The seven functions or processes involved in managing the finance function are based on the acronym F.I.N.A.N.C.E. These are Financing, Investing, Negotiating and Deal Making, Administering, Numbers Generation, Cash and Treasury Management and Evaluating and Planning.
The first two finance functions are financing and investing. These two finance functions enable the translation of corporate goals, strategies and operating plans into investments (assets) and financing (liabilities) plans. Because of the criticality of these two functions, there are certain criteria that the decision makers must adhere to in order to make a sound investment and financing decisions. The primary criteria should be to achieve the financial objectives and performance indicators set, which emanate from the overall corporate vision, mission and policies. This is bound together by a comprehensive financial plan that lays down the foundation for the short- and long-term investment and financing decisions. In putting together the financial strategy, investment and financing decisions are guided by five sub-objectives or criteria: 1) maximize returns on investments; 2) optimize liquidity and leverage position; 3) achieve investment flexibility; 4) asset control; and 5) minimizing investment risk. On the other hand, the five sub-objectives related to financing decisions are: 1) minimize the cost of funds; 2) remain financially liquid and solvent; 3) achieve financial flexibility; 4) maintain financial control; and 5) minimize financial risk.
The primary criteria [of financing and investing] should be to achieve the financial objectives and performance indicators set, which emanate from the overall corporate vision, mission and policies.
The third finance function is negotiating and deal making. From a financial standpoint, the best person to assess the deal no doubt is the finance person (working closely with the legal officers and technical experts.
The fourth finance function is administering. This is where the finance person’s skills are tested including managing people, managing information, managing processes, managing systems and managing policies.
The fifth finance function is numbers generation, analysis and reporting. Similar to administering, this function challenges the finance person’s abilities to gather relevant information, processing and storing them and eventually disseminates the processed information to all concerned.
The sixth finance function is the cash and treasury management. While this entails much of accounting skills, it also highlights the finance person’s ability to understand the flow of funds as well as safekeeps and releases funds as necessary.
The seventh finance function is evaluating and planning. The finance person is the one who orchestrates the entire process of corporate planning and spearheads the budgeting. This is where his or her other finance functions come together into a coherent and comprehensive enterprise evaluation process and a corporate and financial plan that will guide the strategies and action programs of the organization.
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