ROLE AND SIGNIFICANCE OF FINANCE IN OTHER FUNCTIONAL AREAS

Submitted to : Submitted by :R.D. Purkayasthya Biswajit BhattacharjeeAssistant Professor Student, DBA-JNSMSDBA-JNSMS, AUS Roll No. 19

Assam University, Silchar

Finance is a field within economics that deals with the allocation of assets and liabilities over time under conditions of certainty and uncertainty. Finance can also be defined as the science of money management. A key point in finance is the time value of money, which states that one unit of currency today is worth more than one unit of currency tomorrow. Finance aims to price assets based on their risk level and their expected rate of return.

Finance can be broken into three different sub-categories:

public finance, corporate finance and personal finance.

Finance

Production management Marketing management Financial management Personal management

Various functional areas of management are:

Production management:  Production means creation of utilities by converting raw material in to final product by various scientific methods and regulations. It is very important field of management. Various sub-areas of the production department are as follows.

Plant lay out and location Production planning Material management Research and Development Quality Control

Various functional areas of management (c0nt…)

Marketing management:Marketing management involves distribution of the product to the buyers. It may need number of steps. Sub areas are as follows

AdvertisingSales managementMarket research

Various functional areas of management (c0nt…)

Finance and accounting management:Financial and accounting management deals with managerial activities related to procurement and utilization of fund for business purpose. Its sub areas are as follows

Financial accountingManagement accountingTaxationCosting

Various functional areas of management (c0nt…)

Personnel Management: Personnel management is the phase of management which deals with effective use and control of manpower. Following are the sub areas of Personnel management

Personnel planningRecruitment and selectionTraining and developmentWage administration Industrial relation

Various functional areas of management (c0nt…)

Relationship with production management

The production department is responsible for the development and manufacturing of the product. It is also responsible for the quality control. The inventory manager acts as the bridge between the sales department and production department. The inventory manager develops the inventory policy considering the requirement of both production department and the marketing department. Similarly, the capital budgeting manager works in coordination with the sales department and production department in order to decide whether an investment proposal is to be made or not. The capital budgeting manager uses the revenue forecast from the sales department and production volume and costs from the production department in order to analyze an investment alternative. Thus, there is close relationship between production management and financial management.

Relationship of Finance with other Functional areas

Relationship with marketing management   

The financial manager closely work with the marketing manager. The marketing manager involves in product survey, demand analysis and forecasting of the sales volume for the given price. The marketing manager also involves in new product development, expanding marketing territory, pricing of the products etc. These functions of the marketing manager have financial implications. The financial manger closely works with marketing manager in these issues in order to analyze develops the promotion and pricing strategies. In this regard, the credit manager, inventory manager and the capital budgeting manager work together with the credit policies. Similarly, the inventory manager suggests the best inventory policy. The capital budgeting manager analyses the feasibility of the project.

Relationship of Finance with other Functional areas (cont…)

Relationship with human resource management   

Human resource management involves in the recruitment and selection of the employees. It definitely involves cost. The costs of human resource are analyzed in capital budgeting decision by the capital budgeting manager. Similarly, the treasure works closely with human resource department regarding the pension fund management and different incentive policies to the employees.

Relationship of Finance with other Functional areas (cont…)

Financial Objectives

Different types of organisation have different

financial objectives:

e.g. Vodafone: aim to make a large profit. Charities: aim to get many donations and help

people as best they can. Clubs: aim to use funds to give the best

possible service to their members.

The Role of the Finance Department

Business finance is required for the establishment of every business organisation. With the growth in activities, financial needs also grow. Funds are required for the purchase of land and building, machinery and other fixed assets. Besides this, money is also needed to meet day-to- day expenses e.g. purchase of raw material, payment of wages and salaries, electricity bills, telephone bills etc. We are aware that production continues in anticipation of demand. Expenses continue to be incurred until the goods are sold and money is recovered. Money is required to bridge the time gap between production and sales. Besides producers, may be necessary to change the office set up in order to install computers. Renovation of facilities can be taken up only when adequate funds are available.

ROLE AND SIGNIFICANCE OF FINANCE IN OTHER FUNCTIONAL AREAS

To meet contingenciesFunds are always required to meet the ups and downs of business and unforeseen problems. Suppose, some manufacturer anticipates shortage of raw materials after a period. Obviously he would like to stock raw materials. But he will be able to do so only when money would be available. To promote salesIn this era of competition, lot of money is required to be spent on activities for promoting sales like advertisement, personal selling, home delivery of goods etc.

ROLE AND SIGNIFICANCE OF FINANCE IN OTHER FUNCTIONAL AREAS (cont…)

To avail of business opportunitiesFunds are also required to avail of business opportunities. Suppose a company wants to submit a tender but some minimum amount is required to be deposited along with the application. In the case of non-availability of funds it would not be possible for the company to apply.

ROLE AND SIGNIFICANCE OF FINANCE IN OTHER FUNCTIONAL AREAS (cont…)

All of these different types of organisation share the need to have good financial management.

The efficient management of finance is vitally important to the success or failure of an organisation.

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Good Financial Management

Every organisation must make sure that it has enough money: to pay wages and salaries. to pay bills (e.g. suppliers, electricity, advertising). to develop new products and services.

Organisations must also check how much they are spending - organisations which have high costs, are often unsuccessful.

Good Financial Management

Ensures that: There are adequate funds available to

acquire the resources needed to help the organisation to achieve its objectives.

Costs are controlled through monitoring of budgets.

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The Financial Function

Ensures that: Not only that adequate funds are available, but

that they are available at the right time. The cash flow of an organisation is also important.

Profitability of the organisation is controlled, ensuring that the agreed profitability targets are being met.

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The Financial Function

The care and planning of the financial

needs of an organisation are as necessary

as the planning for operations,

marketing, human resources and

administration.

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The Need for Planning

The Finance Department has three main tasks to help the organisation achieve its objectives:

Payment of wages and salaries. Payment of accounts. Maintenance of financial records and

accounts.

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The Main Tasks of the Finance Department

Organisations need to keep their staff happy, one way that this can be achieved is by ensuring that they are paid the right amount at the right time.

The Finance Department will make necessary deductions for tax and National Insurance.

They will also provide information to HM Revenue & Customs to make sure that taxes paid have been correctly calculated.

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Payment of Wages and Salaries

The Finance Department needs to ensure that it makes payment to its suppliers on time, as well as collecting money owed by customers.

Payment to suppliers fall into two different categories: Cash Credit 22

Payment of Accounts

The Finance Department will record financial transactions, so that at the end of the year or period it can prepare final accounts.

Financial records are a history of the organisation’s activities.

Under the Companies Acts of 1985 and 1989, it is an offence for limited companies not to maintain proper financial records.

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Maintenance of Financial Records

Thank You