Excerpt (computer-generated)

20.04.2000
What are the roles and responsibilities
of a finance department
Muhammed Yesilhark
Introduction 2
Traditional roles of the finance department 2
Modern roles and responsibilities of the finance department 3
Conclusion 6
Bibliography 8

Introduction
Nowadays the finance department of a firm has a broad range of roles to undertake inside and
outside its business and carries large responsibilities especially in fields such as "Shareholder
Value" which is increasingly gaining in importance.
The essay focuses on traditional responsibilities such as financial accounting, payroll, estimating
and handling cash in- and outflow thus managing liquidity. The second part analyses the newer
roles like management accounting, strategy involvement, management information systems,
financial analysis and the broader range of responsibilities in the finance department. Finally, a
review of the roles and responsibilities will be undertaken to evaluate the importance of the
finance department.
Traditional roles of the finance department
The traditional roles and responsibilities of a finance department are important for the smooth
operation of the business. However, most of the functions do not have a considerable strategic
importance.
The most common function of the finance department comprises the documentation and the
controlling of incoming and outgoing cash flows as well as the actual handling of the cash flows.
These two parts played and still play a significant role inside the department, however, due to the
computer revolution it is mostly dealt with on computerised systems (such as SAP R/3). The
introduction of mass computer systems has made the task less labour intensive and far quicker,
even real-time. Cash flows can be displayed on an up-to-date basis every day, performance can
be analysed and evaluated straight away. This gives the financial department and the senior
management useful tools to see how the company is performing at any given time. This will be
discussed later when analysing the new roles.
The finance department is also responsible for the payment of bills, wages and salaries. This as
well has been computerised. Wages and bills are paid through electronic systems. Both
transactions are outgoing cash flows. On the other hand, payments for goods or services sold will
be accounted for in this department.
The area of wages is a very difficult one for the finance department as it underlies strict legal
limitations. Data protection is very important for the firm as it is imposed by law.
Financial accounting exists for centuries now in one or another form. It delivers to interested
stakeholders such as potential investors, banks, shareholders, suppliers, etc. detailed information
about the financial situation such as the financial health of the firm.
It is used to attract capital from the outside. As Boddy and Paton (p.622) state: "The capital
markets′ reaction to reports of financial performance affect the ability of the company to raise
capital." The Financial accounting is employed moreover to undertake investment and credit
analysis and used for the taxation of the business.
Another major function the finance department assumes is the budgeting and performance
evaluation. It could be seen as planning/forecasting and controlling/evaluating. Though
budgeting is a traditional role its importance has risen rapidly especially as the companies have
grown to huge conglomerates where control is very complex and difficult. The purpose has
moved from pure control to a more analytical meaning (Cost-Return).
Certainly, the traditional function of the finance department is important and many modern roles
are based on and evolve from them. However, computer systems have made these roles far less
important as it is a low level activity in the firm.
Modern roles and responsibilities of the finance department
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Chief financial officer

From Wikipedia, the free encyclopedia

Jump to: navigation, search

"CFO" redirects here. For other uses, see CFO (disambiguation).

The chief financial officer (CFO) is a corporate officer primarily responsible for managing the
financial risks of the corporation. This officer is also responsible for financial planning and
record-keeping, as well as financial reporting to higher management. In some sectors the CFO is
also responsible for analysis of data. The title is equivalent to finance director, a common title
in the United Kingdom. The CFO typically reports to the chief executive officer and to the board
of directors, and may additionally sit on the board.

Contents
[hide]
• 1 Qualifications
• 2 Federal government of the United
States
 • 3 See also
• 4 References

[edit] Qualifications
Most CFO-s of large companies have finance qualifications such as an MBA or come from an
accounting background. A finance department would usually contain some accountants with
Certified Public Accountant or equivalent status. The Sarbanes-Oxley Act of 2002, enacted in
the aftermath of several major U.S. accounting scandals, requires at least one member of a public
company's audit committee to be a financial expert.[1]

[edit] Federal government of the United States

The federal government of the United States has incorporated more elements of business-sector
practices in its management approaches, including the use of the CFO position (alongside, for
example, an increased use of the chief information officer post, within public agencies).
The Chief Financial Officers Act, enacted in 1990, created a chief financial officer in each of 23
federal agencies. This was intended to improve the government's financial management and
develop standards of financial performance and disclosure. The Office of Management and
Budget (OMB) holds primary responsibility for financial management standardization and
improvement. Within OMB, the Deputy Director for Management, a position was established by
the CFO Act, is the chief official responsible for financial management
The Office of Federal Financial Management (OFFM) is specifically charged with overseeing
financial management matters, establishing financial management policies and requirements, and
monitoring the establishment and operation of federal financial management systems. OFFM is
led by a controller.
The CFO Act also established the CFO Council, chair by the OMB Deputy Director for
Management and including the CFOs and Deputy CFOs of 23 federal agencies, the OFFM
controller, and the Fiscal Assisant Secretary, the head of the Office of Fiscal Service of the
Department of the Treasury. Its mandate is to work collaboratively to improve financial
management in the U.S. government and "advise and coordinate the activities of the agencies of
its members" in the areas of financial management and accountability.
OMB Circular A-123 (issued 21 December 2004) defines the management responsibilities for
internal financial controls in federal agencies and addressed to all federal CFOs, CIOs and
Program Managers. The circular is a re-examination of the existing internal control requirements
for federal agencies and was initiated in light of the new internal control requirements for
publicly-traded companies contained in the Sarbanes-Oxley Act of 2002.
While significant progress in improving federal financial management has been made since the
federal government began preparing consolidated financial statements, the Government
Accountability Office (GAO) reported that "major impediments continue to prevent [GAO] from
rendering an opinion."[2] In December 2006, the GAO announced that for the 10th consecutive
year, the GAO was prevented from expressing an opinion on the consolidated financial
statements of the government due to a number of material weaknesses related to financial
systems, fundamental recordkeeping, and financial reporting.
At the same time, in calendar year 2007, the CFOC announced that for the second consecutive
year, every major federal agency completed its Performance and Accountability Report just 45
days after the end of the fiscal year (2006)

[edit] See also

• Treasurer
• Auditor general (disambiguation)
• Comptroller

Aims and responsibilities

The Finance Department is responsible for the effective financial managment and
stewardship of the University and for ensuring that the University's financial
position remains healthy and sustainable.
The Finance Department operates in a devolved manner with College, Support Group
and Subsidiary accounting staff, as well as central Finance Department staff taking their
professional leadership from the Director of Finance.

Finance Department activities

 Provision of professional advice and direction.
 Delivery of management reporting that enables senior and local managers to
effectively manage their activities.
 Statutory financial and fiscal reporting.
 Processing transactions related to income, expenditure, capital projects and
financing.

Strategic aims
The strategic aims of the Finance Department are:
 Maintain tight stewardship over the University’s financial resources, ensuring that
financial funding in the form of cash and loan facilities are available for managed
strategic growth without over commitment.
 Increase transparency of income and full costs of activities across the University.
 Maintain and improve the University’s financial control environment including the
management of financial risk.
 Maintain and improve the financial systems and processes such that they are
easy for users to access, operate quickly and efficiently.
 Tighten financial and management reporting such that accurate up to date
information reflecting income received and due, and expenditure undertaken and
committed, is reported on a timely basis each month and at year end.
 Develop a culture of customer service and support, and continually improve the
provision of financial advice provided to academic and functional managers to
 assist them in the effective management of their area of responsibility and the
University overall.

Corporate Services Group

The Finance Department is part of the Corporate Services Group which provides the
physical, operational and commercial environment which supports the educational and
research activities of the University.
 Corporate Services Group website