Financial Organization

A small business usually carries planning and control in a single individual, often a person heading up the whole company. Financial management in such this company is apt to be informal; it is simply a facet of the manager’s overall job guiding, coordinating, and controlling the activities of the firm.

As the business grows, so obviously does the need for managerial help. In a medium size company, financial management is often placed in the hands of an officer, called treasurer. The job is no different than that encountered by executive heading up the smaller establishment except that the man in the smaller company wears other hat, such as salesman, purchasing agent, personnel manager, operating head, as well as treasurer. In the larger unit, the treasurer attends only to financial maters.

Among large, multi-division, multi0product, international organizations, financial management attains an even higher degree of specialization. To do so, virtually all corporate organization have several layers of financial managers, starting at the plant level and ending not infrequently with the board of directors.

As a practical matter, the board may appoint a financial committee of three to 12 members, consisting of both top management and directors. The committee’s responsibility is usually to act as an intermediary between a company’s operating personnel and the decision making board. Almost anything in the financial realm falls with such committee ken, including questions of financing, budgets, expenditures, dividend policy, and future planning. Such is the power of financial committee that in most cases their recommendations are approved as a matter of course by the full board of directors.

On the operational level, the financial management team may be headed up by a financial vice president. This is a fairly recent development. Top financial officers now have a hand in everything from mergers and budgets to personnel and marketing. They woo bankers and analysts of stock. Because they usually know the company more than anyone else, they often move, finally, right into the driver’s seat.

The financial vice president answers directly to the president. Serving under him are the treasurer and controller.

Within the purview of the controller falls such vital tasks as the preparation of financial statements, cost studies, detail associated with taxes and the payroll, and the problems involved in formulating accounting procedures. The major assignments, though, are in the area of planning and control, or, more particularly, in establishing and maintaining an operation budget with the aim of maximizing profits.

The treasurers responsibilities are no less important. The job is to keep on top, which mean informed and in contact, with the financial markets, so that a company has ready access to funds when necessary. The treasurer usually takes charge of the management of a company’s cash, investing it temporarily as needed. The treasurer also gets handed such assorted assignments as taking charge of credit and collections, handling insurance, and distributing dividends.

There is no hard and fast rule as to who gets what job. Assigments no less than titles can and do vary from one company to another. But, no matter what title is painted on the door, the official in one way or another is involved in financial management. As such, the primary concern is helping to get as much yardage as possible out of a company’s capital. The idea is, if possible, to stretch the cash so that it can do double or triple duty, or even better. The profit obtained for each money invested in the company is known as the return on investment. It represents a clear and forceful measurement of how efficiently a business is run and the capital employed.