Every company has its finances at the center of its operations. In short, any business must have money to function. Finance is tasked with overseeing the money to ensure the company’s success. So, what exactly are finance’s main objectives?
What Is the Function of Finance?
Jamie Johnson, CEO of FJP Investment, explains it clearly “managing money inside an organization is the responsibility of the finance department of an organization. Cash flow is monitored in and out of the organization; financial reports are generated, as well as financial strategies are developed for the business’ performance.”
Specialized finance teams with several job titles and management levels are common in large businesses. In smaller businesses, you may discover that the firm owner oversees finances or is outsourcing that function.
The Primary Objective of Finance
Any finance team has two main purposes. Firstly, reliable records of money transfers inside the firm must be kept ensuring both legal compliances as well as accurate financial reporting to stakeholders.
Secondly, establish effective financial plans that monitor the overall health of the organization and assist in securing its long-term success. Let’s explore these positions in further depth.
Accounting And Reporting
As the backbone of every financial department, accounting is responsible for daily record keeping, reporting, payroll processing, and cash flow reporting. Balance sheets and financial statements are maintained by this sector of finance.
They also ensure that the firm is compliant with regulations and is in excellent financial condition, among other things. Managing and performing internal audits, as well as submitting tax returns, are all part of the job description.
Financial Management Strategy
This requires thorough financial planning to examine the entire health of the organization and to set both short- and long-term objectives. A firm can anticipate future growth and trends by analyzing its recent reports.
As well as creating forecasts and budget plans, the strategic finance team must identify and mitigate risks, ensure that the business’ finances are protected by varying financing options, and communicate with investors and other stakeholders as needed in order to accomplish these tasks effectively.
Aspects Of Finance
Accounting and strategic planning are the two primary tasks of finance, as we have already covered. While these two roles are interconnected, they may be further broken down into numerous other sectors of finance.
Record keeping and financial reporting make up a major part of finance in a firm. They are mandated by HMRC, but organizations also retain them to monitor performance and any money owing to investors or partners.
Accounts Payable and Accounts Receivable
They are mandated by HMRC, but organizations also retain them to monitor performance and any money owing to investors or partners.
In the financial function, accounts payable and receivable play an important role. In the account payable process, payments are made to other firms for products and services that the business has received from them. Accounts receivable oversees monitoring money received from clients, as well as issuing invoices and late reminders.
In most cases, the accounts payable and receivable departments will utilize computer software to record transactions. As the last step, they will reconcile their books once a month or quarter by comparing their transaction records to their business bank account records.
Payroll is perhaps one of the most widely recognized tasks of a corporation. In a business, the primary responsibility of payroll is to ensure that all employees are paid properly and on schedule. Taxes, national insurance, pension payments, and any other benefits will be calculated properly and paid on time to the appropriate authorities by these individuals as well. This is to ensure that all the above will be paid on time to the necessary agencies.
Financial controllers make it possible for a firm to properly conduct its financial processes in accordance with the law and guidelines. Through the implementation of internal controls, they will also help safeguard the firm from fraud and theft.
Planning And Growth
Through the implementation of internal controls, they will also assist in safeguarding the firm from fraud and theft.
Every firm must have a clear plan for growth and development to maximize its chances of success. Financial planning comes into play here. They utilize the accounting team’s data and market indicators to anticipate how the organization will perform in the future. Identifying future possibilities, as well as hazards to the firm, are both critical to enterprises.
A company’s ultimate success depends on how well it identifies and manages its risks. As part of risk management, companies discover, analyze, and then implement steps to reduce possible hazards.
Changes inside the organization or changes outside the organization might be considered risks. By recognizing these risks early, your firm will have the greatest potential opportunity to limit any negative impact on the business, as well as discover any possibilities that may come from the changing business scene.
This position is responsible for managing the organization’s money and ensuring that there are always enough funds available to allow it to run successfully.
For the firm to continue to generate income, the treasury team collaborates closely with other finance teams. This will allow the business to remain financially stable while also avoiding any risk of debt.
Relationship With Investors
There are usually many stockholders and investors in a large business. Communication with investors and shareholders who are interested in the company’s financial soundness is the responsibility of the investor relations function. It will be the responsibility of the investor relations personnel to provide stakeholders with frequent briefings on the company’s performance and planned organizational changes.
Additionally, the person in this job is responsible for maintaining and nourishing the company’s connection with its investors. This aids in encouraging and engendering confidence so they will continue to invest in and support the business.