The finance department is like the backbone of an enterprise. It holds everything together through effective accounting and statistics that keep everything in check. In a company, the finance department has multiple responsibilities. The primary responsibility we believe them to hold is bookkeeping, but they are also responsible for assisting managers in making and updating their strategic decisions.
Financial and Strategic Planning
An essential task of the finance department is concerned with managing daily financial decisions with long term company objectives. The long-term, medium-term, and short-term goals are hence synchronized through the enterprise’s financial predictions that your financial department provides. They are responsible for measuring your project’s success.
Finance and Leadership
People working in the finance department are unlikely to be good at management and leadership. But they play an essential part in providing critical data and information to the management to lead effectively. For example, if the company is going to launch a new product in the market, they will need the finance department’s support to give them a feasibility report. They will need information about how they can find funds for this venture and so on. The leadership also needs to know how the business is performing, and the financial department provides them with this information.
Below, we explain some other responsibilities of the finance department:
Day-To-Day Transactional Accounting
The primary job of bookkeepers in the company, or as we know them as the finance department, is to be responsible for day to day transactional accounting. Their responsibilities include tracking all the company’s transactions and the management of any reporting. Day to day record keeping and preparations of financial statements also is the responsibility of this department. As a manager or owner of the company, you need to know where it stands financially. When the finance department provides this information, then the management makes high-level decisions.
Here, in this article, we will also get to know about the day to day general accounting responsibilities include bookkeeping. Payroll, finalizing information for income statements, balance sheets, cash flow reports, and so on.
Management of Cashflow
The finance department of your company is also responsible for the management of the company’s cash flow. They make sure that there are enough funds for day-to-day tasks. It also includes the services to the customers and the credit and collection policies. There are also payment policies for suppliers. In most companies, a daily log is made so that they can systematically calculate the company’s ongoing cash needs.
Tax and Compliance
Having a registered business inevitably involves taxes. Paying tax, hence, means doing a lot of calculations and filling out numerous forms. Accountants often use financial statements and other information. The tax and compliance responsibility is to ensure all the government forms are filled and submitted on time. The finance department also works to minimize tax so that the company can gain maximum net income.
Contribute To Management and Improvement
When all the necessary tasks are taken care of, the finance department starts contributing to the company’s management and improvement of projects. They measure and report all the key numbers which can identify the success rate of a project. The company managers use the finance team’s information to understand where they lack and where they can improve.
The finance department of your company is also responsible for risk management. They identify, evaluate, prioritize, and mitigate the company’s risks. The finance department predicts internal changes for a new venture that isn’t working out so well. They also indicate the external changes that include the recession in the economy, currency fluctuation, etc. They use their available resources to minimize the impacts and monitor it for changes.
Risk management also helps maximize opportunities for a project by predicting and being aware of the market changes and investment opportunities.
Capital budgeting observes and recognizes projects and opportunities in the market that can be worthy of investment. So its uses include land acquisition, mergers, or purchase of a fixed asset. The whole idea of capital budgeting for a company involves the main objectives of increasing profitability for the company. They aim to maximize the profit to ensure the growth of the company’s capital.
Some companies know that the organization’s finance department is a resource to assist the managers that run the business. With the ever-growing trend of outsourcing finance departments, it has become possible for even small-medium enterprises to access all the benefits of a finance department. And the best part is that it only costs a part of what hiring a complete finance team would have ideally cost. Professional help in financing is the key to keep the business up and to run. Without it, your business may have very little room for growth and sustainability.