1

The efficient management of finance is important to the success of an organisation. 2

The Tasks of Finance Department 3 Payment of Salaries Production of Internal Financial Information (e.g. budgets) Production of Organisation’s Annual Accounts Payment of Invoices Analysis of Financial Information (e.g. ratio analysis)

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. 4

The Financial Function Ensures that: There are funds available to acquire the resources needed to help the organisation to achieve its objectives. Costs are controlled through monitoring of budgets. 5

The Financial Function 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. 6

The Need for Planning The care and planning of the financial needs of an organisation are as necessary as the planning for operations, marketing, human resources and administration. 7

The Main Tasks of the Finance Department 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. 8

Payment of Wages and Salaries 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. 9

Payment of Accounts 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 10

Maintenance of Financial Records 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. 11

Business Decisions Without proper financial records, organisations are unable to operate efficiently or effectively: How much money has the business spent? How much has the business sold? What is the value of the business’s assets? 12

Identifying Appropriate Financial Information One of the major roles of the Finance Department is to identify appropriate financial information, before communicating this information to managers or decision makers. By communicating this information the Finance Department ensures that informed judgments and decisions can be made. 13

The Main Financial Statements The Balance Sheet The Trading Profit & Loss Account The Cash Flow Statement 14