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Importance of the financial manager

The Financial Manager acts as an agent for the shareholders of the firm. The Inter-American Investment Corporation (IIC) highlights the importance of having a well-versed financial manager in order for a company to be profitable over the long term.

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The financial manager is responsible for supervising and handling the company’s financial reports, investment portfolios, accounting and all kinds of financial analyses. It must also supervise the enterprise’s cash management strategies in addition to the regulatory framework. 

It must adequately manage the organization’s cash flow by supervising balance sheets, profit and loss statements and the cost and revenue model. 

Job responsibilities also include the development of an efficient financial strategy, which must clarify all of the organization’s financial aspects, while meeting the objective of minimizing costs and maximizing profit. He is also in charge of budgetary decisions and of developing a financial operating plan.  

The Financial Manager must be skilled in the technical aspects of all financial decisions made by the company. The Inter-American Investment Corporation also highlights the importance of having a professional in-depth knowledge of legal regulations and statutory litigation. The key elements of financial management follow below: 

  • Financial planning
  • Financial control
  • Financial decision-making
  • Financial planning

Management needs to ensure that enough funding is available at the right time to meet the needs of the business. In the short term, funding may be needed to invest in equipment and stocks, pay employees and fund sales made on credit. In the medium and long term, funding may be required for significant additions to the productive capacity of the business or to make acquisitions.

Financial control

Financial control is a critically important activity to help the business ensure that the business is meeting its objectives. It is a method designed to answer the following financial concerns that a company may have, such as:

  • Are assets being used efficiently?
  • Are the businesses assets secure?
  • Does management act in the best interest of shareholders and in accordance with business rules?

Financial control tools

  • Cash controls: systems for managing cash amounts.  
  • Bank controls: systems for making sure that the bank account cannot be misused.
  • Budgeting and accounting controls: systems that provide sufficient information or manage the activities of the organization.
  • Purchase and authorization controls: making sure that different people are involved at each stage.
  • Management controls: extra checks made by management.
  • Physical controls: keeping property and equipment in good order and secure; and guidance on the personal use of items owned by the organization. 

Financial decision-making

The key aspects of financial decision-making relate to investment, financing dividends and asset management. For example, investments must be financed in some way, however, there are always financing alternatives that can be considered. For example it is possible to raise finance from selling new shares, borrowing from banks or taking credit from suppliers.

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