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Financial Management - Finance – An Introduction

Organization of the Finance Functions

   Posted On :  19.06.2018 09:38 am

Today, finance function has obtained the status of a science and an art.

Organization of the Finance Functions
 
Today, finance function has obtained the status of a science and an art. As finance function has far reaching significance in overall management process, structural organization for further function becomes an outcome of an important organization problem. The ultimate responsibility of carrying out the finance function lies with the top management. However, organization of finance function differs from company to company depending on their respective requirements. In many organizations one can note different layers among the finance executives such as Assistant Manager (Finance), Deputy Manager (Finance) and General Manager (Finance). The designations given to the executives are different. They are
 
Chief Finance Officer (CFO)
 
Vice-President (Finance)
 
Financial Controller
 
General Manager (Finance)
 
Finance Officers
 
Finance, being an important portfolio, the finance functions is entrusted to top management. The Board of Directors, who are at the helm of affairs, normally constitutes a ‘Finance Committee’ to review and formulate financial policies. Two more officers, namely ‘treasurer’ and ‘controller’ – may be appointed under the direct supervision of CFO to assist him/her. In larger companies with modern management, there may be Vice-President or Director of finance, usually with both controller and treasurer. The organization of finance function is portrayed below:



It is evident from the above that Board of Directors is the supreme body under whose supervision and control Managing Director, Production Director, Personnel Director, Financial Director, Marketing Director perform their respective duties and functions. Further while auditing credit management, retirement benefits and cost control banking, insurance, investment function under treasurer, planning and budgeting, inventory management, tax administration, performance evaluation and accounting functions are under the supervision of controller.

Meaning of Controller and Treasurer

 
The terms ‘controller’ and ‘treasurer’ are in fact used in USA. This pattern is not popular in Indian corporate sector. Practically, the controller / financial controller in India carried out the functions of a Chief Accountant or Finance Officer of an organization. Financial controller who has been a person of executive rank does not control the finance, but monitors whether funds so augmented are properly utilized. The function of the treasurer of an organization is to raise funds and manage funds. The treasures functions include forecasting the financial requirements, administering the flow of cash, managing credit, flotation of securities, maintaining relations with financial institutions and protecting funds and securities. The controller’s functions include providing information to formulate accounting and costing policies, preparation of financial reports, direction of internal auditing, budgeting, inventory control payment of taxes, etc. According to Prof. I.M. Pandey, while the controller’s functions concentrate the asset side of the balance sheet, the treasurer’s functions relate to the liability side. 

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