No business can operate without an efficient
supply of finance. It is the lifeblood of all organizations and the common
denominator by which most business performance is measured both internally and
externally. The accounting and finance department is at the centre of any
organization and is responsible for ensuring the efficient financial management
and financial controls necessary to support all business activities.
A good finance director needs to understand every
aspect of a business so that s/he can develop a financial strategy that will
support the business goals. Likewise, as a non-financial manager, it will help
you become more effective in your own role if you have an understanding of the
various roles of your organization’s accounting and finance department.
Check out LBTC’s accounting
and business management courses.
The principal roles of the accounting and finance
department, under the overall control of the finance director, can be
conveniently grouped into:
Financial accounting
This is concerned with keeping account of all
transactions, using the double entry bookkeeping system and preparing final
accounts suitable for meeting the various regulatory requirements for statutory
reporting, the stock exchange and taxation authorities. The person responsible
for this function in most medium to large organizations is the financial
accountant, who will normally report to the finance director.
Financial systems
Medium- to large-sized organizations may employ a
systems accountant, who will analyse the financial information needs of an
organization and review existing systems. S/he is responsible for the design
and maintenance of financial systems and for providing an interface between the
finance and technology/systems departments. Within the accounting and finance
function a systems accountant may report to the financial accountant,
management accountant or financial director.
Systems accountants are involved in the
implementation of change processes within the finance department and may manage
new financial systems projects. They may also be required to assist other users
of financial information.
All this and more on LBTC’s CFO
course.
Payroll
Larger organizations will have a paymaster or
payroll manager. In smaller companies this task may be performed by the
financial accountant.
Budgeting
In a larger organization budgeting may be carried
out by a budget accountant. In a medium-sized company it may be undertaken by
the management accountant.
Budgeting is concerned with the financial
evaluation of plans and with reporting against this, normally on a monthly
basis.
Check out LBTC’s finance
for non finance training course.
Management accounting
Management accounting is concerned with the
analysis and control of financial information to assist in the day-to-day
operations of an organization. Most medium- to large-sized companies will have
a management accountant responsible for this function who will report to the
financial director.
Management accounting and financial accounting
overlap in that management accounting reports are often based upon information
derived from the financial accounting records. For example, the ‘actual’
expenditure figures shown in management accounts will be taken from the financial
accounting records. Sometimes financial accounting and management accounting
are integrated. An example of this would be the fully integrated standard
costing system where the financial accounts are structured in such a way as to
provide cost and management information directly.
Taxation
Most large companies will have a taxation
department dealing with all tax affairs. In a smaller company this may be
handled by the finance director or possibly the financial accountant.
As well as day-to-day taxation management and
reporting, all decisions made by a company will have tax implications and these
need to be identified and built into the decision-making process and financial
plans. Not only does tax have to be accounted for but cash needs to be made
available at the right time to pay it to the authorities. Tax does, therefore,
affect cash planning and budgets.
Tax evasion is illegal and, in addition, most
countries also have anti-avoidance laws. It is the tax department’s
responsibility to ensure that all laws are complied with.
There are many aspects of taxation that are open
to debate and argument. This is why it is important to understand the taxation
implications of business plans. Some companies adopt a more aggressive stance
than others when dealing with a taxation authority. Others, often large
multinational companies that value global relationships at a government level,
may want to be seen as responsible tax citizens and adopt a more conciliatory
approach. A large multinational company will have tax managers, some of whom
are accountants and others who are lawyers specializing in taxation. Counsel’s
opinion will also be sought on aspects of tax law that are unclear.
Learn about this on LBTC’s finance
related courses.
Treasury and financial planning
Large corporations will have a treasurer with
responsibility for the treasury function. The treasurer will normally report to
the financial director. The treasurer is responsible for the efficient provision,
investment and use of funds.
Supporting the business strategy
The finance director is a member of the executive
team and is responsible for providing a financial environment that supports the
business strategy. The right mix of short-term and long-term finance and equity
funds needs to be available to meet the organization’s aspirations and to
provide the organizational agility needed to benefit from future opportunities.
All managers have a primary responsibility to create value, and a primary
responsibility of the finance director is to enable them to do this.
Accordingly, financial strategy must first and foremost be integrated with the
business plan.
Check out LBTC’s CFO
seminar.
Creating value
Within the context of the business plan the
finance director has a responsibility to create value. This can be done
through, for example, obtaining the best possible borrowing rates,
cutting/controlling costs, reducing financial risks, improving debt collection,
better cash management and many other activities.
All this and more on LBTC’s finance
for non finance managers training course.
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