1. H E A V Y V E H I C L E S F A C T O R Y , A V A D I
FINANCE DEPARTMENT
PROCEDURES
2. The term, finance has to be understood clearly as it
has different meaning and interpretation in various
contexts. In the words of Howard and Upton,
“finance may be defined as that administrative area
or set of administrative functions in an organization
which relates with the arrangement of cash and
credit so that the organization may have the means
of carrying out its objectives as satisfactorily as
possible”.
3. The contributions of finance department to any
company and how these contributions positively
affect organisational performance will greatly
depend on factors such as the extent to which the
owner/ manager is involved in his company.
ROLES AND RESPONSIBILITIES
4. BOOKKEEPING
This is the most basic function of the finance
department. It involves the day-to-day recording,
analysis and interpretation of a company’s financial
transactions. This will include the tracking of all
expenses (purchases, payments etc.) and sales of
finished products. In some startup companies, this
role is often carried out by a bookkeeper who might
be replaced by more specialized payables and
receivables clerks as the company grows or expands
its operations.
5. MANAGEMEN OF CASH FLOW
It is the duty of the finance department to manage all
cash flows into and out of a company and ensure that
there are enough funds available to meet the day-to-
day running of the company. This area also
encompasses the credit and collections policies for
the company’s customers, to ensure that vendors and
creditors are paid correctly and on time; and that the
company is also paid correctly and as when due.
6. BUDGET AND FORECASTING
In this function, the finance department works with
managers to prepare the company’s budgets and
forecasts and also give feedback with regards to the
financial standing of the company. This information
can be used to fulfill the cash needs of each
department, plan company staffing levels, plan asset
purchase and expansions at minimum cost before
they become necessary. The finance department can
also use past records from respective departments to
make better budget and forecast over long-term and
short-term time horizons.
7. MANAGEMENT OF TAXES
Running a company involves paying tax, and it is the
duty of the finance department to handle tax issues.
This includes creating good corporate relationships
with government by remitting PAYE (Pay As You
Earn) to the relevant authority, and ensuring that
implementation of tax matters are done within the
framed policies
8. FINANCIAL REPORTING AND ANALYSIS
Financial reporting and analysis is the function that takes
raw accounting entries and transforms them into
meaningful, usable and comparable financial statements.
The finance department contributes to organizational
growth by measuring and reporting on regular bases, key
numbers that are vital to the success of the company.
This will likely include a summary of all funding sources,
expenditures and reserves available for future use
(excluding those already committed and budgeted for
current period) some non-financial information. And are
usually communicated to managers in a logical and
understandable format.
9. PROVIDING STRATEGIC GUIDELINES
Another key responsibility of the finance department
is in crafting strategy that could potentially drive the
growth of the organisation. The availability of data
collected from sophisticated tools, combined with
the right expertise and refined strategy can help set
realistic long-term goals for the startup. Some of the
areas where the finance department can add
significant value is in identification of the right
pricing strategy, target market, and even product
mix.
10. PAY ROLL
Payroll is a critical function of the accounting
department and includes making sure all employees
are paid accurately and timely. In addition, proper
tax is assessed and tax payments are on time with
state and federal government agencies
11. Management Accounting
Management accounting is concerned with the analysis and
control of financial information to assist in the day-to-day
operations of an organization. Most medium- to large-sized
companies will have a management accountant responsible
for this function who will report to the financial director.
Management accounting and financial accounting overlap in
that management accounting reports are often based upon
information derived from the financial accounting records.
For example, the ‘actual’ expenditure figures shown in
management accounts will be taken from the financial
accounting records. Sometimes financial accounting and
management accounting are integrated. An example of this
would be the fully integrated standard costing system where
the financial accounts are structured in such a way as to
provide cost and management information directly
12. WHAT IS A FINANCE OFFICER?
The role of the Finance Officer involves providing
financial and administrative support to colleagues,
clients and stakeholders of the business. It’s a role
that may attract applicants keen to move up the
financial corporate ladder; those with ambitions of
being Finance Managers, or even the CFO one day.
Finance Officer job description should highlight the
need for candidates who are focused on outcomes,
excellent problem solvers and strong
communicators.
13. WHAT SHOULD BE INCLUDED IN FINANCE
OFFICER JOB DESCRIPTION
Reporting to a manager and supporting the finance
and accounting teams, a Finance Officer job
description should include some of the below key
duties and responsibilities. This is a role that
interacts with several departments internally.
14. A Finance Officer job description generally includes:
Assisting in the preparation of budgets
Managing records and receipts
Reconciling daily, monthly and yearly transactions
Preparing balance sheets
Processing invoices
Developing an in-depth knowledge of organisational products and
process
Providing customer service to clients
Resolve financial disputes raised by the customer service and sales
teams
Being a key point of contact for other departments on financial and
accounting matters
Supporting the Finance Manager and executives with projects and
tasks when required
15. DIRECT MATERIALS
In relation to manufacturing entities, the term direct
materials signifies one or more items, matters or substances
that are either physically transformed into a useable product
or that become part or component of that product. The cost of
such materials is directly traceable to each individual unit of
product manufactured and is, therefore, regarded as direct or
product cost. The quantity of direct materials needed to make
a unit of product is usually known or can be closely estimated.
For example, an engineer working in a furniture
manufacturing company can easily tell you the quantity of
wood, glue, nails and length of glass sheet needed to
manufacture an executive table. The direct materials often
form a major element of total prime cost of a given
manufacturing process.
16. INDIRECT MATERIALS
The term indirect materials refers to one or more items, matters or
substances that are essential to carry out a production or
manufacturing process but they don’t physically become the part of
product or a component of it. The cost of such materials is classified
as indirect cost because it can’t be easily and conveniently traced,
linked or associated to a unit of product or a job order.
The procedure for drawing indirect materials from storage is similar
to the direct materials i.e., they are requested by production
manager via a materials requisition form.
The cost of indirect materials used is added to the entity’s
manufacturing overhead cost and, thus, ultimately made part of the
total product cost. However, if the amount is significantly minor,
the cost of these materials can be directly charged to expense as
incurred during a period. The selection from the either approach is
largely impacted by the entity’s costing policies.
17. Examples of indirect materials
Some common examples of items treated as indirect materials in
manufacturing businesses are listed below:
The cost of oil and grease used to lubricate moving parts of
machines used in a manufacturing operation.
Air and oil filters used in machines, furnaces and ventilation
systems.
Protective equipment like gloves, glasses, eyewear and hamlets etc.
used by factory workers.
disposable/expendable tools and safety equipment.
Adhesives, glues and tapes.
Supplies used for washing and cleaning purposes.
Fittings and fasteners.
Use of pins, gums, staples, pencils etc. in a service providing firm.
18. Direct materials are tangible items and ingredients which are physically included in a
product and which can be easily identified with that product. Examples include timber
for manufacturing a chair, steal for a car and orange pulp to produce orange jam.
Indirect materials are essential for production operations but they are not physically
added to the product and also they can’t be easily and conveniently linked to or identified
with a particular product. Examples include oil filters, air filters, grease and disposable
items like gloves used in a manufacturing process.
Both direct and indirect materials are essentially part of the product cost, also
called manufacturing cost or inventoriable cost.
The type and quantity of both the materials needed to complete a unit of final product is
specified by bill of materials – a document prepared by engineering and production
department.
To start or continue manufacturing process, production manager uses materials
requisition form to request the required quantity of materials from storage department.
Indirect materials cost is often added to the manufacturing overhead and therefor
automatically becomes the part of entity’s manufacturing or product cost. If, however, the
amount is insignificant, the entity can opt to expense such cost as incurred. The cost of
materials so treated don’t contribute to manufacturing or product cost but are charged to
profit and loss account or income statement in its entirety like other period costs.
IMPORTANT POINTS TO REMEMBER
