What Is the Meaning of Finance Function?

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Think of the finance function as a rainbow displaying various colors, all of which interrelate to form a seamlessly efficient arc of colored light. In the business environment, various sub-functions diligently contribute to make financial management a success. The finance work stream feeds such sub-processes as accounting, tax compliance, treasury and financial reporting.

Accounting

The accounting discipline often features an unforgiving demand for performance, especially if government agencies run sting operations to uncover instances of fraudulent bookkeeping. This financial function also calls for better risk management and an unwavering commitment to data transparency, as investors generally sift through accounting information to gauge a firm’s economic standing. Bookkeepers generally work under the guidance of senior accountants to record economic events. They do so by debiting and crediting financial accounts, which run the gamut from assets and equity to expenses, debts and revenues.

Tax Compliance

A company that consistently abides by fiscal rules attracts the support of the Internal Revenue Service. Besides the IRS, state and local tax authorities also like organizations that are forthcoming with performance data and meet their fiscal obligations on time. As a financial function, tax compliance helps a company accurately prepare its operating information, file regulatory forms on time, make tax payments promptly and conform to legal standards.

Corporate Treasury

Corporate treasury may be one of the most important financial functions, especially when it comes to safeguarding a company’s assets and investing its cash effectively. This is a department with short-term investment horizons and relentless pressure for results. This is because corporate treasurers must strike the right balance between allocating the company’s cash to various business units and investing the remaining balance at the best interest rates of return.

Financial Reporting

When an organization engages on an operating path that is economically unsustainable, the financial-reporting function is there to remind corporate management that the firm cannot bite off more than it can chew. The discipline helps senior executives make sense of factors affecting profitability and solvency, as well as what it will take to turn struggling businesses around. Financial reports include such data summaries as balance sheets, income statements and cash-flow statements.

Budgeting

Budgeting enables companies to design the tools necessary to curb costs, avoid excessive spending and encourage personnel to work more efficiently and effectively -- whether or not they work in the same location. By fostering employee cooperation, budget managers attempt to identify areas where the firm is duplicating work, as well as how employees can add more value by changing the way they perform tasks.

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