Finance Functional Model and Statements

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Finance Functional Model

Functional Statements

By Mansour Baker, SHRM-CP

Posted 19 March 2020

The finance functional areas are grouped into activities or processes based on their need in accomplishing tasks.

Exhibit 1

The Finance Functional Structure Model

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
Insure 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

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

Payroll

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

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