The finance department is responsible for handling every aspect of corporate financial management. Finance managers are mid or senior-level professionals who are responsible for all the financial activities of their organisation. The responsibilities entrusted to finance managers are consistent across industries and corporations. Their main task is to ensure the financial well-being of the company and engaging in activities like budgeting, reporting, compliance, risk management, etc. to achieve these goals.
Here are some of the main job responsibilities for finance managers:
Budgeting and financial planning – Managing the financial budget is one of the prime responsibilities of the finance department. The process starts with the finance managers sourcing the data from various departments. Then they work with the department heads and senior management to arrive at detailed budgets for various projects and departments.
The budgeting exercise lays the groundwork of how the company will proceed in the coming year. Key decisions must be made at this point by management and the budgeting exercise allocates resources for every initiative or operational activity.
Reporting the numbers
Reporting is an ongoing activity that executives in the finance department must perform. At the end of the day, a business must turn a profit and finance managers are responsible for tracking the profitability and other related metrics for not only the company but within each department or product line as well. The finance department serves as the eyes of the top management and even external stakeholders and provides a glimpse into the operations of the business.
These reports are the most important indicators of how well a specific product or department/ business vertical is doing. Therefore, some companies review these reports even daily. It falls to the finance department to ensure that all managerial staff has access to reports which are relevant to them and presented to them in the format that is easy this decipherable and actionable.
The numbers that are relevant for each department head might be different and finance managers must provide each of them with what they need. For example, the HR Department might only need numbers related to payrolls, but they might need it in greater detail. Whereas the CEO will need numbers related to every department, but the numbers would have to be summarised for the CEO’s consumption.
The finance department is also responsible for managing a lot of risks related to the financial management of the business. For example, consider a European business that is importing raw materials from Japan and exporting finished goods to the United States. In this example, the business is exposed to currency risk and fluctuations between the Japanese Yen, the US dollar and the Euro. The finance department thus must manage this risk which involves forecasting, analysis, simulations, scenario building and finally deciding on the actual hedging strategy.
There are dozens of other risks to manage as well. For example, managing the credit risk of the company’s creditors, having enough cash liquidity for day-to-day operations or contingencies, having backup credit lines set up in case of emergencies and so on.
Coordinating with Banks/ Securing Capital
Depending on the business structure of the company, the finance department might have to liaise with several banks around the world. Examples of bank-related activities include – a merger or acquisition, raising capital from the debt or equity markets, managing international trade and payments, handling investments on behalf of the company or even managing day-to-day cash collections.
In addition to just coordinating with banks on these activities, it also falls on the finance department to minimise the cost of capital for the business. They must negotiate the cheapest rates for borrowing and structure the business in a way that maximises shareholder value.
Compliance – The finance department also has a role to play in managing regulatory and legal compliance. For example, ensuring that proper tax laws are being followed or complying with international sanctions and so on.
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