Roles and Responsibilities of a Finance Department

The activities expected from a finance department cover a wide range from basic bookkeeping to providing information to assisting managers in making strategic decisions. What to expect from your finance department will depend largely on factors such as how much involvement the owner/manager has in the organization.

At the base level, your bookkeeper will be responsible for all the day-to-day transactional accounting for the business. This will include the tracking of all transactions and the management of any government reporting. In very small owner-managed businesses, this role is often filled by a family member with accounting experience. An outside accounting firm is usually used for annual financial statements and returns. In larger organizations this role will extend right through to preparing the financial statements with an external auditor engaged for assurance purposes.

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The finance department is also responsible for management of the organization’s cashflow and ensuring there are enough funds available to meet the day-to-day payments. This area also encompasses the credit and collections policies for the company’s customers, to ensure the organization is paid on time, and that there is a payment policy for the company’s suppliers. In most organizations there will be some form of forecast prepared on a regular basis to systematically calculate the ongoing cash needs.

Where there are cash needs beyond the day to day working capital, the finance department is responsible for advising and sourcing longer term financing. Financing may be obtained though bank or private lender debt or, in applicable firms, share issues to private investors. If the organization is ready to target angel investors or venture capitalists the finance department will be key in preparing the documents required for these presentations and may work with outside consultants on a company valuation. In larger firms considering public share offerings the finance department will assist with the preparation of the offering documents but will likely also use outside consultants to advise on this complicated process.

With the must-do’s taken care of, the finance department can now start to contribute to the management and improvement of the operations by measuring and reporting regularly on key numbers crucial to the success of the organization. Management accounting information is information that managers can use to monitor the operations and decide where further attention may be required. It will likely include some non-financial information and should be communicated to managers in a way that is easy to understand. In smaller owner-managed businesses this resource, though extremely important, is often overlooked or ignored.

Looking forward, the finance department will work with managers to prepare the organization’s budgets and forecasts, and to report back on the progress against these throughout the year. This information can be used to plan staffing levels, asset purchases and expansions and cash needs, before they become necessary. Some organizations often ‘plan’ by the seat of their pants, while organizations know it is important to have some idea of where you want to go before you start going there.

Finally, the finance department should be called upon to provide information to assist managers in making key strategic decisions, such as which markets or projects to pursue or the payback periods for large capital purchases. The finance department can often contribute an objective perspective based on special financial assessment techniques.

In summary, some organizations know the finance department should be considered a resource to assist managers in the running of the business. With the growing popularity of outsourced finance departments, it is possible for even small businesses to have access to all of the benefits of a full finance department, through part time professionals, at a fraction of the cost of employing a full time finance department.

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