The financial manager is responsible for utilizing financial records to strictly monitor the finances of the organization. When business is thriving, they should be monitoring investments and devising strategies to assist the organization in maintaining or improving its financial position. When things deviate from the anticipated course of action, strategies devise to enhance the financial performance of the organization in the present and future. Having a comprehensive understanding of a company’s financials enables them to provide executives with valuable insights on operational efficiency. In this article, we will cover the goals of finance manager along with equivalent matters around the topic.
The Corning case illustrates the perpetual pursuit by financial managers to identify the optimal investment strategy in which the probability of achieving a positive return on investment surpasses the probability of incurring a negative return. In the realm of finance, return pertains to the probability of generating a profit, while risk concerns the likelihood of incurring a financial loss or failing to achieve the anticipated level of return on an investment. In the financial sector, the requirement for a return that is directly proportional to the level of risk is a well-established principle. The notion commonly refer to as the risk-return trade-off universally recognize. In the process of determining investment opportunities and borrowing amounts, financial administrators consider a variety of return and risk-related factors. Examples of such factors include fluctuations in interest rates, shifts in market demand, prevailing market conditions, societal challenges, and the overall state of the economy.
Goals of Finance Manager
Financial management, in the context of business operations, entails the oversight of an organization’s funds to ensure that its objectives can fulfill. This process encompasses the entirety of a company’s financial activities, including their planning and organization. The activities undertaken by an organization to evaluate its assets, cash flows, financing, and risk management are referred to as “financial management.” Because of this, organizations can attain their objectives and increase their revenue. Here are a few things you should know about goals of finance manager before you think about money, investing, business, or management. To dive deeper into quality of finance manager topic, read more about it in this extensive research paper.
Controlling
It is the financial manager’s responsibility to monitor the company’s expenditures and make any required adjustments to ensure that profits remain stable or increase. Following the documentation of all modifications and adjustments, the outcomes compare to their initial expectations. As a result, the organization will experience greater ease in attaining its objectives and generating long-term profits.
Profit Max
Profit obscures additional details and presents little for a single figure. Earnings are influenced by various factors, such as the volume of sales generated, the financial investment made, the product’s potential utility, and the level of production. A clarification of the concept is achieved when profit discuss in relation to the size and scale characteristics that were previously mentioned. In the context of this perspective on relative return, the concept discuss is profitability.
Thus, this objective is more efficacious than endeavoring to accumulate the greatest amount of wealth feasible. When examining the matter, one should adopt the perspective of return on investment (ROI), an abbreviation denoting “profit per rupee invested.” ROI represents the proportion of profit or return to the mean expenditure. To determine the profit per rupee of sales, divide the total profit by the total sales. To ascertain the turnover of capital, one must divide the revenues of the organization by its investment. For example, one indicates the business’s potential revenue, while the other indicates its level of activity.
Obtaining the maximum amount of money is equally as essential as earning high scores in achieving this objective. The unintended repercussions of this objective closely resemble those of the profit maximization objective, except for a minor distinction. The maximization of wealth is an objective that is in no way associated with any particular cause. However, in order to achieve profit maximization, profits must integrate with sales and investing. Because of this, it is a relative measurement. It is desirable as an alternative to the pursuit of maximizing one’s financial gain. Nevertheless, additional considerations render this objective merely “qualified” with regard to its desirability.
Profit Maximization
Optimal profitability ought to be the objective of every competent financial manager. Profit results from an operation in which a company’s revenue exceeds its expenses. Profits can be increased by maximizing revenue and reducing expenses. There is also the option of reducing expenses while increasing revenue. Profit potential could maximize if it is possible to increase prices without a concomitant decline in demand. Profit maximization is as straightforward as capitalizing on the price elasticity of demand, which enables consumers to purchase more products.
However, the majority of individuals do not prioritize maximizing their financial benefit. It becomes abundantly apparent that limits exist. To begin with, the concept of riches is not readily apparent. An alternative conceptualization of profit is in the form of gross profit. The amount of money you made can also be calculated by dividing your profit and obtaining your earnings before taxation. For this reason, it is essential to be honest regarding the gain. Additionally, whether short-term or long-term profit maximization is the objective must make crystal obvious.
The profitability of a company should be directly proportional to its scale. Failure to achieve this condition makes the concepts of efficiency and success difficult to comprehend. The value of a dollar today is greater than its value tomorrow and the day after that; however, in the pursuit of profit maximization, the time value of money disregard. This brings us to the fourth determinant: the temporal duration available to you. The value of money declines as a result of inflation.
Planning
A differentiation can make between an accountant and a financial manager in that the latter is tasked with overseeing the routine bookkeeping operations, whereas the former is preoccupied with devising the organization’s long-term financial strategy. Goals related to debt service management, reduction of production costs, and elimination of administrative expenses could all be incorporated into these programs. You may additionally strive to achieve particular sales figures, profit margins, and cash inflows and outflows. Additionally, if the company generates surplus funds, he must ascertain the most efficient means of utilizing them.
Moreover, he might devise tactics to acquire capital for the company, thereby enabling its expansion or even acquisition of other businesses. He must develop a comprehensive budget in order for these plans to be successful. The financial information included in this study, which is also referred to as a budget variance analysis, comprises the balance sheet, income statement, cash flow statements, and accounts receivable and accounts payable reports. In order to assess the progress of the organization towards its objectives, the financial manager will routinely examine this budget variance analysis. However, he will offer assistance in determining the necessary modifications in the event that it is not. This is the goals of finance manager.
Liquidity Max
In order to possess liquid assets, an organization must possess the capability to promptly remit its short-term obligations. Your capacity to accomplish this will be contingent upon several factors, including the proportion of liquid assets to current liabilities, the maturity dates of current assets and liabilities, the nature of your assets, the quality of your non-cash current assets, and your rapport with short-term creditors, bankers, and individuals who can empathize with your situation.
A company better position to confront future challenges when it maintains a high current ratio, all of its liabilities mature simultaneously, and its current assets are distributed equitably. Current assets are those that can convert to cash without incurring any losses in a timely and effortless manner. An organization must maintain readily available liquid assets to operate. In addition, it must have the ability to negotiate with creditors and be willing to assist financiers in order to maintain a high level of liquidity.
While this is a commendable objective, it is flawed due to the difficulty, expense, and risk involved in acquiring any of these items. For daily bill payment, every organization requires a consistent flow of revenue. A financial loss would ultimately result for the organization. An organization can capitalize on extraordinary opportunities if it possesses a significant financial reserve. There are numerous additional options, such as purchasing a large quantity of items at a low cost, lending money to those in need while interest rates are high, and paying off short-term debts inexpensively. An abundance of delightful occurrences transpire. However, circumstances in which cash resources are idle, as suggested by excessive liquidity, should avoid whenever possible. I absolutely see your argument. Having a substantial amount of currency on hand and generating income are two competing objectives that must coordinate.
Cash Management
The cash flow of an organization demonstrates the amount of money it actually receives and spends, in contrast to its projected income and expenses. A critical responsibility of a financial manager is to monitor the cash flow of the organization. A business may have delinquent accounts from customers. However, presuming prompt payment to resolve those accounts would be imprudent. Establishing a cash management policy is crucial for ensuring the financial stability of the organization. This policy provides sufficient funds to cover all payments. This requires a combination of liquid funds and excellent credit in order to accomplish.
Cost containment
Cost confinement goes beyond expenditure restriction and cost reduction strategy; these are just two parts of the overall process. Establishing tendering procedures and criteria for purchasing items is also crucial. A finance manager is tasked with submitting requests for proposals to contractors, suppliers, and vendors. Adhering to this process ensures obtaining the highest quality and most competitive prices. When deciding whether to retain duties internally or outsource them, a goals of finance manager assesses the current and anticipated resource requirements of the organization. The financial manager is also accountable for the debt and tax affairs of the organization. The incumbent of this position is responsible for reducing the amount of interest and taxes owed by the organization.
Reporting
Ensuring that the organization complies with all reporting obligations constitutes a critical duty of the finance manager. To accomplish this, they strictly adhere to all regulations and ensure that their financial reports are accurate and distributed uniformly. This is extremely significant because, for tax purposes, corporations require to disclose their financial information to the government so that it may monitor them. Advocating openly regarding these concerns contributes to the preservation of the company’s positive reputation among the general public.
Legal Comply
The financial manager of a public corporation is responsible for ensuring that the organization complies with all legal financial obligations. The obligations encompass various tasks, such as paying sales and income taxes. Providing employee benefits is also a part of these responsibilities. Adhering to federal and state wage regulations is another important obligation. Additionally, the submission of tax returns to the Securities and Exchange Commission is part of the mandated tasks. Another duty entrusted to the financial manager is ensuring that the organization complies with all relevant legislation in its industry. A financial manager may enlist the assistance of internal or external specialists, including CPAs and tax professionals, to guide them through these regulatory obligations. This is the goals of finance manager.
EPS Max
Achieving maximum earnings per share (EPS) entails dividing the amount of money received after taxes by the total number of outstanding shares. Considering the consequences and possible gains, this goal can lead to the maximization of profits. In addition, the precise nature of the profit and the metric used to quantify it describe in great detail. Issues arise, for instance, when the neglect of the impact of dividend policy on value results in a decline in value despite the pursuit of maximizing earnings per share (EPS).
FAQ
What is an Appropriate Development Goal for a Manager?
The subsequent stage of development is the final one that your superiors ought to have documented in writing. It is of utmost importance that they acquire knowledge regarding the management of expanding teams, a responsibility that goes beyond simply delegating tasks to others. Beyond this, much more must consider than merely fostering the appropriate culture and offering career progression opportunities.
What are Quantifiable Goals?
Quantifiable objectives are explicit statements that specify what require and what outcomes anticipate from the services or experiences at hand. In the objectives, a breakdown of responsibilities should include. The group of individuals whose knowledge, actions, or capabilities will alter as a result of the system.
How do you Assess your Goals?
Using the SMART framework significantly simplifies the process of attaining objectives. Evaluating the outcomes of an undertaking is facilitated when the goals precisely define, quantifiable, attainable, pertinent, and time-constrain. Equally crucial is the manner in which objectives accomplish.
Final Remarks
The accounting team exercises oversight over the cash of the business. The financial manager is responsible for predicting future cash requirements, identifying potential funding sources, optimizing the use of existing funds, and determining the most effective means to acquire additional capital. Financial administrators have the authority to oversee the planning, purchasing, and financing components of money management. One of the primary responsibilities of the finance manager is to identify opportunities to maximize the firm’s value. Frequently, individuals’ choices culminate in enduring repercussions. When performing various business tasks, keep in mind that goals of finance manager plays an important role in the overall process.
