The Challenging Role of a Finance

Manager in a Dynamic Business

Environment

Approaches to Finance function

Traditional Approach:-
Finance function was confined to only
procurement of funds.
Modern Approach:-
It includes both raising of funds as well as their
effective utilization.
Financial managers oversee the preparation of financial reports and investment activities.
Objectives of Finance Manager Responsibilities:-

The finance manager is generally concerned with procurement, allocation and control of
financial resources of a concern. The objectives can be-

1. To ensure regular and adequate supply of funds to the concern.

2. To ensure adequate returns to the shareholders which will depend upon the earning
capacity, market price of the share, expectations of the shareholders?
3. To ensure optimum funds utilization. Once the funds are procured, they should be
utilized in maximum possible way at least cost.
4. To ensure safety on investment, i.e., funds should be invested in safe ventures so
that adequate rate of return can be achieved.
5. To plan a sound capital structure-There should be sound and fair composition of
capital so that a balance is maintained between debt and equity capital.

Almost every firm, government agency, and other type of organization employ one or more
financial managers. Financial managers oversee the preparation of financial reports, direct
investment activities, and implement cash management strategies. Managers also develop
strategies and implement the long-term goals of their organization.

The role and duties of financial managers vary with their specific titles, which include
controller, treasurer or finance officer, credit manager, cash manager, risk and insurance
manager, and manager of international banking. Controllers direct the preparation of
financial reports, such as income statements, balance sheets, and analyses of future
earnings or expenses, that summarize and forecast the organization's financial position.
Controllers also are in charge of preparing special reports required by regulatory authorities.
Often, controllers oversee the accounting, audit, and budget departments. Treasurers and
finance officers direct their organization's budgets to meet its financial goals. They oversee
the investment of funds, manage associated risks, supervise cash management activities,
execute capital-raising strategies to support the firm's expansion, and deal with mergers and
acquisitions. Credit managers oversee the firm's issuance of credit, establishing credit-rating
criteria, determining credit ceilings, and monitoring the collections of past-due accounts.

The Role of the Finance Manager

The role of finance manager in the company is an important one. The function of the finance
manager is not confined to the management and making of the accounts but it also plays a
major role in dividend decisions, capital budgeting decisions, capital structure outlay of the
firm, decision related to the merger and acquisitions, and all the investment decisions of the
firm. Thus the finance manager plays an important role in any business enterprise.

Financing Activities:-

The service of providing funds or capital for commercial or private reasons comes under the
umbrella term - Finance. It is also a branch of economics that studies the management of
money and other assets. It can be also defined as the management of funds and capital
required by a business and private activities. Management of finance has also developed
into a specialized branch within the financial sector and is carried out by finance managers.
Simply put these managers arrange money to be lent to businesses or private individuals
using either money already available from company accounts or from external lenders. The
simple process of optimization is used to receive the most from these funds by reducing the
cost of arranging the finance whilst at the same time ensuring returns are high.

Investment Activities:-

Financial managers are usually appointed as heads of the financial divisions of companies.
The financial division of a company is responsible for recording, analyzing and interpreting
financial information. Financial reports are then made available to people concerned such as
the managing director of the company, the bank manager and the shareholders of the
company.

Operating Activities:-

A finance manager will provide support to a corporation's operations department. Helping to

assist a corporation's accounting department and operations group by reviewing the annual
budget on a weekly basis, a finance manager will also prepare a company's financial data
analysis as well. Other job duties of the finance manager include identifying specific areas in
a corporation's budget that should be cut and preparing the monthly analysis of a company's
production costs.

Direction Activities:-

A finance manager can be compared to the captain of a ship who has first to set the
course to reach the destination and then steer the ship along the course. Similarly, a
manager has to, first of all, set objectives which the firm must achieve. Objectives
provide the direction in which the firm must move. Having decided upon the objectives,
the manager must constantly monitor the progress and activities of the firm to ensure
that it is moving in the desired directions. This is the first and foremost task of every
manager.

Coordination Activities:-
Main purpose of the role The Finance Manager, as a member of the Country Management
Team, plays a key role in developing and implementing the country strategy especially the
required financial inputs, as well as ensuring that there are sound financial practices in
country and rigorous budgetary control. This position provides financial management for a
multi-programmed and multi-site operation in a challenging living and working environment.
A key priority in all locations is to embed clear financial management controls and to ensure
understanding of and compliance with these by all staff. Overall objectives reporting to the
country manager, and working closely with finance and other departs team.

Analysis Activities:-

With any job there come certain requirements and prerequisites. Becoming the manager of
financial planning analysis requires a few credentials and related skills. The requirements
that a company specifies usually include previous experience in the banking sector with
specialization in fields like corporate finance, acquisitions and mergers. The candidate is
also expected to have an intimate knowledge of database applications and spreadsheets.
The additional requirements include the know how of e-commerce, good managerial skills
and problem solving capabilities. A candidate well versed in the above is sure to land a job
as the manager of financial planning analysis.

Decision Making Activities:-

If managers believe their tenure with their current employer will be short, they are unlikely to
undertake activities that are costly in the short run, and enrich the company only after a long
period of time, since they do not longer expect to remain with their employer to share the
rewards. Our hypothesis is that, all else being equal, the greater the rate of senior
management turnover, the smaller the percentage of revenue that a firm will invest in long-
term projects, such as R&D or employee training. Management and CEO stock ownership
can have a mitigating effect, since the greater the percentage of the firm that is owned by
management, the more management's incentives should be aligned with those of other
shareholders. This paper provides a theoretical model to demonstrate that, the greater the
probability that the manager will remain with the firm for a long period of time, the more the
manager will invest in long-term projects that maximize shareholders' wealth.

Profit Maximization Activities:-

Profit maximization is the traditional approach and the primary objective of financial
management. It implies that every decision relating to business is evaluated in the light of
profits. All the decision with respect to new projects, acquisition of assets, raising capital,
distributing dividends etc are studied for their impact on profits and profitability. If the result of
a decision is perceived to have positive effect on the profits, the decision is taken further for
implementation.

Utilization of Available Resources:-

By improving resource utilization, the finance manager can drastically reduce the costs of
providing increased levels of service. Control through software and hardware must be taken
on as a means of enabling more than just one single application to run on a single machine.
It is paramount to consolidate servers if you want to increase your return on investment from
resources that are under utilized. As mainframes tend to run at eighty to ninety percent of
their capacity, systems that are distributed tend to run at merely fifteen to twenty five
percent. Organizations are beginning to find that adjustments in allocation have to be made
in order to take total advantage of available resources.

Optimally Activities:-

The finance manager develops a hypothesis from asset pricing theory and optimization
theory that in a diversified portfolio of equity securities there is no linear relationship between
equilibrium equity returns and financial reporting variables subject to managerial discretion,
only a nonlinear relationship. Alternatively stated, this study presents theory and evidence
suggesting that linear conditional mean effects of discretionary financial reporting variables
on equity returns for an industry portfolio of firms are zero, while the nonlinear conditional
mean effects are nonzero.

Summary and Conclusion:-

The role of the financial manager is more than simply the person who, as the accountant of
years ago, tallied the assets and liabilities of a corporation. The finance manager is part
financial wizard, and part strategic planner, as well as someone keenly aware of industry
trends and standards. The financial manager must understand all aspects of the business so
they are able to adequately advise and support the chief executive officer in decision-making
and ensuring company growth and profitability into the future.