1.1 Roles of Finance Function

Question 1

The FF enables, shapes and narrates value creation through it’s roles of:

Answer 1

• Planning
• Forecasting
• Resource allocation
• Performance management and control
• Financial (corporate) reporting

Question 2

Change is the new norm in many org due to:

Answer 2

• Seismic shifts in level of competition
• customers expectations
• global political outlook
• combined with fast pace of technological change

Question 3

Change has been a constant but what is different is:

Answer 3

How rapid change has become.

Question 4

The rapid and unpredictable changes have resulted in huge disruption:

Answer 4

• Org. have to plan for a different way of doing business
• The roles of the FF have evolved

Question 5

The two main types of org:

Answer 5

• 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.

Question 6

Main functions of bus:

Answer 6

• Operations
• Sales and marketing
• Human resources
• IT
• Finance

Question 7

These functions reflect the model of the bus as:

Answer 7

taking three basic types of resources - material, labour & money - to produce g&s to make profit.

Question 8

The three roles FF plays in order to bring value to org:

Answer 8

• Enabling (Enterprise pillar),
• shaping how ( Performance pillar),
• and narrating how ( Financial pillar)
  An org creates and preserves value

Question 9

Value is the:

Answer 9

achievement of specified objectives in the most economic way and at the required level of quality and reliability.

Question 10

The FF works both in terms of:

Answer 10

• creating value in the short term
• preserving value in the long term

Question 11

FF enables org to create and preserve value through:

Answer 11

• Planning
• Forecasting
• Resource allocation

Question 12

Planning:

Answer 12

FF has an important role in preparing plans to assist the org in achieving it’s objectives and creating relevant strategies. (Operational level - budgets)

Question 13

Forecasting:

Answer 13

An important role of FF at operational level is preparation of forecasts (future sales / material prices)

Question 14

Resource allocation:

Answer 14

An important role of FF is to determine which resources (labour, material, machinery, finance) the org. needs to achieve objectives.

Question 15

The FF shapes how an org creates and preserves value through:

Answer 15

• Performance management
• Control

Question 16

Performance management:

Answer 16

• 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)

Question 17

Control:

Answer 17

• 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.

Question 18

FF narrates how an org creates and preserves value through:

Answer 18

• Financial (corporate) reporting

Question 19

Financial (corporate) reporting:

Answer 19

• 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.

Question 20

How the FF relates to other functions:

Answer 20

• 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