The finance department in a business or institution is a division responsible for handling money on its behalf. Depending on the type of company, the role of a finance department will vary. Apart from controlling the expenditure and income, the finance department ensures that transactions associated with the organization’s daily operations run smoothly without disruptions
In a business, the financial department oversees the disbursement of salaries, clearing of supplier invoices, payment of utility bills, and other running expenses. Apart from all this, the department is required to perform a detailed analysis of the company’s financial situation and develop a business model profit plan. The plan will include everything from controlling costs to seeking out credit lines, and new investment strategies to improve the financial situation of the business continually.
What Does a Finance Department Look Like?
The typical finance department handles two aspects of a business—its past and future. The accounting section takes care of what happened in the past, with responsibilities including:- Bookkeeping, payables, and receivables—Keeps track of day-to-day transactions of the business.
- Financial reporting—This section translates all of the accounting entries from the bookkeeping section into financial statements that can be analyzed and shared.
- Taxes and compliance—Every business has to deal with taxes. This involves a great deal of form filling and calculating. The tax and compliance section makes use of information from the bookkeeping section and financial statements to fill out necessary forms and file the tax on time.
- Financial planning and analysis—This section presents strategic and financial plans to predict how financial results would play out over a timespan on a regular basis. When the actual sales and expenses reports are available, a comparison is made to determine which areas of the business could be improved or changed so the company’s goals are met. This is generally termed as variance analysis. Over time, updating these reports helps in a better understanding of how various scenarios, such as losing a major client, would play out, and how it would affect the company.
- Treasury and working capital management—The main priority of this module is to ensure that the business has working capital or liquid cash to run daily operations. Apart from projecting the company’s future working capital requirements, the section needs to make sure that any surplus cash is invested in the short term to yield some kind of interest.
- Corporate development and corporate strategy—This division is responsible for arranging and analyzing mergers or acquisition deals, and maximizing possibilities for debt and equity financing. Their input is taken in scenarios whereby the business owner needs to make highly strategic decisions, such as testing out a new market or product.
