Functions of Finance Manager
The finance manager is an integral part of the corporate management of an organization. With his professional experience, expert knowledge, and competence, he has to play a key role in the optimal utilization of the financial resources of the organization. With the growth in the size of the organization, the degree of specialization of finance function increases. In large undertakings, the finance manager is a top management executive who participates in various decision-making functions.
He has to update his knowledge with regard to Foreign Direct Investment (FDI), Foreign portfolio investment, mergers, amalgamations acquisitions, and corporate restructuring, performance management, risk management corporate governance, investor relations, working capital management, derivative trading practices, investor education, and investor protection, etc.
Forecasting of Cash Flow
This is necessary for the successful day-to-day operations of the business so that it can discharge its obligations as and when they arise. In fact, it involves matching cash inflows against outflows and the manager must forecast the sources and timing of inflows from customers and use them to pay the liability.
The Financial Manager has to plan for mobilizing funds from different sources so that the requisite amount of funds are made available to the business enterprise to meet its requirements for the short term, medium-term, and long term.
Managing the Flow of Internal Funds
Here the manager has to keep a track of the surplus in various bank accounts of the organization and ensure that they are properly utilized to meet the requirements of the business. This will ensure that the liquidity position of the company is maintained intact with the minimum amount of external borrowings.
To Facilitate Cost Control
The Financial Manager is generally the first person to recognize when the costs for the supplies or production processes are exceeding the standard costs/budgeted figures. Consequently, he can make recommendations to the top management for controlling the costs.
To Facilitate Pricing of Product, Product Lines, and Services
The Financial Manager can supply important information about cost changes and cost at varying levels of production and the profit margins needed to carry on the business successfully. In fact, the financial manager provides tools for analysis of information in pricing decisions and contributes to the formulation of pricing policies jointly with the marketing manager.
The Financial Manager is usually responsible for collecting the relevant data to make forecasts of profit levels in the future.
Measuring Required Return
The acceptance or rejection of an investment proposal depends on whether the expected return from the proposed investment is equal to or more than the required return. An investment project is accepted if the expected return is equal to or more than the required return. Determination of the required rate of return is the responsibility of the financial manager and is a part of the financing decision.
The function of asset management focuses on the decision-making role of the financial manager. Finance personnel meet with other officers of the firm and participate in making decisions affecting the current and future utilization of the firm’s resources. As an example, managers may discuss the total amount of assets needed by the firm to carry out its operations. They will determine the composition of a mix of assets that will help the firm best achieve its goals. They will identify ways to use existing assets more effectively and reduce waste and unwarranted expenses. The decision-making role crosses liquidity and profitability lines. Converting the idle equipment into cash improves liquidity. Reducing costs improves profitability.
In the management of funds, the financial manager acts as a specialized staff officer to the Chief Executive of the company. The manager is responsible for having sufficient funds for the firm to conduct its business and to pay its bills. Money must be located to finance receivables and inventories, make arrangements for the purchase of assets, and identify the sources of long-term financing. Cash must be available to pay dividends declared by the board of directors. The management of funds has, therefore, both liquidity and profitability aspects.