The Structure and Shape of the Finance Function

Question 1

Mintzberg five components of an organisation

Answer 1

Strategic apex
Technostructure - Middle line - Support staff (admin)
Operating core

Question 2

Centralised organisation structure advantages and disadvantages

Answer 2

Adv
Experienced people make the decisions
Consistent policies throughout the company
Quick decisions without consultation
Standardised procedures (leading to EOS)
Disadv
Reduces input of day to day exports in decision making
Demoralising branch managers by making their opinions unheard

Question 3

Decentralised organisation structure advantages and disadvantages

Answer 3

Adv
Reduces burden on senior management
Empowers local managers
Subordinates have better knowledge of local conditions
Middle management are groomed to take higher positions
Disadv
Reduction in uniformity will unsettle customers
Local managers may not see the bigger picture like head office does

Question 4

Span of control definition

Answer 4

Refers to the number of direct reports or subordinates controlled by a manager

Question 5

Scalar chain definition

Answer 5

The number of layers of management from the bottom of the organisation to the top
Tall organisation triangle = long scalar chain
Flat organisation triangle = short scalar chain

Question 6

Tall organisation features

Answer 6

Long scalar chain
More managers with narrow span of control
Suffer from too many managers
Expensive to run
Decisions take long time to reach the bottom of the organisation
Good promotion opportunities
Managers do not have to spend a lot of time managing staff

Question 7

Flat organisation features

Answer 7

Relatively few managers with a wide span of control
Quick decisions
More susceptible to fraud and error

Question 8

What is an open system?

Answer 8

Connected and interacts with its environment (between organisation and outside world)
Both controllable and uncontrollable inputs and can produce predictable and unpredictable outputs
Open systems can also exist within organisations
Most organisations are open systems

Question 9

What is a closed system?

Answer 9

Isolated from and independent of is environment
Organisation and environment is separated
Relatively closed systems may exist within an organisation - eg R&D and security (aim to protect sensitive information)

Question 10

Features of entrepreneurial structure

Answer 10

(Spider in a web)
New or small organisation
Little specialisation or formalisation
Founder has power and creates the culture
Informal work environment
Reacts quickly to challenges

Question 11

Features of functional structure

Answer 11

Organised around different business functions - often categorised as departments or divisions
Departments are based on specialised functions - eg R&D, finance, marketing
Emphasis on roles rather than individuals who fill those roles
Bureaucratic and slow in distributing information

Question 12

Features of matrix structure

Answer 12

(A net)
Organised around projects such as designing, building, marketing and selling
Communication tends to be horizontal
Built upon principles of flexibility and dual authority, goes against classical theory of management that advocates unity of command
Increasing popularity due to recognition that functional versatility is the key to flexibility.
Horizontal structure

Question 13

Features of divisional structure

Answer 13

Each division is largely autonomous with its own subculture - eg Mars has confectionary division and pet food division
Central HQ or head office will be limited but typically retains some functions - eg planning, finance, legal services (or some of these services may be outsourced)

Question 14

Hierarchical shape finance function

Answer 14

Triangle shaped with a large number of less qualified people towards the lower end of the triangle carrying out basic processing and interpreting work tapering to the top at CFO

Question 15

Diamond shape finance function

Answer 15

Geared less towards stewardship and more towards growth strategies and providing financial insight to add value. Automation of routine processing has reduced the number of less skilled staff at the lower end of the function with a large band of multi skilled individuals in the middle interacting with the rest of the business

Question 16

Financial accounting role

Answer 16

Bookkeeping and preparation of financial statements

Question 17

Management accounting role

Answer 17

Record current costs and revenues then analyse this information to identify trends
This information is then reported up through the organisation
Budgets are prepared to translate the organisations objectives into a financial plan and actual performance is then compared to this budget and control action is taken when deviations are identified

Question 18

Treasury role

Answer 18

In charge of the cash flow management of the company
Plans to minimise total tax liabilities
Identify most suitable ways to raise finance
Manage risks - interest rate and foreign currency risk managed using derivatives such as futures and options
Management of working capital making sure the company has the liquid funds it needs

Question 19

Internal audit role

Answer 19

Reports to the audit committee on the efficiency of operations, reliability of financial reporting, deterring and investigating fraud, safeguarding assets, commenting on compliance with laws and regulations

Question 20

Financial planning role

Answer 20

Uses the information provided by finance departments to support planning and analysis

Question 21

Taxation role

Answer 21

Provide expert tax planning, alternative tax solutions, or provide analysis relating to the taxation impact of different strategies by drawing information from available sources

Question 22

Project management role

Answer 22

Uses the information provided by finance department to support internal decision making
Stages in project management process:
Initiation
Planning
Executing
Controlling
Review and close
Finance likely has a role in controlling (to track costs) and initiation (project appraisal and financial viability)

Question 23

What is a shared service centre (SSC)?

Answer 23

A separate business unit created within a company to deliver a specific service or suite of services across the company

Question 24

Features of SSC

Answer 24

Operate like independent businesses
View other departments in organisation as customers
Aim to gain efficiencies through continuous improvement that results in more efficient standardised processes
Utilise technology to bring efficiencies
Heavily focused on value creation. And held accountable to agreed service levels

Question 25

Boundary of control definition

Answer 25

Limit of an organisation’s direct jurisdiction - inside-out view looking outward from organisation

Question 26

Boundary of identity definition

Answer 26

View from outside the organisation - an outsider looking towards the organisation

Question 27

Externalisation definition

Answer 27

AKA jobless structure
A wide range of non-traditional employment arrangements including casual workers, temp workers, fixed term contract arrangments

Question 28

Internal audit functions

Answer 28

SCREAM
Safeguarding assets
Commenting on compliance with laws and regulation
Reliability of financial reporting
Efficiency of operations
Allegations - investigating fraud
Management in any other way

Reports to audit committee

Question 29

Effective internal control system

Answer 29

OAP SPASM
Organisation - clear reporting lines
Authorisation - signed by appropriate person
Personnel - robust recruitment and rewards to employees

Segregation of duties
Physical - locked doors
Arithmetic - correct calculations
Supervisory - employees should be supervised
Management - management should review all information received and be vigilant

Question 30

Stages in project management process

Answer 30

Initiation - In response to a need, appraisal to see if project is feasible
Planning - What needs to be done and how will success be measured?
Executing - Team members perform roles and project manager coordinates
Controlling - Tracking progress against plan and corrective action