A Complete Guide on the Role of a Financial Manager in an Organization
As every game has a referee or an umpire to make crucial decisions and promote fair play similarly, the financial manager plays the massive role as an umpire who makes necessary decisions regarding the financial activities of an organization. He is the person who analyses all the data and reports and makes decisions based on the outcome of the reports. A financial manager plays multiple roles for an organization, it may help the firm in various ways. We will discuss the main responsibilities and the roles played by the financial manager in this blog.
Main responsibilities of a financial manager
- Raising adequate funds. As we all are aware that finance is the life-blood of every business organization, hence the financial managers are responsible for raising adequate funds from various sources and maintaining the liquidity of the business.
- Selecting perfect sources of finance. The financial manager is the person who after studying the reports and documents decides the selection of sources of a fund such as equity and debt. The financial manager decides the proper proportion of equity and debt in a capital structure.
- Proper allocation and utilization of funds. Financial manager always keeps a watch on the movement of funds in a business organization and they make sure that the funds are utilized in an efficient manner
- Monitors the growth capability and the size of the organizations.
- Ensures perfect profit planning. Profit is important for every business organization to sustain itself in the competitive market. Profit planning involves the proper use of the profit earned or generated by a business. Financial managers make vital decisions regarding the allocation of profits as reinvestment plans, dividend decisions, etc.
Important roles of a financial manager
- Analysis of market trends in the capital market
- Finding opportunities for growth and expansion of the size of a business
- Management of company credit
- Making decisions regarding dividend payout ratios
- Wealth maximization of company owners
- Handling financial negotiations.
- Monitoring the stock market in case of a listed company
- Understanding capital markets
- Evaluation of the financial performance of the business
- Cash management of the business
- Financial control
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Why do we need a financial manager?
As every business firm needs finance, similarly, every firm needs a financial manager to take care of the financial resources of the business and to ensure the optimum use of the respected financial resources. Some vital reasons regarding the need for a financial manager are stated below:
- Maximizes the current value of the business:
The financial manager always puts his efforts together to maximize and improve the value of the business and its assets such as its stock etc. in case of a listed company
- Maintains growth of the business:
By improving the value of the business, the financial manager also focuses to attain growth by utilizing the profits properly.
- Profit maximization:
The financial manager by allocating the funds effectively helps the business to earn maximum profit and avoid unwanted wastage of financial resources and cuts off unwanted costs.
- Minimizes costs:
Minimization of reckless costs is one of the best ways to increase the profits of the business. Financial manager by monitoring the flow of funds in the business ensure proper allocation of funds and excludes unwanted costs.
- Helps in avoiding bankruptcy:
The prime aim of every financial manager is to keep the business in a solvent position by any means and to protect the business from any further financial shocks such as bankruptcy etc.
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Various types of financial managers:
- Controllers: They guide in the preparation of various reports that can be used for analysis and forecasting of the organization's financial health. They control and give instructions regarding the formation of reports such as balance sheets, income statements, etc.
- Finance and treasures officers: They focus on the preparation of the budget for the organization and other various investment activities.
- Credit managers: These managers are responsible for the credit management function of an organization
- Cash managers: These managers evaluate the inflow and outflow of cash in the organization to make various investment decisions
- Risk managers: These managers help the organizations to reduce unexpected losses by utilizing different strategies formulated by them to face the risks.
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How can CDA help?
CDA being a well-known auditing and accounting firm in Dubai provides professional services to its clients with the help of its experienced team. They are always ready to tackle your issues regarding any financial or accounting matters. CDA provides you with multiple services under one roof, and it is known for its personalized approach of dealing with its clients. To know more about the services provided by CDA contact us soon.