1.3 The Role of a Financial Manager

Finance matters to more than just a company’s Chief Financial Officer (CFO). At some level, all jobs require financial decision making because of limited resources. There are many specific jobs related to finance in an organization and they each are important in the operation of the business.

In larger public companies, as well as many smaller companies, the top financial officer is the Chief Financial Officer (CFO) The top financial officer in larger public companies, as well as many smaller companies. . The CFO reports to the Chief Executive Officer (CEO) and the board of directors (or, in a privately owned company, to the owners themselves), and is ultimately responsible for all financial decisions. Generally, two financial managers report to the CFO, the treasurer and the controller. The treasurer Financial manager in charge of externally focused items such as financial planning and fundraising. is the firm's chief financial manager responsible for external financial activities such as financial planning, raising funds, capital expenditure decisions and managing cash. The controller Financial manager in charge of internally focused items such as accounting statements and tax statements. is more internally focused and concentrates on the firm's reporting activities, tax management, and accounting. Under each of these positions are many other financial analysts, staff accountants, and even foreign exchange managers who each have a specific finance-related function in the organization. Many large organizations have entire departments whose focus is to make money using company funds. For example, a large company may make investments in other companies by buying their stock or they may buy the whole company and use an internal team to focus on mergers and acquisitions. They may also have a foreign exchange department to minimize foreign exchange risks, exploit opportunities for arbitrage, or have a real estate division for investment. Many different jobs are either directly or indirectly related to finance.

Even for those with occupations that are not primarily finance oriented, it is important to understand the role finance takes in an organization. Because many business functions are interrelated, numerous successful managers work in several different areas of the business before they become senior management. This gives them a better view of the organization which can lead to better strategic decisions.

Further, compensation is based on financial performance! A manager might prefer to compensate for effort, but business is often based on more easily measured results. One’s paycheck may depend on understanding of how one’s role impacts the bottom line of the company. For example, a territory manager may be responsible for the profitability of their territory. A marketing manager could have responsibility to come in under budget while increasing market share. Operations may be asked to reduce cost while increasing output. Without a basic understanding of finance, successful achievement of these goals may be difficult or even impossible.