Finance Functional Model
- Functional Statements
- What are the roles and responsibilities of a Chief Finance Officer?
Posted by: Mansour Baker
The finance functional areas are grouped into activities or processes based on their need in accomplishing tasks.
The Finance Functional Structure Model
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Described below are the functional statements for the Finance team
Level 2 Finance Functional Statements
Financial Systems Support
- Develop finance’s IT system strategy
- Determine Finance department’s functional/business IT system requirements
- Develop IT budget
- Establish policies, and processes for the Finance Systems Support department
- Oversee implementation of Finance Management System and define system design customization and updates/upgrades
- Monitor Finance Management System performance
- Provide user support to ensure full leverage of system capabilities
- Provide end-user training
Financial Planning, Budgeting and Control
- Establish effective and rigorous policies in the Financial Planning, Budgeting and Control Department
- Develop and monitor the financial performance evaluation process and report on all financial data and KPIs,
- Review annual plans and budgets produced by divisions and support functions
- Ensure that best practice financial planning is adopted and adhered to by all divisions and support functions in the company
- Prepare company’s financial budgets, plans, and forecasts
- Highlight issues, variances, and risks, and recommend remedial action where necessary
- Work with divisions and support functions to increase levels of financial awareness and capability
- Liaise with external and internal auditors
Accounting
- Establish effective and rigorous policies and standards in the Accounting Department
- Maintain accounts receivable and payable, general ledger, fixed assets accounts and employee compensation records to provide accurate statements of the company’s financial position
- Manage an employee compensation service to ensure that payroll and related benefit activities are provided in a timely and accurate manner
Treasury and Investment
- Establish an effective and rigorous policy on all Treasury matters
- Manage short-term working capital and investments to maximize return to the business
- Manage cash flows of the business to ensure that cash requirements can be met effectively
- Provide investment support
- Monitor cash investment and generate reports
- Negotiate and establish advantageous banking and credit facilities with banks
- Control and manage company’s foreign currency exposure
- Ensure company assets and contingencies & liabilities are covered in line with good practice
Level 3 Financial Planning, Budgeting and Control Functional Statements
Financial Policies and Procedures
- Develop and maintain financial policies and procedures, and costing standards
- Define financial Key Performance Indicators (KPI) in coordination with the Financial Monitoring and Analysis Department
- Provide financial guidelines related to all company investments, divestitures and capital expenditures
- Develop, maintain, review and update financial regulations and authority definition
Financial Planning, Monitoring and Analysis
- Assist divisions and support functions in developing financial plans and consolidate submitted financial plans
- Develop company financial plan (revenues, prices, costs, investments)
- Develop guidelines for capital allocation process in cooperation with the Financial Policies and Procedures Department
- Forecast company financial performance
- Provide support to the Strategic Planning Department on developing the long-term strategic plan
- Develop financial performance evaluation process
- Benchmark overhead costs
- Measure financial KPI’s against targets
- Analyze KPI variances (target versus actual) and provide solutions and recommendations to the Management and Board of Directors
- Implement controls of Support Functions and measure spending against benchmarks
- Maintain cost accounting standards
Budgeting and Control
- Set budgeting policies and processes
- Consolidate divisions and support functions’ budgets and develop master budget
- Assist divisions and support functions in developing capital, operating and manpower budget and consolidate their budgets
- Monitor utilization of the budget
- Prepare budget reports and review with Internal Audit Department
Financial Reporting
- Develop and maintain internal financial reporting processes
- Collect and consolidate financial information from divisions and support functions
- Develop and prepare management information reports, financial statements, and statutory reports for presentation to Management, Board of Directors, and auditors
- Liaise with the Internal Audit Department and external auditors and arrange audited financial statements
Level 3 Accounting Functional Statements
General Ledger
- Carry out monthly, quarterly and end of year closing
- Conduct daily book-keeping and perform bank reconciliations
- Perform cost allocation
- Generate internal accounting and costing data and reports
- Develop, maintain and control chart of accounts
Accounts Receivables
- Implement and monitor credit policies
- Receive payments
- Handle company sales collection and collection of bad debts which have surpassed a certain amount of days
- Perform payment/ billing reconciliation
- Generate reports on accounts receivable
Accounts Payable
- Process invoices and payments
- Reconcile purchase orders/ receipts
- Generate reports on accounts payable
- Archive invoices and payment orders
Payroll
- Generate salaries, benefits, and pensions payments
- Check accounting entries
- Generate payroll reports
- Liaise with the Financial Systems Support Department for payroll production
Fixed Asset Accounting
- Control and classify assets
- Calculate depreciation
- Track assets/equity and non-cash investments (conduct post-analysis of non-financial investments)
- Keep records of all investments including capital expenditure projects
- Ensure correct project closure and asset capitalization
Level 3 Treasure and Investment Functional Statements
Cash Management
- Manage daily bank transactions
- Monitor service levels and bank fee structure
- Provide forecast data to Treasury to enable cash management
- Handle daily cash requirements
Investment Support
- Develop guidelines to evaluate investment opportunities
- Support and advise the Business Development Department in new investment opportunities
- Provide support to major capital projects and acquisitions/disposals
Treasury
- Select suitable banking partners and manage relationship with them
- Evaluate and approve investment instruments
- Manage overall company funding requirements
- Manage capital structure of company
- Identify and manage foreign exchange, interest rates, and other counterparts risk exposure
- Hedge transactions and execute foreign exchange/ interest rate contracts
- Produce treasury reports
Insurance
- Identify risk and insurable interest
- Select suitable insurance partners
- Identify insurance policies, review and follow-up insurance terms and condition and risk exposure
- Prepare insurance contracts in coordination with Legal Department
- Handle claims and follow-up on claim status
- Handle any specific insurance accounting
- Plan tax and estimate tax adjustments in accordance with tax legislation
What are the roles and responsibilities of a Chief Finance Officer?
The role of a Chief Finance Officer (CFO) is to define the financial governance for profit, cost, and service center structures. Plan, direct and control the company overall financial plans, processes, budgeting, risk, and treasury to ensure that the Company can achieve its strategic and operating objectives set by the business strategy.
The main key accountability areas of a Chief Finance Officer
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Key Accountabilities
Strategic Contribution
- Provide input to the development of corporate strategy and develop the finance strategy in line with the company vision, mission, and business strategies.
- Participates as an integral member in the strategic planning process by providing objective and analytical insights on the financial impact and soundness of business decisions to the executive leadership.
- Participates in the development of the 5-year strategy plan for the company.
Financial Reporting
- Directs and oversees the preparation of the company financial reports and statements (according to accounting standards), including income statements, balance sheets, reports to internal and external stakeholders, and reports for government regulatory agencies and external/internal auditors.
- Oversees and approves the accuracy of financial statements and consolidated performance reports of the company before submitting to the CEO & Board Committee.
- Oversees preparation and generation of any ad hoc / special reports requested by the CEO & Board Committee.
Budgeting Planning & Control
- Directs the company annual budget planning process, consolidates departments, and defends final annual budget plan to the CEO & Board Committee for review and approval.
- Oversees and controls the company annual budget execution and utilization.
Treasury
- Leads the treasury for the company and ensures effective implementation of policies & processes of FOREX management.
- Manages the investment of portfolio so as to maximize yield over the long term in line with the overall asset-liability management strategies. Undertakes this in accordance with liquidity needs of the company.
- Identifies risks due to exposure to foreign exchange rate fluctuations, interest rates liquidity and other counterparts. Take diligent steps to reduce or neutralize these risks.
- Oversees Finance related activities to ensure sufficient capital is adequately available to allocate, in order to facilitate business investments and growth.
Internal & External Audit
- Oversees auditing process of the company by internal and external auditors.
- Presents final audit report to the CEO & Board Committee with observations and recommendations.
Relationship Management
- Establishes and manages effective relations with potential investors, banks, auditors, and financial bodies in order to ensure that the appropriate levels of services are obtained to the best advantage of the company meeting all obligations.
Continuous Improvement
- Lead and direct the continuous review and improvement of the Finance function practices taking into account international standards and changes in the business environment.
Leadership
- Ensure the effective achievement of Finance functional objectives through the leadership of the division - setting individual objectives, managing performance, developing, and motivating staff, provision of formal and informal feedback and appraisal - in order to maximize subordinate and departmental performance.
Technology
- Leads the implementation of a financial management information system and collaborates with the IT Department to acquire requisite business support systems for finance. Ensures that the global best practices in technology and financial systems are institutionalized.
Communication and Working Relationship
Internal
- Interfaces & communicates company finance performance to the CEO, and Board of Directors.
- Interfaces with the company department heads and direct reports on finance & risk related matters.
External
- Interfaces with external auditors, banks, financial bodies, vendors, and investors on finance & risk related matters.
