As a company grows, the responsibilities of the finance manager expand, with more outsourced functions coming in-house and more long-term strategic planning added to the finance manager's plate. Understanding the roles and responsibilities of a corporate finance manager will help you decide if this career is right for you and how to prepare to land these types of finance jobs.
Unlike a bookkeeper or accountant, a financial manager, often known as a chief financial officer, plans long-term financial strategy for a company, delegating bookkeeping work to lower-level staff. The financial planning aspect of the job includes setting goals for achieving specific revenues, profit margins and gross profits. It also requires setting targets for overhead and production expense levels and debt-service management. The financial manager needs to create a master budget that’s tied to the company’s balance sheet, accounts receivable and payable reports and cash flow and profit-and-loss statements. The financial manager conducts regular reviews of the master budget, called budget variance analyses, to determine if any changes should be made based on the actual performance of the company vs. its financial projections. Financial managers also determine the best investment options for a business’s excess cash and review ways to acquire capital for expansion or acquisitions.
A key responsibility of a financial manager is to control the company’s expenses. This requires more than simply setting spending levels and cutting costs. Cost containment includes creating requests for proposals, bidding processes and purchasing policies for contractors, vendors and suppliers to ensure the company gets the best combination of quality and price. The financial manager sets benchmarks that determine when it’s most cost-effective to perform activities using in-house staff and when it’s better to use contractors. Cost-containment efforts include managing debt to ensure interest payments don’t wipe out company profits. Financial managers also create strategies that help reduce a company’s tax liability, such as depreciating assets.
Cash Flow Management
One of the most important functions of a financial manager is to project and manage the company’s cash flow. Cash flow refers to the actual receipt of money and payment of bills, as opposed to the company’s budgeted income and expenses. Assuming that because a business has more income than expenses it can pay its bills can lead to disaster. For example, if the company does not negotiate customer credit terms and vendor and supplier payment terms correctly, the business might be waiting to collect sales invoices long after bills have come due. Cash flow management includes monitoring receivables turnover and keeping enough credit and cash reserves available to keep the company financially stable.
The corporate financial manager ensures the business meets all of its legal obligations, such as sales and income tax payments; employee benefits contributions; state and federal labor wage requirements; and Securities and Exchange Commission reporting, if the company is a public corporation. At small and medium-sized businesses, the financial manager often works with tax experts and CPAs who guide the company regarding its legal obligations.
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