The Finance department
Role and Importance
Finance department consists of a Chief Financial Officer, Head of Accounts and Accountants.
There are two sets of roles for the financial management:
A) Financial Planning: the process of preparing budgets, estimates long-term or short-term financial requirements for any project by using various modern planning methods.
B) Obtaining the Necessary Funds: the basic role of the financial management is to obtain funds from known sources, such as: The financial institutions (commercial banks).
C) Investing of Funds: It Means the best use of money to achieve the greatest possible return. Therefore, the CFO (Chief Financial Officer) must take the financial decision after comparing many available investment opportunities.
D) Control: Meaning to make sure that performing of projects is done according to plans in terms of cost and quality. Also, to detect the deviations between planned and actual cost with no compromise on quality levels.
It occurs rarely, but it is also the old financial roles, because union, merger and coalition are known since old times between companies if projects stalled. In this case, companies will look for a way to get rid of this situation by doing the following steps:
1) Recapitalization and Reorganization, either by restructuring the company itself or the capital of the company.
2) Combination, a process of integration of a company with another to ensure its continuity.
Objectives of the Financial Management:
The goal of the financial management agrees with the goal of the owners of the company, and consistent with the reliable relationship between them in managing the company in a manner that achieves their goals.
Talking about the goals of the financial management is similar to talking about the goals of the company, and they are
1) Maximizing the Profit Target: Companies usually have the attention to focus on producing of a commodity or a service. This interest can be reflected in the objectives of the company, and the amount of the measurable objectives such as profitability and production. It aims to simplify dealing with it as a normative basis for taking the decisions related to the financial activities in different projects. The extent of our acceptance of any decision depends on the extent of its contribution to the productive efficiency, reduce the cost and thus increase the profits.
2) Increasing the market value of the company and consequently, owner's wealth as a main goal.
Increasing the market value of the owner's wealth are a primary long-term objective. By maximizing the wealth of owners leads to increase the share price in the market which is considered the best measure of the value of owner's wealth in the company.
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