Organisation of Finance Function

The organisation of finance function implies the division and classification of functions relating to finance because financial decisions are of utmost significance to firms. Therefore, to perform the functions of finance, we need a sound and efficient organisation.

Although in case of companies, the main responsibility to perform finance function rests with the top management yet the top management (Board of Directors) for convenience can delegate its powers to any subordinate executive which is known as Director Finance, Chief Financial Controller, Financial Manager or Vice President of Finance. Besides it is finally the duty of Board of Directors to perform the finance functions. There are various reasons to assign the responsibility to the Board of Directors. Financing decisions are quite significant for the survival of firm. The growth and expansion of business is affected by financing policies. The loan paying capacity of the business depends upon the financial operations.

The organisation of finance function is not similar in all businesses but it is different from one business to another. The organisation of finance function for a business depends on the nature, size financial system and other characteristics of a firm. For a small business, no separate officer is appointed for the finance function. Owner of the business himself looks after the functions of finance including the estimation of requirements of funds, preparation of cash budget and arrangement of the required funds, examination of all receipts and payments, preparation of credit policy, collecting debtors etc. with the increase in the size of business, specialists were appointed for the finance function and the decentralisation of the finance function began. For a medium sized business, the responsibility of the finance function is given to a separate officer who is known as financial controller, finance manager, deputy chairman (finance), finance executive or treasurer.

In a large sized company the finance function has become more difficult and complex and the position of financial manager has become very important. He is the member of top management of an organisation. For such large organisations it is not possible for a finance manager to perform all the finance functions or to co-ordinate with the various departments. Therefore, finance and financial control are separated and allocated to two different sub-departments. For the ‘finance’ sub-department treasurer is appointed and for the ‘financial control’ sub department, financial controller is appointed. Each of them have various sub-units under them.

Financial planning and financial control are quite significant for a large sized organisation. Therefore, a finance committee is established between the Board of Directors and Managing Director. It includes the financial Manger, representatives of the directors and departmental heads of various departments. Managing Director is the chairman of the committee. Its main function is to advise the Board of Directors on financial planning and financial control and co-ordinate the activities of various departments. The following chart explains the organisation of finance function.

From the chart it is clear that treasurer and financial control work under finance Manager. Financial Manager is responsible to the Managing Director for his actions.

Treasurer performs the functions of procurement of essential funds, their utilisation, investment, banking, cash management credit management, dividend distribution, pension, management etc. Financial, controller is responsible for general accounting, cost accounting, auditing, budget, reporting and preparing financial statement etc. In India the function of financial manager is given to secretary in most of the companies. He performs the functions of treasurer and financial controller along with the routine functions of secretary. He collects necessary data and information and sends them to the Managing Director.