The Finance Function

Question 1

What responsibilities does the Finance function have in business? (6)

Answer 1

Responsibilities can include:
- Sales order processing
- Purchasing
- Monitoring bank account
- Payroll management
- Management accounting
- Inventory control

Question 2

Who are some of the external stakeholders of the Finance function? (6)

Answer 2

• Shareholders (Profit dividends & management)
• Banks (Loan repayments)
• Customers (High quality products & sustainability)
• Suppliers (Prompt payment and solvency)
• Regulatory Bodies (Compliance with regulation)
• Government organisations (Taxation and legislation)

Question 3

What support might the Finance function offer to the Sales and Marketing department?

Answer 3

• Customer account balances, time owing, and credit status, and even flagging up late payers who should not be sold to again until amounts owing are paid
• Comparisons of sales targets to actual sales
• Sales function cost analysis compared to budgeted costs

Question 4

What support might the Finance function offer to the Production department?

Answer 4

• Production function cost analysis compared to budgeted costs, allowing overspend analysis if necessary
• Budgets produced by Finance will allow the calculation of necessary raw material inventories

Question 5

What information might the Finance function provide to external suppliers?

Answer 5

• Remittance advices and other financial details, informing suppliers of amounts yet to be paid, by when, and how.
• Purchase orders for suppliers to order goods
• Details of faulty goods returned to the supplier

Question 6

In a business, who might the Finance function provide payroll information to?

Answer 6

Human resources or the payroll department, DEPENDING ON WHICH IS IN THE EXAM. If both, CHOOSE PAYROLL.

Question 7

What is the difference between internal and external auditors?

Answer 7

Internal auditors are either directly employed by or contracted to the business which they audit - concerned with internal checks and controls. External auditors are independent of the business they are auditing, and larger LLCs are required to provide an externally audited report in their Financial statements each year.

Question 8

What is Solvency in a business context?

Answer 8

The ability for a business to pay debts when they are due.

Question 9

How can Solvency be ensured and controlled?

Answer 9

Finance function can provide accurate and complete information about:
- Present funds
- Future Incomings: bank balance, amounts owing and when
- Future Outgoings: Amounts due to suppliers and other expenses - such as payroll, and when they are due
This can be calculated in a CASH BUDGET.

Question 10

When money in, money due, and money quickly realised is greater than money paid out, what is the surplus called?

Answer 10

Working capital