Emerging role of finance manager in India

There has been a total attitudinal change among owners towards the finance manager. He is no longer referred to as my accountant. Instead of being a commodity, the finance manager is now a part of the top management. The finance manager does not cover the routine duties of finance and accounting. As a member of top management he is also responsible for formulation and implementation of policies and decision making.

The finance manager job has vastly changed. Earlier it was a support function now it is mainline. And finance itself has been a profit center.

In these competitive times, survival depends largely on an organization’s capabilities to anticipate and prepare for change rather than just react to it. The role of the financial officer, thus, becomes crucial to meet these technological, economic and political, changes.

Key challenges of Finance Manager

Investment Planning

Investment planning focuses on effective investment strategies and to analyze the risk associate with it. Finance manager is responsible for analyze the risk and help management to reduce this risk so that it does not affect the financial goal of an organization.

Financial Structure

Financial structure is the way in which company assets are financed such as short term, borrowings long term debt, and equity. Finance manager analyze the government rules and regulation, banks norms, capability of the organization and the available options in the market to finance the companies assets. That helps management to decide which option is profitable for the organization.

Treasury Operations

Treasury operations is basically the overall responsibility for administering the banking functions of organization, cash management and investment services. These all activities are directly linked with the growth of organization and profit.

Investor Communication

Finance department provides investors with an accurate account of the company's affairs. This helps investors to make informed buy or sell decisions.

Management Control

Control is one of the managerial functions like planning, organizing, directing etc.

It basically includes the three steps, to set the standards, measure actual performance and taking corrective action. Finance manager help organization to set the targets and helps organization to achieve that target by continuously monitoring the actual performance with set standards.

Clearly, the clout of the finance manager is growing along with the change in his role and reforms in the financial sector gather speed, this trend will only increase.

Financial managers aim to boost the levels of resources at their disposal. Besides, they control the functioning on money put in by external investors. Providing investors with sufficient amount of returns on their investments is one of the goals that every company tries to achieve. Efficient financial management ensures that this becomes possible.

Financial Analysis and profit

Financial statement is also known as financial statement analysis or accounting analysis. Every firm is most concerned with its profitability. Financial analysis is a best way to determine the profit of an organization. Financial ratios are the primary method used to analyze a company's financial statements.

Through this statement, it becomes easy for an organization to make comparison between past profit and the current profit. It is also used in budget planning for the next year.

Benefits of financial statements analysis

Keep Current on Debts

The Current Ratio analysis is the total current assets divided by the current liabilities on balance sheet. This can help to determine whether have adequate liquidity to meet upcoming debts.

Determine Profit Margins

Companies can determine their profit margins with the help of financial statement analysis. Companies can determine their cost of production. Gross Margin Percentage is used to determine this, which is total revenue less cost of sales divided by total revenue. Use this to help reduce the costs of production and help to increase the efficient utilization of resources. That ultimately contributes in growth of profit of a company.

Track Inventory

Inventory management is an important function of any organization. With the help of financial analysis any organization can better manage the inventory. Turn over ratio is used to determine whether it meets projected sales figures or not.

Determine Debt to Equity

A Debt-to-Equity Ratio determines how much total liabilities are in relation to equity in the business on a balance sheet.

See Improvement over Time

Companies can compare their financial statement numbers over time to spot trends and changes that affect business. With the help of this companies can determine the risk factors and can make plans to reduce these risk factors.

Helps in Bench Marking

Benchmarking is the process of determining who is the very best, and help to sets the standards. With the help of financial statement companies can set their bench mark.

The Financial Analysis performs in-depth analysis of the company’s financial and operating results independently and prepares management reports.

The financial statements are ultimately the "scorecard" for the company's performance .and it also helps to determine the strength of an organization.

Infrastructure and Finance

Infrastructure is an important criterion of calculating the development of country. Infrastructure includes metro rail project, over bridge, ports, corporate buildings, Investment in real estate, Power plant, financial institutions, Hospitals, Schools and Colleges, communications systems, etc.

Today these all elements are interrelated and help to build the complex system of any country. Government invests a huge part of income of country on the development of infrastructure.

Contribution of Infrastructure and Finance

Help in Industrialization

Developments of infrastructure contribute a lot in growth of industries. Development in communication system help to carried out all business process more optimally that helps to increase the profit of companies. That ultimately increases the profit of country.

Over bridge and metro rail project help in transportation.

Generate more employment

For any project man power are required and after completion of any project they need to hire people to carried out the activities. For example after completion of metro rail project they need to hire people for ticket counter, security, driver, etc.

Ultimately it helps to generate employment that helps to increase the per ca pita income of country.

Development of financial institutions

Development of financial institution act as catalyst to carried out the activities of business process. Expansion in same product line or in different product line, companies required finance. The capital requirement of the company is full filled by these institutions. They are also making considerable efforts to facilitate the process of emergence of new entrepreneurs for setting up enterprises in small scale sector.

It helps to develop the backward region and motivate people to become an entrepreneur.

That ultimately contributes in growth of country.

Increase living standards

Employments, industrialization, and development of entrepreneurship ultimately help people to become financially strong and increase their standard of living.

Promote foreign Trade

Supports from financial institutions help business man to trade outside the country. It is an important factor of the development of any country. Foreign trade helps in the optimum use of natural resources. It ensures the presence of stable price by avoiding wide fluctuations in prices. It tries to equalize the world price. It enables a country to import those goods which it cannot produce. It ensures large production because the production is carried on to meet the demand of its people as well as world market. Large scale production also ensures a great deal of internal economies which reduces the cost of production.

All above points proves that infrastructure and finance are the important key factor for development of country. It also helps in growth of individuals

How to Finance a Business

It is no longer a dream to start one’s own business or to expand his business to take the advantage of prevailing opportunities. As of now it is only a matter of determining the ways that are available to finance a business at right time, so that it can succeed.

Broadly speaking there are main six ways available to finance your business.

Supplier credit

It is the simplest way to obtained fund for business. Companies buy goods and services and have anywhere from seven days till 6 months to pay for them; when companies need more credit from suppliers the financial controllers will negotiate with suppliers for longer credit terms.

Lease financing

Instead of purchasing the equipment, one can choose to lease equipment - this is a form of financing. Cars, computers and heavy equipment can be financed for a period of time. And then have the option to either return it or buy it at a reduced price.


Bank Loan

Many banks provide loans with fixed or variable rate of interest. It is based on size of business and the growth opportunity of that particular industry in which one is going to invest.

Bank overdraft

A bank overdraft may be a good source of short-term finance to help a business. Banks provide a credit limit according the amount available in one’s account. The main advantage of overdraft is that the interest is calculated on daily basis.

Stock Issues

Issuing stock of your company is great source of arranging finance. It represents an ownership in the business and in all of its assets.
Equity shares, preferential shares and debentures can be floated in the market to arrange huge funds.

Factoring

Factoring is a process which immediately allows the company to receive money based on the value of its outstanding invoices as well as to receive payment of future invoices more quickly.
Factoring companies generally pays up to eighty percent of amount of the bill.

All such techniques are to be used in accordance with the nature of the business and prevalent market conditions.