Main Functions Of The Finance Department

Paper airplanes are known as “aerogames”, where the Japanese art of origami mixes with aerodynamics. When a paper airplane is made, the balance of weight in its wings must be sought, along with the controlled weight between the tip, center and tail, to create the aerodynamic effect that allows the airplane to take its flight. This is achieved by having a “fold plan / map” that will generate the desired final effect.

The finance department within a company plays an important role, since it could be said that it is in charge of generating the necessary information to determine what “folds” the organization must perform for its flight to occur and remain stable. With folds we refer to decision-making to maintain balance both in its wings (financing and investments) and in its body (income and expenses). 

Therefore, you must seek the optimal balance in the management of income and outputs to analyze and determine the need for loans including their evaluation and selection, as well as decide which investments are possible and which are the most convenient. 

Here are 6 main functions that the finance department of any organization should perform:

Accounting Processes

Having defined a process that allows having accounting information and financial analysis in a timely manner based on a delivery schedule. Clear accounts are the most important pillar for making good decisions.

Internal Control

The more automated the process is generated, the easier it will be to keep track. Project management.

Risk management

Define the need and manage the purchase and updating of insurance and surety, among others.

Market Knowledge

Know the external factors that can affect. It is important to be constantly updating the exchange rate, inflation, interest, historical and forecast movements in prices and costs of raw materials, falling sales in the sector in other times of crisis, etc.

Budget

Work aligned to a budget and monitor compliance with a certain frequency. It is important to generate several realistic scenarios that allow greater visibility of possible situations, as well as to determine cut-off dates to, if necessary, make timely and scheduled adjustments.

Without proper management of the finance department, we will have trouble keeping our organization flying. Establishing these 6 functions within financial support will maintain balance and make decision-making within the organization easier.

The investment function by finance consists of:

Look for investment options that the company may have, options such as the creation of new products, acquisition of assets, expansion of the premises, purchase of titles or shares, etc.

Evaluate these investment options, taking into account which one has a higher profitability, which one allows us to recover our money in the shortest possible time.

And, at the same time, evaluate if we have sufficient financial capacity to acquire the investment, either using our own capital, or if we have the possibility of accessing an external source of financing.

Select the most convenient option for our business.

The search for investment options occurs when:

We want to grow the business, for example, by acquiring new assets, new machinery, launching new products, expanding the premises, buying new premises, etc.

We have excess liquidity (cash that we are not going to use) and we want to invest it in order to make it grow, for example, in the acquisition of securities or shares, in bank account deposits, etc.