Finance in an Organization -
Department of Finance

 

In an organizational structure , there is the management, supply chain department, IT – information technology department, marketing department, sales department, operations department & finance department among others. The department of finance’s primary function is accounting, examining financial statements & reporting, preparing & forecasting budgets and treasury.

What is the department of finance? Finance refers to the management of money & investment, within an organization the department of finance perform several function such as accounting & treasury.

In this paper, in the first part (I) the department of finance will discussed & in the second part (II) outsourcing of the department finance (or function) with its advantages related to efficiency & effectiveness will be discussed.

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I- Department of Finance 

 

Within a firm, the department of finance (shown below in - figure 1) alongside other departments, make up the organizational structure of a firm. The department of finance’s primary function is accounting, examining financial statements & reporting, preparing & forecasting budgets and treasury (department, divisions, functions etc can be opened/made with the book by making full template). The department of finance can be very expensive for firms which makes them less efficient & effective. Some firms don’t perform some function of finance and therefore don’t have all data they need for better decision making, with outsourcing those enterprises can have access to those data without the expensive cost of having those business process in-house.  Recently, finance departments have reduced their cost by almost 30%, firms are looking for ways to be efficient in order to increase their profit. In order for firms to be efficient, outsourcing is the best option.

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Figure 1 - Image of an organizational structure - 

with the functions performed in a department of finance

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II- Outsourcing Finance

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 Outsourcing the finance department or functions (example: Financial Planning & Analysis - FP&A) result in a decrease in expenses which will immediately increase the profit of the enterprise. By doing so, those firm can increase their investments, or allocate more funds in research & development (a process by which a firm can create new products & services). In addition to efficiency, firms that employ an outsourcing strategy can now focus on the core aspects of their business making them effective. Finance & Accounting (F&A) Business Process Outsourcing (BPO) is an arrangement whereby a business engages an external party to assume some or all parts of its finance and accounting functions, such interpretation & analysis of financial statement up to outsourcing the entire department. Business Process Outsourcing makes it less expensive for a company to access accurate & complete financial data which is important for decision-making. A firm that is not profitable enough can outsources functions & department to reduce expenses thereby increasing it's profit. Firms that don’t have a full finance department can outsource those functions such as interpretation & analysis of financial statements and have access to ratio analysis, trend analysis (horizontal analysis & vertical analysis); without the expensive cost of making a full finance department in-house. 

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To conclude, the finance department’s functions are important for a firm’s decision-making. With Finance & Accounting (F&A) Business Process Outsourcing (BPO) a firm can access accurate analysis without having to have business process made in-house.