicants forget that they are not to be used for personal matters; something that is ignored regularly. Quite understandably, lenders are unhappy about this type of arrangement as they feel the money might be unsafe.

Hopefully by educating the small (and large) business owners of their fiscal responsibilities they may build the basis of an improved company in the future. The problem is that many small businesses do not always source the best finance deal like trying their bank or alternatives like family or relations. Finance managers can help improve their company's profits by using external sources which also lessens the risk on them at the same time. Banks have a strange attitude regarding lending money; they prefer to only arrange this facility to people that don't actually need money.