Introduction-To-Finance

The purpose of the finance function

• In a small firm, the business owner usually manages financial tasks

  • They may choose to make use of an accountant or bookkeeper to support them, particularly for tax purposes

• In larger businesses, a finance function usually completes these complex tasks, which include:

  • Processing and recording transactions, such as:

    • Collection of payments from customers

    • Payments to suppliers

    • Payment of salaries, wages and other employee benefits

    • Applications and receipts of loans and grants

  • Providing financial information, such as:

    • Business costs and revenues

    • Break-even calculations

    • Cash flow forecasting

    • Profit or loss calculations

    • Profitability and liquidity calculations

  • Supporting business planning and decision-making by:

    • Obtaining appropriate finance for a range of purposes including:

      • Expansion

      • Day to expenses

      • Replacing or repairing equipment

    • Producing financial statements used in:

      • Business plans

      • Annual Reports

      • Management reports

The crossover between finance and the other functions

• Changes in production methods, marketing approach or organisation structure may be modelled by the finance function to identify the impact on costs, sales and profit

  • The finance function provides important information on the impact of change on business performance

  • The finance function can monitor external factors, such as the business cycle, and report on its impact on business performance

• The finance function supports activity across a business by providing information and monetary resources

The influence of the finance function on business departments