Finance is one of the major elements of any organization and an important component of a successful company. A ﬁnance department today has a wide variety of tasks to undertake inside or outside a company. Any company’s eﬃciency and success relies heavily on how well the ﬁnancials are handled. For a company’s smooth operation, keeping a close eye on the ﬁnancial function is extremely critical.
Financial matters also vary and most of the local market ﬁnance leaders can only expose a limited part of the entire ﬁnancial operations that a corporation does. Therefore, I will examine basically the key functions and responsibilities of a ﬁnance department, and I hope you will have a good understanding of what to expect from a career in ﬁnance or from a ﬁnancier you work closely in a company by the end of this writing. But before I do so, let us start with the key areas of a ﬁnance department.
A key area of expertise in ﬁnancial controls and operations where everything starts, consisting of accounting and bookkeeping, reporting and analysis, risk management, tax, and all ﬁduciary duty. Controlling is a fundamental that needs a good level of understanding who desires a career in ﬁnance in a company.
It takes signiﬁcant time and eﬀort to have deep knowledge and to become an expert on it, but it pays oﬀ in the long run when you become a decision-maker. Also, it is critical to keep in mind that it seems like most of controllership activities will likely be handled by Bots and will be automated in the mid-term horizon, thus the more you understand the topic the more you will lean towards contributing by your judgement.
Financial Planning and Analysis:
A key business partnering area focusing on business and the future state of the company. Consistent ﬁnancial planning, forecasting, and budgeting, cash ﬂow and investments management. This area attracts the most attention of newcomers to ﬁnance since it deals with business closely and you may have more inﬂuence on decision-makers.
Basically, the above mentioned two areas cover the big-ticket items in ﬁnance and always will be a top priority of ﬁnance departments no matter what the size of the company, which play a vigorous role in the sustainable growth of companies as well as the achievement of business ﬁnancial objectives.
In a ﬁrm, the position of the ﬁnance department greatly depends on the company’s size. At the very least, by simple bookkeeping, the ﬁnance department will take care of the company’s day-to-day transactions, which we named under this as controllership. The ﬁnance department will assist a management team and functional leaders in making ﬁnancial decisions for larger organizations and will prepare estimates for the anticipation of topline and contributions with ongoing cash, funding requirements.
Overall, the ﬁnance department is the component of the organization responsible for handling the organization’s funds and coordinating the spending of the funds on diﬀerent assets. It is the part of a ﬁrm that maintains successful ﬁnancial management and ﬁnancial control required to maintain all business operations.
MAIN ROLES AND RESPONSIBILITIES OF THE DEPARTMENT OF FINANCE
Factors such as the degree to which the management is successful in business can significantly depend on the contributions of the finance department of every business and how these activities improve organizational success.
A finance department’s functions and responsibilities are;
1.Financial Planning, Forecasting and Budgets
The finance planning team works with executives in this area to plan the budgets and estimates of the company while providing clear directions regarding the company’s financial status. Most times Food for Thought documents concerning an upcoming planning strategy and calendar provide a clear path of best practices and actions for different departments in the company.
This guidance can be used to understand and meet each department’s OpEx investment — cash needs, planning of company staffing levels, planning of assets and expansions at minimum cost before they become necessary. Historical data may also be used to visualize a clearer growth prospect both in spending side and topline in the budgeting which will help to estimate right investment amounts in long-term and short-term time increments.
2.Accounting and Bookkeeping
This is the function of finance’s most fundamental feature. The day-to-day registration, documentation, review, and evaluation of the financial transactions of a firm are involved. This will take into account the recording of all costs and sales of goods (purchases, expense reports, payments, etc.).
In some start-up companies, this function is mostly performed by an accountant, who may be replaced by more skilled general ledger, payables and receivables experts as the business develops or expands in its operations.
3.Reporting and Analysis
Reporting and analysis is the function that takes accounting inputs and turns them into meaningful, functional reports and eventually financial statements. This involves calculating, classifying one-off expenses to provisions, and reporting them within a format and method required by generally accepted accounting standards of the country that company operates in.
These reports are typically expressed in a logical and understandable manner to managers. The entire reporting information is important for internal and external parties to make plans by seeing the company’s viability and financial stability.
Paying taxes are undoubtably part of owning and managing a business, and it is the responsibility of the finance department to deal with tax issues on behalf of management.
Tax planning, typically with the intention of understanding and optimizing tax liability, considers the tax consequences of incomes, expenditures, or business decisions. A big objective of tax workings is accuracy and optimizing corporate income tax liability.
In all strategic decisions and activities, there is always a risk, which cannot be removed completely but this can be minimized with the right assessment and mitigation plan. Finance departments especially are faced with issues including but not limited to policy changes, security breaches and fraud. By becoming sensitive to internal self-monitoring activities and to an external focus about market trends, opportunities and competitive landscape changes, the long-term profitability of the business can be sustained, and opportunities can be optimized effectively.
6.Cash Flow Management
It is possible to summarize the concept of business cash flow management as the method of tracking, evaluating, and maximizing the net amount of cash receipts minus cash expenses. For any company, net cash flow position is an essential indicator of financial health. It is the responsibility of the finance department to handle all cash flows in and out of a business and to ensure that adequate funds are available to meet the day-to-day operation of the business. This function also concerns the credit and collection practices of the company to ensure that suppliers and borrowers are paid accurately and on time.
It is the responsibility of the financial teams to advise management on the best funding mix that can obtain the firm the largest returns and assist them at the lowest cost to source longer-term financing so that there is a healthy profit level. Financing includes the flow of cash, the organization’s costs and responsibilities, and sources of income.
Investment management represents the managing of financial assets (bank deposits, bonds, loans, and stocks) and other commercial investments such as manufacturing, R&D, product portfolios, acquisitions, divestments, alliances, and collaborations in a company. Besides reviewing and choosing new investments, it is also the responsibility of the finance department to monitor the use of the current assets of the organization. Apart from capital investments, the finance department should keep in mind current assets. Future cash flows of the company needs to be predicted and handled effectively in a way that maximizes profitability.
In summary, the finance department of a company determines not only its financial presence but also its performance and success by means of solid partnering with all internal and external stakeholders. To have a potent finance understanding and a successful finance career, it is key to decide on which part of finance really attracts your interest in your initial two to three years. Additionally, it is always beneficial to be flexible, open to learn continuously from others and focus on solutions rather than problems and meticulous details.