Role Of A Finance Manager
Role Of A Finance Manager – Financial management functions towards the ultimate goal of any business, i.e. maximizing profits and wealth. If we broadly classify the functions of the financial manager of the company, it can be the acquisition and use of funds. The purpose of raising funds is to reduce the cost of funds, while the purpose of spending funds is to increase returns. Let’s take a closer look at the functions of financial management.
Below is a diagram of Financial Functions. Adapted from Prasath Sarawana B, Padhuka A Student’s Guide to Accounting and Financial Management.
Role Of A Finance Manager
The fundraising function begins with an assessment of the fund’s requirements. Multiple forecasting exercises to determine all the future requirements of the project and to find the amount required for fixed assets and capital investments. To get financing, you need to decide what the sources of financing will be. Not only should the claim amount be sufficient, but the financial manager should also determine the term of the claim. Time of funds is very important in financial management because it carries the time value of money and we know that “a dollar today is not the same as a dollar 1 year from now”.
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Once the assets are properly valued, capital structure decisions will focus on two things. a) Combination of long term financing and short term financing ii) Combination of own funds and debt funds. Long-term funds are generally used to finance long-term needs such as fixed assets, other long-term investments and part of the working capital that is permanently invested at any time.
Working capital management is a daily job for the CFO. It refers to the broader functions of acquiring and using resources. It mainly involves the management of current assets and current liabilities and keeps the gap between the two managed depending on the resources available to the organization. Cash management is a major task in working capital management. Finance Manager manages all branches, departments, etc. you have enough money to pay the necessary expenses. The easier cash management is, the more efficient your business processes will be.
Dividend decisions primarily involve making decisions regarding the payment of dividends to shareholders. A major concern of management is determining the dividend payout, which depends on many factors, such as the company’s financing requirements, the comparison of expected returns on the company’s projects, and the return available to shareholders. in the normal market, the stability of dividend payments, market expectations, earnings trends, tax considerations for shareholders, etc.
Investment decisions involve allocating/using funds in the right mix of projects and fixed assets to maximize the organization’s profits. Net present value, internal rate of return, payback period, etc. Various methods are used such as
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Financial analysis does not include financial functions, but it is necessary to evaluate all financial functions performed. This includes evaluation, improvement, etc. Outcomes evaluation assesses the effectiveness and appropriate use of resources.
Sanjay Borad is the founder and CEO. Passionate about keeping and making things simple and easy. Running this blog since 2009 and trying to explain the meaning of “Financial Management Concepts”. The chief financial officer (CFO) leads the company’s financial management team. The role and responsibilities of a CFO vary depending on the size and type of business. In a typical corporation, the CFO and his team will facilitate the flow of capital from outside investors and oversee cash management within the organization and with investors. The CFO reports to the CEO or president of the firm.
Regardless of their purpose, all organizations can benefit from the services of a financial manager. Financial managers often oversee the financial health of an organization and ensure its long-term viability. They are responsible for important tasks such as monitoring cash flow, calculating profitability, controlling expenses, and creating reliable financial information.
A bachelor’s degree in accounting, finance, or business administration is often required to become a financial manager. A master’s degree in a relevant field can provide the knowledge and skills needed to advance to leadership positions.
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Individuals can earn various professional certifications in addition to college degrees to enhance their knowledge and skills. Certificates such as:
The Financial Management International Association provides a range of information on credit analysis and management, online finance, investment and management accounting.
In summary, the primary function of a corporation’s finance department is to maximize the value of each share of the company’s stock:
This is not an exhaustive list, as managers in the finance function are often assigned special projects and other analytical tasks to perform. Any business, whether it’s a small-town bakery or General Motors, needs money to operate. To make money, you must first spend money: inventory and supplies, equipment and facilities, and employee wages and salaries. Therefore, finance is essential for the success of all businesses. It may not seem like marketing or production, but managing a company’s finances is key to a company’s success.
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Financial management is the art and science of managing a company’s money and is not just the responsibility of the finance department. All business decisions have financial consequences. All department heads should work closely with finance personnel. For example, if you are a sales representative, the company’s credit and collection policies will affect your ability to make sales. The head of IT will need to justify any request for new computer systems or employee laptops.
The income from the sale of the company’s products should be the main source of finance. But the money from sales doesn’t always come when you have to pay the bills. Financial managers must track how money flows in and out of the company (see). They work with other department managers in the company to determine how available funds will be used and how much money is needed. They then select the best sources for the funding they need.
For example, a financial manager tracks day-to-day business information, such as cash receipts and payments, to ensure the business has enough money to meet its obligations. In the longer term, the manager will carefully study if and when the company should open a new manufacturing plant. The manager will also suggest the best way to finance the project, raise funds and monitor the project’s performance and performance.
Financial management is closely related to accounting. In most companies, both areas are the responsibility of the vice president of finance or the chief financial officer. But the primary function of an accountant is to collect and present financial information. Financial managers use financial statements and other information prepared by accountants to make financial decisions. Financial managers focus on cash flows, cash flows, and cash flows. They plan and monitor the company’s cash flow to ensure cash is available when needed.
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Financial managers have a complex and challenging job. They analyze financial data prepared by accountants, monitor the company’s finances, and prepare and implement financial plans. One day they might come up with a better way to automate cash collection, the next day they might be looking at a proposed purchase. Key Duties of a Financial Manager:
How can financial managers make sound planning, investment and financing decisions? A financial manager’s primary goal is to maximize value for the company’s owners.
The value of a publicly owned corporation is measured by the price of its shares. The value of a private company is the price at which it can be sold.
In order to increase the value of the company, the financial manager must consider the short-term and long-term consequences of the company’s actions. Profit maximization is one approach, but it should not be the only one. Such an approach favors short-term gains over long-term goals. What would happen if a company in a highly technical and competitive industry did not conduct research and development? In the short term, profits would be high because research and development is expensive. But in the long run, the company may lose competitiveness due to lack of new products.
Role Of Finance Manager
Exhibit 6.2 How cash flows through a business (Credit: Copyright Rice University, OpenStax licensed under CC BY 4.0).
This is true regardless of the company’s size or point in the life cycle. At Corning, a company founded more than 160 years ago, executives believe in thinking long-term and not managing quarterly earnings to meet Wall Street expectations. Once known to consumers for kitchen products such as Corelle cookware and Pyrex heat-resistant glassware, the company is now a technology company.