The Role Of A Financial Manager

Financial managers play a huge role in determining the success of a business. They are usually in charge of managing and planning finances in an organization.

A financial manager can either make or break your business. Thus, if you are a business owner, ensure you hire a reliable financial manager.

Otherwise, you would be setting yourself up for disaster. In this article, we discuss some of the primary roles of a financial manager.

Financial estimate of the total capital needed by the business

One of the primary roles of a financial manager is coming up with financial estimates that depict the capital needed by a business.

All businesses have expenses. For instance, most companies need capital for manufacturing/designing products, buying company assets, and paying their employees.

Indisputably, companies should have a list showing a breakdown of all expenses. A financial manager is responsible for coming up with this list and devising various ways to cater to them.

A dependable financial manager will develop financial estimates of both the short-run and the long-run. This way, the company will plan and facilitate payments faster.

Identifying source of funds and equity to debt ratio

After coming up with a financial estimate, the finance manager should determine the source of funds. They should evaluate all their revenues and then select a primary source of funds.

When identifying the capital structure, finance managers should calculate the equity to debt ratio. Doing this enables the company to reduce its expenses and boost shareholder equity.

Selecting sources of funds 

Once the financial manager knows the source of funds available in the company, they will need to determine the best sources to use for funding.

They can often decide to cater to expenses from the company’s shareholder’s equity or public deposits. Choosing a particular source of funds for the business is essential.

It helps you keep track of the company’s finances and balance all the financial statements. Subsequently, it makes it easy for you to determine the exact company profits/losses.

Issuing of funds when necessary 

A financial manager has the authority to issue funds when necessary.

For example, when a specific department in the company applies for a certain amount of money, the financial manager is the only one who can release the funds:

  1. They will evaluate the primary purpose of the requested funds.
  2. They can consult other persons of higher authority in the company. From there, they will decide whether they’ll release the funds or not.
  3. A financial manager is in charge of authorizing all payments made to suppliers and employees.

Maximizing return on investment

Financial managers should work towards maximizing a company’s profitability. Thus, they should work towards minimizing expenses and maximizing revenues.

They can do this by directing funds to the proper channels. For example, if a particular asset brings in a significant ROI, they should channel more funds towards it.

On the flip side, financial managers should also eliminate all unnecessary expenses. Ultimately, a financial manager should make sure the company receives a substantial return on investment.

Distribution of funds to various channels

When a company receives revenues and profits, the financial manager should plan how the money will be distributed. But first, they have to identify the money that needs to be put back into the business.

After they do this, they should determine the total amount required by shareholders among other company members. Analyzing the factors influencing the company’s profitability is critical for the business.

Financial managers should therefore spare some time to do this. In turn, they’ll come up with a solid financial strategy that propels the company towards success.

Handling and managing the company’s cash 

As their name suggests, financial managers are responsible for managing cash. Managing the cash of a business also entails managing the current assets.

Additionally, it involves keeping track of all the company’s revenues and expenses to prevent any deficits or surplus.

Proper management of cash leads to smooth business operations. Moreover, a good financial manager will ensure the company receives maximum cash flow to cater to all business expenses.

Evaluating the overall financial performance of a business 

Lastly, a financial manager should monitor and evaluate a company’s economic performance. This way, the company will know where it stands and develop a suitable financial strategy to boost its profits.

Examining a company’s financial performance often means looking at the return on investment.

The ROI will help you know the overall performance of your business. After determining the ROI, they should then plan how to increase it.

Essential Skills for Financial Managers

Analytical skills:

All financial managers should have excellent analytical skills. Remember, they need to examine the company’s financial performance and present a detailed presentation.

Additionally, financial managers are responsible for making financial decisions based on the company’s overall performance. Thus, they need to be analytical.

Excellent communication skills:

A finance manager usually works with all company departments. Thus, they should portray excellent communication skills.

They should justify their financial decisions through detailed and meaningful explanations that are simple to understand.

Pay Attention to detail:

When dealing with finances, you should not leave out any details. Otherwise, this would tamper with all the company’s financial records.

Financial managers should ensure all business expenses and revenues are included in the balance sheets.

Mathematical skills:

Indisputably, every financial manager should possess good mathematical skills. Finance is all about playing with numbers.

Thus, they should perform the correct additions, deductions, multiplications, and divisions to develop accurate financial figures in the balance sheet.

Organizational skills:

Company finance managers deal with a lot of information. And if they are not careful, they might end up losing documents and data.

Thus, a financial manager should have excellent organizational skills.

Why get a financial manager

Financial managers are essential to a company. Typically, they are in charge of handling and planning all company finances.

When hiring a finance manager, ensure they have outstanding analytical and organizational skills. Ultimately, a good financial manager will help a business attain success.