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Defining the Financial Managers Role

Defining the Financial Managers Role

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Published by Mekbib Mulugeta

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Published by: Mekbib Mulugeta on Jun 28, 2012
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Defining the Financial Managers Role1 of 3www.qfinance.com
Defining the Financial Manager’s Role
Checklist
This checklist outlines the role of the financial manager.
Definition
A financial manager is responsible for providing financial advice and support to colleagues and clients toenable them to make sound business decisions. The role of the financial manager is more than simplyaccounting; it is multifunctional. Financial managers must understand all aspects of the business so thatthey are able to adequately advise and support the chief executive officer in decision-making and ensuringcompany growth and profitability.Almost every firm, government agency, or other type of organization has one or more financial managers.Financial managers oversee the preparation of financial reports, direct investment activities, and implementcash management strategies. They also implement the long-term goals of their organization.Many corporations operate multifunctional teams where the financial manager is responsible for a particulardivision or function, or looks after a range of departments and functions. Financial managers often havespecific roles and titles:
Controllers 
prepare financial reports and analyses of future earnings or expenses that summarize theorganization’s financial position. Controllers are also in charge of preparing special reports required byregulatory authorities—especially important because of the Sarbanes–Oxley Act, designed in part to protectinvestors from fraud.
Treasurers and finance officers 
direct and oversee budgets, monitor the investment of funds, manageassociated risks, supervise cash management activities, execute capital raising strategies, and deal withmergers and acquisitions.
Risk and insurance managers 
administer programs to minimize risks and losses that could arise fromfinancial transactions and business operations.
Credit managers 
supervise the firm’s issuance of credit, fix credit-rating criteria, determine credit limits, andmonitor the collection of past-due accounts.
Cash managers 
supervise and manage the flow of cash receipts and disbursements to meet business andinvestment needs.The financial manager’s role, particularly in business, is changing in response to technological advances thathave significantly reduced the time it takes to produce financial reports. Financial managers now performmore data analysis to offer senior management ideas on how to maximize profits. They play an increasinglysignificant role in mergers and acquisitions and in related financing, and in areas that require wide-ranging,focused knowledge to diminish risks and maximize profit.
Advantages
Financial managers improve business organization and risk management by providing reassurance onthe effectiveness and efficiency of operations, financial reporting, and compliance with applicable lawsand regulations.Financial managers provide management with an in-depth and unbiased understanding of risks thatthe organization may be facing, allowing for preemptive planning.Financial managers give company officers and directors forewarning of ethical and legal issues thatmay affect the organization.
 
Defining the Financial Managers Role2 of 3www.qfinance.com
Disadvantages
Although they are meant to be independent and impartial, financial managers are paid by the companyand are an integral part of the company management; this can lead to conflicts of interest whenadvising senior management on, for example, investment risk.Financial managers’ judgments, estimates, and interpretations are not always objective because oftheir close relationship with the organization for which they work.
Action Checklist
Has the financial manager worked in related business fields previously and, if so, for how long? Whatreliable references can be provided?How good is his/her track record on risk assessment and planning forcontingencies?In assessing business processes, how up-to-date ishe/she with technology controls in auditing?
Dos and Don’ts
Do
Consult with the financial controllers where ethical or legal issues may be involved.
Don’t
Don’t forget to consult key stakeholders and managers when evaluating and employing new financialmanagers, so that areas of competence can be checked.
More Info
Books:
Brigham, Eugene F., and Louis C. Gapenski.
Financial Management: Theory and Practice 
. 11th ed.Cincinnati, OH: South-Western College Publishing, 2004.Jorion, Philippe.
Financial Risk Manager Handbook 
. 4th ed. Hoboken, NJ: Wiley, 2007.Shim Jae K., and Joel G. Siegel.
Financial Management 
. 2nd ed. Hauppauge, NY: Barron’sEducational Series, 2000.
Article:
Varughese, Jess, and Peter Bond. “The ten commandments of integrating an acquisition.”
US Banker 
(July 2008).
Report:
US Government Accountability Office. “Financial management: Effective internal control is key toaccountability.” February 16, 2005.
Websites:
Association for Financial Professionals:www.afponline.orgFinancial Management Association International (FMA):www.fma.org
See Also
Best PracticeMoney ManagersViewpoints

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