Get premium membership and access questions with answers, video lessons as well as revision papers.
1. Budgeting
This involves identifying the organization’s critical needs and deploying resources towards meeting of those needs.
2. Identifying Sources of Funding
The budget needs to be funded. The critical question will be whether the company has enough financial resources or whether outside sources have to be considered. It is vital that the financial manager comes with appropriate mixture of debt and equity. An inappropriate financial structure can lead to insolvency. For example, short term debt should be for short needs and long term debt should be for capital expenditure. An extension of this role will be debt management. The Finance Manager must negotiate with creditors and bankers so that credit is extended at the lowest cost possible and without restrictive conditions.
3. Asset Management
The company must also maintain the right mix of its assets. The level of current assets at any one time will determine the liquidity of the company. To maintain viability, the company must maintain adequate levels of raw materials, trade stock, debtors and cash. Excess cash must be invested and credit terms given to debtors must not be to the company’s disadvantage. Company must not be overstocked and it must also avoid stock outs.
4. Managing Risk
Finance managers responsible for overseeing risk are required to minimize the risks and losses that can occur due to certain financial transactions and business moves. They also take care of the firm's insurance budget.
5. Project Appraisal
For all new projects undertaken by the company, the Finance Manager must perform a cost benefit analysis. An assessment must be made of the balance between the risk of losing the deployed resources and the expected income stream.
6. Information Dissemination
The various departments within a company will make decisions that require financial input. It is therefore essential that preparation and submission of high quality returns and reports to other departments is made timely. Further to this, at the end of each accounting period, the Finance Manager plays a central role in the preparation and distribution of financial statements for the consumption of the various stakeholders.
7. Determine the Company's Financial Future
Using the input and help from a company's product management team as well as the purchasing team members, a very important job role of the finance manager is to figure out the specific financial impact of a rise in production costs. The finance manager is responsible for preparing periodic financial forecasts of the company based on the available statistics. The finance manager will also update the company's management team regarding serious financial fluctuations if the manager finds signs of this affecting the company's yearly budget.
8. Analyzes Potential Operational Improvements
On a regular basis, the finance manager must assume the critical job role of analyzing a company's potential operational improvement by investigating the company's current policies and procedures. As the finance manager analyzes these policies, he will give the company's owners valuable input about operational changes that will save the company large sums of capital over the course of a year if the changes are put into motion.
9. Prepares Monthly Cost of Goods Analysis
In order to ensure that a company is using the most affordable suppliers available to stay within the company's annual budget, a finance manager must prepare a monthly cost of goods analysis. Under certain conditions, the finance manager can be asked to find other sources of more affordable material goods in order to stay under budget. By using past yearly budgets in order to secure the same type of materials at a cheaper price, the finance manager will also find ways to reduce a company's overall spending costs as well.
Lellah answered the question on November 8, 2021 at 06:00