Page 12 - DMGT207_MANAGEMENT_OF_FINANCES

Unit 1: Introduction to Financial Management

1.3.1 Place of Finance Function in the Organizational Structure Notes

The finance function is almost the same in most enterprises. The details may differ but the
important features are universal in nature. The finance function occupies such a major place that
it cannot be the sole responsibility of the executive. The important aspects of the finance function
have to be carried on by the top management i.e., the Managing Director and the Board of
Directors. It is the Board of Directors, which makes all the material final decisions involving
finance.
Financial management in many ways is an integral part of the jobs of managers who are involved
in planning, allocation of resources and control. The responsibilities for financial management
are disposed throughout the organization.

Examples:
1. The engineer, who proposes a new plant, shapes the investment policy of the firm.
2. The marketing analyst provides inputs in the process of forecasting and planning.

3. The purchase manager influences the level of investment in inventories.
4. The sales manager has a say in the determination of receivable policy.
5. Departmental managers, in general, are important links in the financial control system of
the firm.
The Chief Financial Officer (CFO) is basically to assist the top management. He has an important
role to contribute to good decision-making on issues that involve all the functional areas of the
business. He must clearly bring out financial implications of all decisions and make them
understood.

CFO (his designation varies from company to company) works directly under the President or
the Managing Director of the company. Besides routine work, he keeps the Board of Directors
informed about all the phases of business activity, including economic, social and political
developments affecting the business behaviour. He also furnishes information about the financial
status of the company by reviewing from time-to-time. The CFO may have different officers
under him to carry out his functions. Broadly, the functions are divided into two parts.
1. Treasury function

2. Control function
Treasury function (headed by financial manager) is commonly responsible for handling financial
activities, such as financial planning and fund raising, making capital expenditures decisions,
managing cash, managing credit activities, managing the pension fund and managing foreign
exchange.

Notes The control function (headed by Chief Accountant/Financial Controller) typically
handles the accounting activities such as corporate accounting, tax management, financial
accounting and cost accounting.

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