8 - Operating Levels of Finance Function Flashcards
Financial reporting, mgmt accounting, treasury and internal audit are all linked to which level of the finance diamond structure? What does this mean their role is?
Level 4 = lowest level - smart finance factories.
Role is to generate info & provide prelim insights.
3 insights financial reporting provide
- financial statements
- analyse effect of changes in accounting standards
- Dashboard of financial ratios & impact on share price
3 benefits of financial reporting function
- Accurate draft financial statements = min adj for audit
2. Improved mgmt decisions as impact of decisions on financial statements can be predicted
4 insights mgmt accounting provide.
- Monthly mgmt accounts = analyse variance
- Real-time monitoring of perf
- Budgets and forecast
- Monitor KPIs
1 benefit of mgmt reporting function
Greater insight into perf = better decision making and hence potential for more profit
4 insights provided by treasury function
- Working K reports
- Advice on sources of funding
- Monitor & predict effect of currency & IR changes
- Predict demand for new shares at diff issue prices to determine optimum price.
Do treasury maintain assets?
NO - the relevant department do this themselves once treasury has advised on source of funding for asset.
1 benefit of treasury function
Improved investment decisions - only undertaken beneficial ones = improved LR profits.
4 insights provided by internal audit
- Effectiveness of internal controls
- Prevent and detect fraud
- Effect of changes in bis environ on org
- Analyse & quantify effect of key risks on org
2 benefits of internal audit.
- Improved identification & mgmt of bis risks
2. Less chance of disruptive events -VE impact org
For this chapter, the specialist finance areas relate to which level of diamond finance structure? What does this mean for their role?
Level 3 - digital COEs
Provide further insight to decision makers about value creation and preservation.
FP&A =
help org to set, monitor and evaluate their progress in achieving goals and objectives.
3 main roles of FP&A
- Analysing org perf
- Analyse trends in bis environ
- Predict future trends and perf
Which of the 4 finance activities do FP&A perform?
Contemporary - analysing for insight & advising to influence.
FP&A are able to leverage…
Tech advances e.g. cloud computing, big data, data analytics and data visualisations.
FP&A insight wrt assets
How best to use surplus assets e.g. by investing in projects, increased inventory & payment of dividends.
FP&A insight wrt financial health
overall financial health of org including analysing financial ratios and drivers behind them.
FP&A insight wrt major board decisions
budgeting, forecasting and data analysis
Do FP&A look at past or future perf?
BOTH - analyse past org perf and also budget and forecast for future
FP&A insight wrt products
- which products generate largest portion of net profit?
- which products generate highest and lowest profit margins?
FP&A insight wrt cost
How cost effective each bis area is and what % of financial resources each consumes vs what they generate
FP&A insight wrt budget
Develop master budget for org based on each function’s budget prepared by each area of bis.
Taxation teams role =
Specialist tax experts who provide info and support to bis functions on tax matters.