What Role for Financial Management in a Company?

By | December 28, 2018

Financial management is a key service of the company. “It sets up tools to help in making strategic decisions and thus prevents financial risks.” The financial management, generally supervised by a Financial and Administrative Director (DAF), helps to plan the development strategy of the company director or general management.

 

Cost Accounting and Financial Management

Cost Accounting is an internal analysis of the company’s finances. It makes it possible to measure the cost and the added value of each business unit in order to validate their profitability. This is the primary role of the financial management of the company, to measure the profitability of each action to be able to take the appropriate measures: increase the production of such a product, stop the marketing of another, strengthen the marketing on such offer from the company catalog …

Financial direction and strategy of the company

More broadly, the financial management of a company verifies that the expenses that decision-makers want to engage to ensure the development strategy are achievable at the moment T. If they are not, the role of the financial service is to determine the actions that will allow the company to find the balance. Thus, the financial service must ensure and verify:

  • the profitability of the company, ie its ability to generate enough revenue to be self-financing
  • the solvency of the company, ie its capacity to repay its debts and loans in the short, medium and long-term
  • “good management of the company’s cash flow, ie its ability to cash in enough products to cover its operating cycle”

Clearly, the financial department and its administrative and financial director (DAF) plan the company’s development strategy alongside the leaders.

Financial advisor

The financial management of the company, a multidisciplinary role

But the financial management of a company also verifies the correct application of the legal procedures applied in the company. It must know the economic and regulatory context in which it operates and anticipates future changes and their impact on the financial health of the company. In a very broad way, the financial management must know its market: the evolution of competitors, suppliers and all the actors that revolve around the company.

The Administrative and Financial Director (DAF), a transverse role

It is alongside the executive or the decision-making body of the company that the administrative and financial director (DAF) evolves. The latter prepares reports and gives its opinion before each management decision. It also tracks the consequences of each of the actions taken to measure their profitability. The Chief Financial Officer plays a key role in risk management.

In conclusion, the role of the finance department is crucial to ensure the sustainability of a business. It intervenes upstream and downstream of each management decision and proposes corrective measures in the event of financial problems. The Administrative and Financial Director (DAF) is a kind of safeguard; guarantee of the profitability of the company. He supports the leader on a daily basis.

Financial Management

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