Finance Companies come in a variety of forms, under different names and performing a range of financial duties.
In these modern times you come into contact with finance companies almost on a daily basis. Many of these prefer to be called financial institutions. As such we will use the terms “companies” and “institutions” interchangeably.
You write and receive checks, make deposits and withdrawals from finance companies, You make contributions to pension plans, you buy and sell shares of stocks in corporations and you pay taxes to the revenue authorities. In each of these acts you deal with some type of financial institution. On the other hand there are some with which you have no contact. Some of these facilitate the exchange of securities from sellers to buyers eg.the Stock Exchange. Others affect the level of income and the stability of the consumer price. eg. the Federal Reserve.
Finance companies serve from large corporations to the federal government, from the small business owner to the individual saver.
The United States financial system is divided into two categories. 1. Deposit institutions and 2. Nondeposit institutions.
Some deposit institutions are commercial banks,savings and loans companies and credit unions.
Non deposit institutions include insurance companies, pension funds and commercial finance companies.
Commercial banks to which you may be more familiar do a thriving profit-making business. They hold the deposits of individuals, businesses and not-for profit organizations in the form of checking or savings account. By lending out these funds at a higher interest rate to borrowers, than what they pay to depositors, they generate revenue to be used in their operating expenses and to gain a profit.
A pension fund is a large pool of money set up by a company or union for the retirement income need of its employees or members.
Insurance companies operate in a similar manner.They provide funeral protection for policy holders who pay premiums.
In this modern age the functions of finincial institutions cannot be fully described without making mention of internet banking or electric funds transfer(EFTS). This is a computerized method for making purchases and paying bills by electronically depositing or withdrawing funds. The great number of checks written each year and the cost of processing these checks led finance companies and the banking system to explore methods to reduce the number of checks written. This ushered in the paperless/checkless era and this system is being further improved upon by the introduction of the ATM card and the debit card.
Because of the complex activities of the financial system, it is necessary that guidance in every area be made available to every one who seeks it. To facilitate this, there is a branch called the finance management company. Its main purpose is not to receive nor dispense money but to educate every one from companies, groups or individuals to be able to use the system whether it is for ordinary banking, investment,business procedures,taxation or any other area that would affect the economy.It all comes under one umbrella-Accounting and Finance.