Finance Manager Hierarchy
Finance Manager Hierarchy – Question: From the previous discussion, we know that the planning and control functions are often designed to evaluate the performance of employees and departments in an organization. This often includes employees who control financial information. That’s why it’s important to understand how most large companies organize their accounting and finance staff.
What are the typical accounting and finance positions in a large company and what functions do they perform?
Finance Manager Hierarchy
Answer: Let’s look at an example to answer this question. Let’s say you are the president of the Sportswear Company mentioned earlier in the chapter, which manufactures hats and jerseys for fans of professional sports teams. Let’s say it’s a large public company. (The term public company refers to a company whose stock is publicly traded, meaning that the general public can buy and sell ownership of the company.) As the president of Sportswear, you ask the following questions:
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The challenge is to determine what would be best within sportswear to answer each of these questions. An organizational chart will help you find a solution.
Figure 1.1 “Typical Organizational Chart” is a typical organizational chart; it shows how accounting and finance personnel fit into most companies. Employees at the bottom of the table report to those above them. For example, the management accountant corresponds to the controller. At the top of the table are those who control the company, usually the board of directors (elected by the owners or shareholders). Review Figure 1.1 “Typical Organization Chart” before proceeding to a detailed discussion of each important financial and accounting position.
*Represents the vice presidents of various departments outside of accounting and finance, such as manufacturing, human resources, and research and development.
**In addition to reporting to the CFO, the internal auditor typically reports independently to the board of directors and/or the audit committee (consisting of elected board members).
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Chief Financial Officer (CFO) Responsible for all financial and accounting functions of the Organization. responsible for all financial and accounting functions of the organization and usually reports to the CEO.
Controller Responsible for managing the accounting staff that provides management accounting information used for internal decision making, financial accounting information for external reporting, and tax accounting information to meet tax filing requirements. The accounting staff is responsible for managing management accounting information used for internal decision making, financial accounting information for external reporting, and tax accounting information to meet tax filing requirements. The three accountants managed by the auditor are:
The Treasurer is responsible for obtaining financing, projecting cash flow needs, and managing the organization’s cash and short-term investments. He reports directly to the manager. The treasurer’s primary responsibilities include obtaining the organization’s funding sources (eg, from banks and shareholders), forecasting cash flow needs, and managing cash and short-term investments.
Internal auditor Responsible for verifying that the company’s internal controls are effective to ensure accurate financial data. reports to the CFO and is responsible for verifying that the company has controls in place to ensure accurate financial data. The internal auditor frequently reviews the financial information provided by the management, financial and tax accountants (all of whom report to the controller and ultimately the CFO). If conflicts arise with the CFO, the internal auditor may report to the board of directors or the audit committee, which consists of elected board members.
Designation Hierarchy In A Private Limited Company
Question: The organization chart in Figure 1.1 serves as a guide. However, not all organizations are created equal, especially smaller organizations.
Answer: Smaller organizations typically have only one or two finance and accounting officers who perform the functions described above. For example, one accountant may perform financial and management accounting duties while another takes care of the tax work (or the tax work may be outsourced to a tax firm). Instead of hiring its own internal auditor, an organization can hire an external consulting firm. Some organizations may not have a CFO or a CFO but not a controller. The structure of an organization depends on a number of factors, including its size and reporting requirements, as set out in Note 1.2 Business in Action 1.23.
Financial constraints prevent a small nonprofit symphony orchestra in California from hiring full-time finance and accounting staff. Although annual income approaches $200,000, all financial transactions are handled and recorded by a part-time bookkeeper employed by the symphony. The accountant also enters budget information and provides monthly financial reports to the treasurer. The Treasurer, a volunteer member of the Board of Directors, is responsible for preparing the annual budget and providing monthly financial reports to the Board of Directors. An outside firm prepares and processes all tax returns, compiles annual financial statements, and reviews accounting transactions at the end of each fiscal year.
Note how the symphony does not have any of the official positions identified in Figure 1.1 “Typical Organizational Chart” except for the treasurer. This shows how financial constraints and accountability demands require an organization to be creative in establishing its organizational structure.
Starter Activity Organisation Structure.
For each of the six questions listed at the beginning of this Sportswear Company section, determine which person in the company will be responsible for providing the appropriate information. Assume that sportswear has the same organizational structure as shown in Figure 1.1 “Typical Organization Chart”. For young companies, the value of a full-time CFO is hotly debated. At the heart of the debate is the trade-off between the high cost (not cheap) of an experienced CFO at such an early stage and the value the individual positions provide in terms of growth, strategy, fundraising and operations.
Borrowing and adapting elements of Maslow’s hierarchy of needs, financial expert Scott Brown presents a unique framework for how startups can consider and make this decision.
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The value of a CFO to a young company is a hotly debated topic. Many argue that these are unnecessary extras and that a small, knowledgeable and well-trained finance team can meet the needs of the business. On the other hand, CFOs offer a deeper and more strategic financial perspective that can help companies prepare for the future and optimize current operations.
Key Finance And Accounting Personnel
As a result, while CFOs add significantly more value than junior finance teams, they are an expensive resource.
In order for a company to successfully address this dilemma, it must first understand what roles, needs and means the business will find. Eventually, the most successful businesses will outgrow their entry-level accounting staff and move up the ranks as the number of dimensions of the finance function increases. By understanding in advance what their needs will be, there are many ways companies can hedge their risks and get what they need, when they need it, without financial commitment.
The real question may not be how long you can last, but how soon you will begin to benefit from the input of an experienced financial leader. In my more than 15 years of experience as a CFO and financial consultant, I have found that the best way to judge whether a company should hire a CFO is to assess where they are on the “hierarchy of needs” I outline below. The following analysis will help companies determine where they are in the hierarchy and guide them to the hiring options that best fit their current needs and how to move to the next level.
Similar to Maslow’s hierarchy of needs, companies have a hierarchy of financial management needs. These are shown in the diagram below.
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The more basic the needs, the more basic skills are needed to fulfill them. As needs grow, so do the skills and knowledge required to meet those needs. Basic needs are administrative and can be met with technical training, but more advanced needs add a strategic component that is best met by someone with extensive business experience. The needs of different businesses grow at different rates depending on the industry, market opportunities, ambitions and resources. A need cannot be satisfied if a previous need remains unsatisfied.
The most basic need for a business is the ability to transact. By transactional behavior I mean buying and selling goods and services and entering into contracts.
. Anyone in the business can do it and it doesn’t require any accounting or financial knowledge. Typically, this is a business that only records transactions in its checkbook and then uses the change in opening and closing balances to measure its success and financial health.
The advantages of corner accounting are clear. It is cheap and requires little effort. It can be done quickly and does not require specialized resources