KEY ROLE OF FINANCE AND RELATED DISCIPLINE

1.0 INTRODUCTION

In this unit, you would identify the key role of finance as it is embedded in the functions of the Finance Manager. The central role of the finance manager will be explained to emphasis its utility as a pivot of management functions.

2.0 OBJECTIVES

At the end of this unit, you should be able to:

1.  identify the key roles of finance in an enterprise 
2. state the duties of a Finance Manager 
3. Explain the interdependent relationship of finance with other sections of a business organisation. 

3.0 MAIN CONTENT

3.1 Central Role of Finance Manager

As could be deduced from Unit 1 of this Module, the finance manager’s duties include:

1.  Budgeting 
2. Raising funds 
3. Selecting and evaluating projects 
4. Planning the marketing and pricing strategies. 

The finance manager is always supposed to be a specialist/professional, with knowledge of many areas of finance. The breadth of finance unction is vast that in many business organisations, it includes human resources from several departments of management.

3.2 Crucial Role Played by Finance Staff

As has been spelt out in Unit 1 of this Module, Finance is concerned with the flow of fund, which is the life blood of the business. The crucial role played by finance staff is recognised as vital and they are rewarded accordingly. Clearly, skill is an extremely valued asset in managing an enterprise. It entails the techniques through which an organisation obtains finance for the business and the usage of the finance to assure the business as a going concern and successful. The use of the finance to establish the enterprise successfully, maintain, sustain and enable it grow into a colossus requires financial dexterity which the finance manager and the staff are at the centre.

SELF ASSESSMENT EXERCISE 1

State the key roles of a finance manager.

3.3 Corporate Organisation

The finance function to staff and departments will be dependent upon the size and magnitude of the business organisation. The larger the organisation, the greater is the degree/level of specialization of tasks and duties required.
The smaller business consolidates many duties in fewer sections and units. Generally however, the head of finance – Director of Finance, Chief Finance Officer, as it may apply, is the treasurer or any other designation like the controller of finance or general manager finance etc.

As expressed in the highlighted functions of an enterprise, the treasurer supervises or participates in the functions of finance. The treasurer oversees or manages the enterprise’s liquid assets, liabilities, payroll and cashier activities, credits and collections, forecasting, capital budgeting and investment and financing. (All these will be discussed later in other units and other financial management courses in the programme as appropriate).
The Treasurer is an active participant in long-range financial planning. Practically, the task of finance is specifically assigned to finance staff, but non-finance staff frequently partakes in the decision-making process.
For example:

1. Cost recording and control are accounting and finance function, whereas the determination of standard costs and the responsibility for correcting any variation(s) from realizable standards is with operations department. 
2.  In the same state, sales department in collaboration with marketing consultant (hired by the enterprise) estimate the level of sales for various pricing/costing policies. This data is then utilized in financial planning to estimate profit levels for each price structure. The framework and responsibility for pricing/costing policy are jointly determined by the marketing/sales department and financial planning staff. Planning funds for operations and capital budgeting is also a joint decision-making process conducted by the production, sales and finance personnel. 
3. The need for a new machine might be determined by the production department which makes its request to the head of division/department etc, (who is a part of financial management team). 

If the expenditure is not greater than the estimated value example N20,000 the decision as to whether to acquire the machine would be made at this point. If the outlay is above that amount, the requisition would be submitted for approval to business organisation with head of finance recommendation and supporting information as onus of proof.

This will then follow the laid-down policy of the enterprise – to approve or disapprove the proposal; based upon data relating to projected production/sales and the available funds to finance the investment.

SELF ASSESSMENT EXERCISE 2

Give one example of how finance inter-depends on other sections/units for implementation of a business.

3.4 Finance Functions in an Enterprise

The functions of finance manager are condensed into the following:

1.  Financing and investment; 
2. Accounting and control; 
3.  Forecasting and long-run planning; 
4. Pricing, and 
5. Others. 

They are discussed below.

1.  Financing and Investments: Supervising the firm’s cash and other liquid holdings, raising additional funds when required and investing funds in projects for adequate returns to keep the enterprise going as a concern. 
2.  Accounting and Control: Maintaining financial records, controlling financial activities; identifying deviations from planned and efficient performance and managing payroll, tax matters, inventories, fixed assets and computer operations. 
3.  Forecasting and Long-Run Planning: Forecasting costs, technological changes, capital market conditions, funds needed for investment purposes, returns on proposed investment projects and demand for the organisation’s product etc. 
4.  Pricing: Determining the impact of pricing/costing policies on profitability. 
5. Other Functions: Credit and collection, insurance and incentive planning (pension, etc.) 

4.0 CONCLUSION

In this unit, we have attempted to establish the financial manager as a key person in the business organisation, frequently rising to the top in an enterprise as his role is central, dynamic and important.

5.0 SUMMARY

In summary, this unit is made up of the central role of the finance manager in a business organisation, the crucial role of finance staff, and the interdependence of finance unit/department with others in a corporate organisation and the highlights of finance function in an enterprise.

6.0 TUTOR-MARKED ASSIGNMENT

1. What are the central roles of finance manager in a business organisation? 
2. Discuss briefly the duties of a treasurer in an enterprise.