Your chief financial officer (CFO) holds the key to your company’s cash and budgets. Alongside the CFO works an army of executives to help with various tasks such as managing ledgers, preparing invoices, and collecting cash. Together with the CFO, these finance professionals constitute the ‘office of the CFO’.
But how do you organize this team so that your workflows run smoothly? Businesses that do not have well-defined finance structures will find it difficult to manage workflows such as procurement and accounts receivables (AR) management as they grow.
In this article, we discuss the different finance functions and key job roles. We also discuss tips to help you build your finance team structure.
The office of the CFO deals with multiple responsibilities that includes reporting the company’s financials, collecting cash receivables from clients, and paying suppliers. To manage these disparate tasks smoothly, the office of the CFO is often divided into smaller departments or functions.
Here’re the six broad departments that make up the office of the CFO. These departments may be further divided into sub-teams.
Procure-to-pay: The procure-to-pay department consists of your accounts payable and purchase teams. This function handles all the processes involved in the purchase of goods or services for your company. This starts with evaluation of vendors, purchase order (PO) release, and ends with the receipt of goods and payment of invoice. After this process, the procurement department also looks at reconciliation, quality and finance audits, and ensures statutory compliance.
Order-to-cash: The order-to-cash department takes care of all the financial aspects involved in fulfilling a customer’s order. This includes receiving the sales order, processing the invoices, collecting the payments, and recording the transaction in the books. The key responsibilities of this team include order management, credit management, order fulfillment, order shipping, customer invoicing, accounts receivable management, payments collection, and reporting and data management.
Treasury: Treasury department manages the money and financial risks of the business. The treasury team develops short and long-term strategies to ensure that the business has money to meet its day-to-day business obligations as well as investment plans. They are also responsible for maintaining relationships with banks to facilitate cash management and funding. Cash management, risk management, and corporate finance management are the treasury’s main responsibilities.
Financial planning & analysis (FP&A): The FP&A team is responsible for transforming your company’s strategies into annual operating and capital budgets. It sets key performance indicators (KPIs) and forecasts the company’s financial performance. Key responsibilities of the FP&A team include planning, budgeting, integrated financial planning, performance reporting, forecasting, and modeling.
Tax and compliance: The tax department is responsible for managing the company’s tax returns and compliance. The tax department also supports the invoicing and other teams in the accurate calculation of taxes.
Record-to-report: This team is responsible for collecting, processing, and presenting accurate financial data. The reporting team provides strategic, financial, and operational information to the management and other stakeholders about the performance of the company.
Note: Small and midsize businesses may have a different structure with a definite overlap between departments. They’re very likely not to have treasury departments or a separate function for reporting. In very small businesses, the same person or team may be responsible for both accounts receivables and accounts payables. The number of departments and sub-teams you have will vary based on your business size and complexity.|
Now that we know which departments could be part of the CFO office, here’re some of the key job roles that you must look at having.
Chief finance officer (CFO): The CFO is the head of your finance department and usually is hierarchically third in an organization, after the CEO and the COO. Based on the size of the company and the terminologies used, the head of the finance department may be referred to as CFO, finance director, or VP-finance. In a bigger company, the finance director and VP-finance could be secondary roles supporting the CFO. The CFO is responsible for the company’s overall financial strategy, investor relations, shareholder reports, and broad strategies to increase profits and reduce costs.
Finance manager: Finance managers are responsible for cash and investments of the company. They decide the budget ranges and work with other functions such as sales, marketing, and HR to optimize the use of finances. Finance managers know how to handle cash assets, analyze investments, track debt, monitor credits and collections, and prepare financial reports and forecasts.
Financial controller: The finance controllers are responsible for money transactions in a more hands-on manner. They track all the financial transactions. They also collect receipts, invoices, and other documents from the concerned departments to record the transactions correctly. Unlike the finance manager who looks at broad budgets and spending, the financial controller tracks the actual spend.
Corporate treasurer: The corporate treasurer is responsible for the company’s exposure to credit and currency risks. The corporate treasurer is a corporate risk management expert, analyzes budgets, monitors the company’s corporate investments, makes refinancing decisions, manages cash reserves and foreign exchanges, and oversees cash flows.
Accountants & bookkeepers: Also known as account managers and account clerks, they are responsible for maintaining the financial records accurately. Their job requires great attention to detail and a knack to spot anomalies in transactions and supporting documents. Every company needs to keep financial records and hence accountants are integral to any finance team. Today, accounting software has automated several bookkeeping functions, saving accountants much time and effort.
Payroll manager: The payroll manager is responsible for making sure that the staff are paid on time and correctly. The payroll manager calculates payroll taxes, provides detailed payslips and identifies and resolves salary-related issues. They also look at ways to automate the process. While the payroll manager has oversight over the whole process, assistants and clerks may help with discrete steps such as calculating taxes or resolving employee issues.
Procurement manager: Also known as the purchasing agent or the procurement officer, this person is responsible for overseeing the buying of new supplies and software services. They collaborate with the various departments to negotiate deals, process purchasing orders, and manage healthy relationships with suppliers.
|Note: Small and midsize businesses may not have all the roles discussed above. For example, the role of corporate treasurer is more common in large enterprises than in SMBs. The finance manager at a small business may don multiple hats and be responsible for procurement as well. Small businesses may not even have a full-time CFO and the finance controller may be managing day-to-day activities including bookkeeping.|
What is the optimal number of finance professionals you should hire? How much should you spend on your finance functions? These are some natural questions that follow once you know the key finance functions and responsibilities.
Your finance team strength will depend on the size of your business and any specific needs that you have. Here we’ve compiled some stats to help you plan your finance team structure, based on studies done by several research houses.
Now that you know the teams that make up a finance department and the key job roles in it, here are some tips to help you structure your finance team better. By finance team structure, we mean how you can organize the different departments and job roles to improve collaboration and efficiency.
Start planning for your CFO office early. Even as you grow from your current size to a multinational enterprise, it is vital to plan ahead. Look at building a financial strategy covering investment plans, cost reduction strategies, revenue growth, and cash management.
Technology holds the key to building an efficient and able finance function. Do not shy from investing in automation technologies to improve the efficiency of your finance teams. Reach out to us to learn how you can automate your accounts receivable processes including e-Invoicing, collections, cash application, and credit risk management.
Here’re more resources to help you be a new-age finance professional:
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