1.1 Roles of Finance Function Flashcards
The FF enables, shapes and narrates value creation through it’s roles of:
- Planning
- Forecasting
- Resource allocation
- Performance management and control
- Financial (corporate) reporting
Change is the new norm in many org due to:
- Seismic shifts in level of competition
- customers expectations
- global political outlook
- combined with fast pace of technological change
Change has been a constant but what is different is:
How rapid change has become.
The rapid and unpredictable changes have resulted in huge disruption:
- Org. have to plan for a different way of doing business
- The roles of the FF have evolved
The two main types of org:
- Profit seeking businesses: Companies, partnerships and sole traders. Main objective is to maximise wealth of owners
- Not-for-profit (NFPO’s: Main objective is to maximise benefit to beneficiaries.
- Public sector org. (schools / hospitals) - government serves population
- Private sector org (third sector) - charities, non-governmental org NGO’s.
Main functions of bus:
- Operations
- Sales and marketing
- Human resources
- IT
- Finance
These functions reflect the model of the bus as:
taking three basic types of resources - material, labour & money - to produce g&s to make profit.
The three roles FF plays in order to bring value to org:
- Enabling (Enterprise pillar),
- shaping how ( Performance pillar),
- and narrating how ( Financial pillar)
An org creates and preserves value
Value is the:
achievement of specified objectives in the most economic way and at the required level of quality and reliability.
The FF works both in terms of:
- creating value in the short term
- preserving value in the long term
FF enables org to create and preserve value through:
- Planning
- Forecasting
- Resource allocation
Planning:
FF has an important role in preparing plans to assist the org in achieving it’s objectives and creating relevant strategies. (Operational level - budgets)
Forecasting:
An important role of FF at operational level is preparation of forecasts (future sales / material prices)
Resource allocation:
An important role of FF is to determine which resources (labour, material, machinery, finance) the org. needs to achieve objectives.
The FF shapes how an org creates and preserves value through:
- Performance management
- Control
Performance management:
- FF has an important role in the management of performance and the achievement of plans and budgets
- Eg: It will help prepare information on performance measures for internal management to assist in monitoring performance of the org.
- These could be quantitative (sales, profits, units produced) or qualitative ( customer satisfaction, level of innovation)
Control:
- Is an important part of effective performance management
- Actual performance is compared to planned performance to identify differences and then variance analysis can be done
- This can result in reassessment / amendment to plans, strategies, budgets.
FF narrates how an org creates and preserves value through:
- Financial (corporate) reporting
Financial (corporate) reporting:
- An important role of FF is to prepare comprehensive reports in order to give information to shareholders and other interested parties about the activities and performance throughout the year.
How the FF relates to other functions:
- assemble and extract data to provide info to other functions and insights about value creation and preservation
- it will work with other functions and stakeholders to influence and shape how this function creates and preserves value
- The CFO will work with heads of other functions to achieve the desired org impact for the function
