Financial manager is the individual who performs the financial management in the firm. A finance manager of a large organization has a very critical responsibility to shoulder as he has to take all decision about raising and utilization of resources have been taken efficiently and at no time resources should remain idle. As the size of organization grows and volume of financial transactions increases, his role and functions assumes bigger importance. A financial manager is also known as CFO, i.e. Chief Financial Officer.

The responsibilities / key functions of a financial manager are as follows:

A) Management functions

Planning:

CFO should make financial planning in the form of short term and long-term plans and frame policies relating to sources of finance, investment of funds including capital expenditure and distribution of profit.

Organizing:

Creating and monitoring proper organizational structure of finance looking to the needs of organization.

Coordination:

A CFO should coordinate with all other department so that no department suffers for want of funds. 

Controlling:

A CFO should fix/ set standards of performance, compare actual with standards fixed and exercise control on differences. He can apply techniques of budgetary control and for this; he should develop a system of collecting/ processing/analysing information.

B) Functions related to finance: 

Financial Planning:

A CFO should make financial planning in the form of short term and long-term plans and frame policies relating to sources of finance, investment of funds including capital expenditure and distribution of profit.

Financial forecasting:

Creating and monitoring proper organizational structure of finance looking to the needs of organization.

Financial engineering:

A CFO should keep himself abreast with new techniques of financial analysis and new financial instruments coming in market. In financial engineering, a CFO has to work on finding out solutions to the problem through complex mathematical models and high-speed computer solutions.   

C) Basic Functions 

6A’s

Anticipating the needs of funds in the organization

Acquisition of funds 

Allocation of funds

Administration of finds

Analysing the performance of funds 

Accounting and recording the transactions.

The six A’s of Finance can be summarized in the following 3 broad headings:

Anticipating and Acquisition of funds:

A Financial manager should ensure adequate quantum of funds from right source, right cost, right time, and right form and at minimum cost. He is responsible for acquiring the funds with the best possible and minimum cost.

Allocation and Administration of funds:

How much amount of funds are to be invested in current capital as well as in fixed assets (long term assets), this is to be considered by the finance manager while keeping in view liquidity & profitability. He also ensures the administration of finance in different departments.

Analysing the Performance of funds and thereafter managing the accounts:

The financial manager should ensure the performance of the allocation and administration of funds, to achieve the objectives of the firm. And finally interpret the results while maintain the records and accounts thereof. 

i. Evaluation of financial performance & reporting:

A CFO should periodically review financial performance against set standards, take corrective measures as well as report performance to the board & management for facilitating timely decisions pertaining to finance at top level.

ii. Upkeep of records and other routine functions:

A CFO should look in to following aspects: 

- supervision of cash receipts 

- safe custody of valuables & securities 

- maintenance of account              

- internal audit 

- compliance of govt regulations

D) Subsidiary functions: 

Besides core functions as above, a CFO should perform following equally important functions such as: 

Maintaining liquidity:

Adequate liquidity need to be maintained for paying obligations in time as well as meeting day to day expenses and for this, he should keep close eyes on cash in-flows, cash out flows. Hence cash budget and cash for-casting becomes his important function.

Profitability:

For ensuring adequate profit and maximizing shareholders wealth a CFO should look in to: 

- Profit planning 

- Price fixation of goods & services 

- Cost of funds/capital 

- Cost control

Risk management:

Preparing strategies for combating risks arising out of 

- Internal & 

- External factors 

E) Other Functions of Modern Age

Achieving corporate goals:

Besides goals of organization goals of different departments have to be achieved to increased market share of company’s products. 

Financial projections / forecasting:

For next 5-10 years consisting of cost & revenues for coming long term period keeping in view companies long term plans.

Corporate Governance:

For image building in the eyes of all stake holders of the company, transparency in systems / procedure and adherence of laws as well as rules & regulations. 

Merger and acquisitions initiative: 

- Including new product lines 

- Technological tie-up/ collaboration with foreign firms 

- Financial restructuring for increasing profitability 

- Tie-up arrangements for greater penetration in new markets in the country & abroad.

financial management

December 05, 2017