ROLE AND SIGNIFICANCE OF FINANCE IN OTHER FUNCTIONAL AREAS

1. ROLE AND SIGNIFICANCE
OF FINANCE IN OTHER
FUNCTIONAL AREAS
Submitted to : Submitted by :
R.D. Purkayasthya Biswajit Bhattacharjee
Assistant Professor Student, DBA-JNSMS
DBA-JNSMS, AUS Roll No. 19
Assam University, Silchar

2.  Finance is a field within economics that deals with the allocation
of assets and liabilities over time under conditions of certainty
and uncertainty. Finance can also be defined as the science of
money management. A key point in finance is the time value of
money, which states that one unit of currency today is worth
more than one unit of currency tomorrow. Finance aims to price
assets based on their risk level and their expected rate of return.
Finance can be broken into three different sub-categories:
 public finance,
 corporate finance and
 personal finance.
Finance

3.  Production management
 Marketing management
 Financial management
 Personal management
Various functional areas of
management are:

4.  Production management:
Production means creation of utilities by converting raw material in
to final product by various scientific methods and regulations. It is
very important field of management. Various sub-areas of the
production department are as follows.
 Plant lay out and location
 Production planning
 Material management
 Research and Development
 Quality Control
Various functional areas of management (c0nt…)

5.  Marketing management:
Marketing management involves distribution of the
product to the buyers. It may need number of steps.
Sub areas are as follows
Advertising
Sales management
Market research
Various functional areas of management (c0nt…)

6.  Finance and accounting management:
Financial and accounting management deals with managerial
activities related to procurement and utilization of fund for
business purpose. Its sub areas are as follows
 Financial accounting
 Management accounting
 Taxation
 Costing
Various functional areas of management (c0nt…)

7.  Personnel Management:
Personnel management is the phase of management which
deals with effective use and control of manpower. Following
are the sub areas of Personnel management
 Personnel planning
 Recruitment and selection
 Training and development
 Wage administration
 Industrial relation
Various functional areas of management (c0nt…)

8.  Relationship with production management
The production department is responsible for the development and
manufacturing of the product. It is also responsible for the quality control.
The inventory manager acts as the bridge between the sales department
and production department. The inventory manager develops the
inventory policy considering the requirement of both production
department and the marketing department. Similarly, the capital
budgeting manager works in coordination with the sales department and
production department in order to decide whether an investment proposal
is to be made or not. The capital budgeting manager uses the revenue
forecast from the sales department and production volume and costs from
the production department in order to analyze an investment alternative.
Thus, there is close relationship between production management and
financial management.
Relationship of Finance with other Functional
areas

9.  Relationship with marketing management
The financial manager closely work with the marketing manager. The
marketing manager involves in product survey, demand analysis and
forecasting of the sales volume for the given price. The marketing
manager also involves in new product development, expanding marketing
territory, pricing of the products etc. These functions of the marketing
manager have financial implications. The financial manger closely works
with marketing manager in these issues in order to analyze develops the
promotion and pricing strategies. In this regard, the credit manager,
inventory manager and the capital budgeting manager work together with
the credit policies. Similarly, the inventory manager suggests the best
inventory policy. The capital budgeting manager analyses the feasibility of
the project.
Relationship of Finance with other Functional
areas (cont…)

10.  Relationship with human resource management
Human resource management involves in the recruitment
and selection of the employees. It definitely involves cost.
The costs of human resource are analyzed in capital
budgeting decision by the capital budgeting manager.
Similarly, the treasure works closely with human resource
department regarding the pension fund management and
different incentive policies to the employees.
Relationship of Finance with other Functional
areas (cont…)

11. Financial Objectives
Different types of organisation have different
financial objectives:
e.g.
 Vodafone: aim to make a large profit.
 Charities: aim to get many donations and help
people as best they can.
 Clubs: aim to use funds to give the best possible
service to their members.
The Role of the Finance Department

12.  Business finance is required for the establishment of every
business organisation. With the growth in activities, financial
needs also grow. Funds are required for the purchase of land
and building, machinery and other fixed assets. Besides this,
money is also needed to meet day-to- day expenses e.g.
purchase of raw material, payment of wages and salaries,
electricity bills, telephone bills etc. We are aware that production
continues in anticipation of demand. Expenses continue to be
incurred until the goods are sold and money is recovered. Money
is required to bridge the time gap between production and sales.
Besides producers, may be necessary to change the office set up
in order to install computers. Renovation of facilities can be
taken up only when adequate funds are available.
ROLE AND SIGNIFICANCE OF FINANCE IN OTHER
FUNCTIONAL AREAS

13.  To meet contingencies
Funds are always required to meet the ups and downs of
business and unforeseen problems. Suppose, some
manufacturer anticipates shortage of raw materials after a
period. Obviously he would like to stock raw materials. But
he will be able to do so only when money would be available.
 To promote sales
In this era of competition, lot of money is required to be
spent on activities for promoting sales like advertisement,
personal selling, home delivery of goods etc.
ROLE AND SIGNIFICANCE OF FINANCE IN OTHER
FUNCTIONAL AREAS (cont…)

14.  To avail of business opportunities
Funds are also required to avail of business
opportunities. Suppose a company wants to submit a
tender but some minimum amount is required to be
deposited along with the application. In the case of non-
availability of funds it would not be possible for the
company to apply.
ROLE AND SIGNIFICANCE OF FINANCE IN OTHER
FUNCTIONAL AREAS (cont…)

15.  All of these different types of organisation share the
need to have good financial management.
 The efficient management of finance is vitally
important to the success or failure of an organisation.
15
Good Financial Management

16.  Every organisation must make sure that it has
enough money:
 to pay wages and salaries.
 to pay bills (e.g. suppliers, electricity, advertising).
 to develop new products and services.
 Organisations must also check how much they
are spending - organisations which have high
costs, are often unsuccessful.
Good Financial Management

17. Ensures that:
 There are adequate funds available to acquire the
resources needed to help the organisation to achieve its
objectives.
 Costs are controlled through monitoring of budgets.
17
The Financial Function

18. Ensures that:
 Not only that adequate funds are available, but that
they are available at the right time. The cash flow of an
organisation is also important.
 Profitability of the organisation is controlled, ensuring
that the agreed profitability targets are being met.
18
The Financial Function

19. The care and planning of the financial needs of an
organisation are as necessary as the planning for
operations, marketing, human resources and
administration.
19
The Need for Planning

20. The Finance Department has three main tasks to help
the organisation achieve its objectives:
 Payment of wages and salaries.
 Payment of accounts.
 Maintenance of financial records and accounts.
20
The Main Tasks of the
Finance Department

21.  Organisations need to keep their staff happy, one
way that this can be achieved is by ensuring that
they are paid the right amount at the right time.
 The Finance Department will make necessary
deductions for tax and National Insurance.
 They will also provide information to HM
Revenue & Customs to make sure that taxes paid
have been correctly calculated.
21
Payment of Wages and Salaries

22.  The Finance Department needs to ensure that
it makes payment to its suppliers on time, as
well as collecting money owed by customers.
 Payment to suppliers fall into two different
categories:
 Cash
 Credit
22
Payment of Accounts

23.  The Finance Department will record financial
transactions, so that at the end of the year or
period it can prepare final accounts.
 Financial records are a history of the
organisation’s activities.
 Under the Companies Acts of 1985 and 1989, it is
an offence for limited companies not to maintain
proper financial records.
23
Maintenance of
Financial Records

24. Thank You