Roles of Financial Manager

The financial activities of a firm are one of the most important and complex activities. Therefore, in order to take care of these activities, a financial manager performs all the requisite financial activities.

A financial manager is a person who takes care of all the important financial functions of an organization. The person in charge should maintain farsightedness in order to ensure that the funds are utilized in the most efficient manner. His actions directly affect the profitability, growth, and goodwill of the firm.

Some common responsibilities of a financial manager are:

  • Producing correct financial reports.
  • Making cash flow statements.
  • Projecting profit and managing credit.
  • Help in making major financial decisions.
  • Directing investments.
  • Making financial forecasts.
  • Budgeting.
  • Managing risks.

Types of Financial Manager

There are basically 5 types of financial managers, but most organizations hire one person to control all financial activities.

The 5 types of financial managers are:

1. Controllers

People who direct the preparation of financial reports that outline and forecast the organization’s financial reports (balance sheet, income statement, etc.).

2. Treasures and Finance Officers

These managers control their organization’s budgets to meet its financial objectives to oversee the investment of funds.

3. Credit Managers

They used to manage the organization’s credit business.

4. Cash Managers

 Cash managers oversee the flow of the cash that comes in and goes out of the company.

5. Risk Managers

Who controls financial risk by using strategies to reduce the probability of a financial loss. 

Roles of Financial Manager
Roles of financial management

Responsibilities of a Financial Manager

Following are the major responsibilities of a Financial Manager:

1. Raising of Funds

In order to meet the necessity of the business, it is important to have enough cash and liquidity. It is the responsibility of a financial manager to decide the ratio between debt and equity. It is important to maintain a good balance between equity and debt.

2. Allocation of Funds

Once the funds are raised through different sources, the next important function is to allocate the funds. In order to allocate funds in the best possible manner, the following point must be considered.

The size of the firm and its growth capability

Condition of assets, whether they are long-term or short-term

The method by which the funds are raised

The method by which the funds are raised these financial decisions, directly and indirectly, influence other managerial activities. Hence, the proper allocation of funds is one of the most important activities.

3. Financial Reporting

 Reporting is a very significant role for all companies. It is a very crucial way of knowing the firm’s financial position and behavior. It shows how much capital is there, where it came from and what expenses were earned in that period.

Financial management provides all necessary reports associated with the financial section of the organization and uses this as the database for estimating and planning financial activities.

4. Profit Planning

Profit earning is one of the prime functions of any business organization. Profit earning is important for the survival and sustenance of any organization. Profit arises due to many factors such as pricing, industry competition, state of the economy, mechanism of demand and supply, cost, and output. A healthy mix of variable and fixed factors of production can lead to an increase in the firm’s profitability. These areas are all managed by the financial manager.

5. Understanding capital markets

They traded shares of a company on the stock exchange for continuous sale and purchase. It is understood that the capital market is an essential factor for a financial manager. Hence, it is the responsibility of a concerned person to understand and calculate the risk involved in this trading of shares debts.

6. Enhancing Staff Strength

Financial management helps in identifying which positions are most profitable to fill. It will also encourage companies to increase salaries to deserving employees.

Qualities of a Financial Manager

If you want to be a financial manager, then you must have some qualities and skills for sure. These skills and qualities are following;

1. Understanding of Accounting Types

 Maintaining accounts of transactions by a company is one of the difficult functions of financial management. Different transactions are done in different ways, and this makes it necessary for these professionals to know both methods. Knowing the difference between these is essential for cash flow management, gathering receivables, and securing payments to various vendors. This is a tough skill for a finance and accounting manager.

2. Able to Prepare Financial Statement

Preparing a financial statement is a fundamental skill required for performing financial roles perfectly. They must make various reports that are consumed by different people inside and outside the company. These statements must show the financial position of an organization and will be helpful for various purposes.

Developing and submitting such statements is also crucial as per rules. It is essential for financial managers to know how to prepare these reports with appropriate format and information.

3. Preparing a Budget

Preparing a budget is a very critical task for anyone. A budget ensures that there is enough money for all activities that will help in reaching set goals. Not only making budgets, but financial managers also must be capable of checking each department’s arrangement for resources.

4. Management Skills

As a financial leader, a financial manager must be able to manage his department well. Some management skills, including people management skills, communication skills, technical skills, conceptual skills, leadership skills, problem-solving skills, time management skills, domain knowledge, etc.

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Sukanta Maiti

I am a Mechanical Engineer by profession, Blogger, and Youtuber by passion. I have been in the engineering field since 2014. I am passionate about sharing all my knowledge about engineering, management, and economics to my readers.

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