Changing Role of Finance Manager

In the wake of fierce global competitiveness, path-breaking technological advancement, increasing regulatory requirements following spate of reporting scandals, changes in business models, growing internationalization of business and sensitivity to financial markets, Indian Corporate to survive and thrive and compete globally will have to redefine tectonically the role of their finance managers so that their focus is less on traditional finance jobs like transaction processing, budgeting and capital raising and instead more on strategy making and managing risks and ensuring greater transparency in corporate reporting.

Todays and tomorrow’s finance managers are expected not only to confine themselves to financial planning, capital raising, managing assets and monitoring with new perspectives, new approaches and new skills but also to assume the role of strategic partner and participate actively in the front-end of strategic thinking, building and reviewing business portfolio, managing risks, and act as an agent among various constituencies within and outside the organization.

Managing money is a tricky business, managing other people’s money is not just tricky; It’s a lot challenging and difficult Considering most people need guidance on where to invest, how to save taxes, the best insurance scheme, which fund to invest in, which stock to hold, which one to sell, how to plan children education and their own retirement. Finance experts are most sought after with a fast-growing working population that earns well and needs expert handling of their finances.

In his endeavor to reduce cost of funding the firm’s requirements, finance managers of Indian Corporate shall have to evolve new financial instruments of the likes of zero-coupon bonds, deep discount bonds, floating rate bonds, secured premium notes, convertible warrants, futures and options incorporating attractive features that could entice finicky investors. Securitization can prove to be the most potent financial instrument for a finance manager in garnering funds at relatively cheaper rate.

Securitization, in fact, is a carefully structured process by which a pool of loans and other receivables are packaged and sold in the form of asset-backed securities to the investors to procure the required funds from them. Through this process relatively illiquid assets comprising loans and receivables are converted into securities. Securitization is cheaper source of financing in comparison to conventional fund raising instruments.

In highly discontinuous and uncertain environment business risks arising out of tumultuous fluctuations in commodity prices, share prices, interest rates and foreign exchange rates have increased considerably which, in turn, have not only enhanced cost of managing business but also increased vulnerability of the organization. A finance manager will have to play crucial role in hedging the unwanted business risks of the firm.

The three most important roles finance and accounting should serve within a company are:

• Identifying opportunities to improve the business
• Executing company strategy
• Budgeting and forecasting

The role of the finance manager

The first objective of the accounting activity is to deliver information necessary for the measurement of the company’s performance. Using some generally accepted and regulated standards and principles, the accountants prepare the financial statements that establish the profit based only on the registered sales and expenses. On the other hand, the financial manager focuses on the actual entries and issues of cash flow that are related to such income and expenses. He/she keeps the company solvent by analysing and planning the cash flows necessary for paying the obligations and purchasing the assets needed by the company to reach its financial objectives. If the individuals involved in the accounting activities focus on collecting information and presenting the financial statements, the financial manager evaluates the situations elaborated by the accounting activity, creates additional information and takes decisions based on subsequent analyses. The purpose of the financial activity is to provide correct and easily interpretable information about the company’s past, present and future operations. The financial manager uses this information, either in its basic form, or after certain processing and analyses, as important entries in the decision-making process.

Reporting

A good finance manager should produce financial reports that show the organization’s financial position, operating performance and cash flow over a period of time through the use of meaningful financial statements. He / She should create management reports on a regular basis that are relevant to decision making processes, measuring performance against measures and targets (output and outcomes) established during finance management planning, against budget objectives, and/or against financial management performance standards used within an industry.