The Finance department in a business is one of the primary pillars of any organization and a vital component of a successful corporation.
A finance department in business nowadays has a wide range of responsibilities to fulfill both within and outside of a firm.
The performance and success of any organization are heavily reliant on how well the finance department is managed.
Maintaining a tight eye on the financial function is critical for a company’s seamless running. In this article, I will examine the finance department in business or any financial department in the pharmaceutical sector, but first, the terms “finance” and “finance department” must be defined.
What Is Finance Department?
The Finance Department is the component of an organization that is in charge of procuring finances for the firm, managing funds inside the organization, and preparing for the expenditure of monies on various assets.
It is the part of an organization that assures the efficient financial management and financial control required to support all business activities.
Growing adoption of the digital finance technologies changes the conventional role and responsibilities of the Finance Department. However, instead of fully replacing manual workflows, financial process automation software aims to help the finance teams shift the focus from tedious, time-consuming tasks to the areas of strategic business value.
7 Key Roles and Responsibilities of Finance Department in Business
This is the financial department’s most fundamental function. It entails the recording, analysis, and interpretation of a company’s financial transactions on a daily basis.
This will entail keeping track of all expenses (purchases, payments, etc.) as well as finished product sales. This function is frequently performed by a bookkeeper in some new organizations, who may be replaced by more specialized payables and receivables clerks when the company grows or expands its operations.
Management of the company’s cash flow
The finance department is in charge of monitoring all financial flows into and out of a corporation and ensuring that there is enough money available to meet the organization’s day-to-day activities.
This section also includes the company’s credit and collections rules, which ensure that vendors and creditors are paid correctly, and very much on time and that the company is paid correctly and on time.
Budgets and Forecasting
The finance department collaborates with management to prepare the company’s budgets and forecasts, as well as to provide feedback on the company’s financial condition.
This information can be utilized to meet each department’s financial demands, plan corporate employment levels, and plan asset purchases and expansions at the lowest possible cost before they become necessary.
The finance department can also leverage historical data from other departments to create more accurate budgets and forecasts for both long-term and short-term time horizons.
Advising and Sourcing Longer-Term Financing
It is the finance department’s responsibility to advise companies on the optimum financing mix that would return the best profit and to assist them in sourcing longer-term borrowing at the lowest cost so that there is a profit level of liquidity.
As described in one of our articles “7 Key Roles and Responsibilities of Finance Department in Business,” some of the many different ways a firm might acquire capital to finance their business include bank credit, private lender loans, or share offerings to private investors (where applicable).
Management of Taxes
Running a business necessitates paying taxes, and it is the finance department’s responsibility to address tax concerns.
This includes maintaining excellent corporate ties with the government by remitting PAYE (Pay As You Earn) to the appropriate authority and ensuring that tax matters are implemented in accordance with the procedures in place.
Management of Company’s Investments
Aside from researching and selecting new investments, the finance department is also responsible for managing the company’s existing assets.
Apart from fixed assets, the finance department should be concerned with current assets. Because working capital has a greater impact on the firm’s liquidity than fixed assets, it must be handled efficiently in order to maximize profitability relative to the amount of funds locked up.
Financial Reporting and Analysis
Financial reporting and analysis is the process of converting raw accounting entries into meaningful, useable, and comparable financial statements.
The finance department contributes to organizational growth by measuring and reporting crucial figures that are critical to the company’s success on a regular basis.
This will almost certainly include a review of all funding sources, expenditures, and reserves available for future use (excluding those already committed and budgeted for the current period), as well as some non-financial data. And are typically conveyed to managers in a rational and understandable style.
Assist managers in making key strategic decisions
The finance department provides information to company management that allows them to make strategic decisions such as which markets or projects to pursue, the payback periods for large capital purchases, the decision on what should be paid out as dividends versus what should be ploughed back into the business, the best financing mix that will yield the company the most profit, and so on, ensuring that the company’s financial goals are met.
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Finance Department Organizational Chart and Duties
Chief Financial Officer
The chief financial officer (CFO) is the general head of the finance department and sits at the top of the accounting department organizational hierarchy. The chief executive officer is the CFO’s boss.
The management accountant is the second most senior person in the finance department and is in charge of the management accounting sub-department.
The management accountant offers timely, accurate, and valuable information to senior management, allowing them to make informed decisions about current and future business operations.
The financial accountant works under the direction of the CFO and is responsible for producing accurate, timely, and useable financial data to help external users of financial reports make informed decisions.
The financial accountant’s job entails preparing, evaluating, and analyzing financial reports for monthly, quarterly, and annual accounting periods.
The internal auditor gives information to the management accountant and is in charge of conducting frequent evaluations of all financial transactions to verify accountability and proper controls are in place to protect the company’s assets, revenues, and expenditures.
The credit controller gives information to the management accountant and is in charge of the company’s accounts receivable. Cash payments and outstanding obligations are included in accounts receivable.
Accounts Payable Accountant
The accounts payable accountant is responsible for the accounts payable sub-department and reports to the management accountant.
This division is in charge of processing and making payments for cash purchases as well as creditors’ payments when they become due.
Accounts clerks are the accounting department’s most junior workers, reporting to the heads of their various sub-departments.
Filing paperwork, doing daily reconciliations, processing and dispatching outbound bills, receiving incoming invoices, and processing payments for invoices are all responsibilities of accounts clerks.
The fiscal officer works closely with department leaders as an auditor to ensure that monies are disbursed in accordance with internal policy.
In Harris County, Texas, for example, the fiscal officer works with other county departments and outside partners to handle capital and debt funding as well as other financial data. Financial reports are produced on an annual and interim basis
A fiscal officer or auditor will most usually have a bachelor’s degree in accounting, according to the US Bureau of Labor Statistics.
The fiscal auditor will also be a certified public accountant, which is required for anyone filing gives information with the Securities and Exchange Commission in the United States.
You must realize by now that the importance of a company’s finance department cannot be understated because a company’s financial policy determines not only its existence and survival but also its performance and success.
Any company that wants to grow and profit should make certain that the financial department is run by personnel who have the proper qualifications.
If you have any contributions or questions about the Finance department in business, feel free to communicate with us via the comment box.
Watch the video below to know more about the financial department in a business: