Skip to 0 minutes and 4 seconds As we have mentioned previously, the finance team has a broad remit in an established business. All of this activity happens over an annual cycle. Here, we’ll see how the different finance activities we introduced earlier work in practice. Keeping a business on track is similar to spinning plates. You cannot afford to ignore one issue, or it could cause a problem. Imagine you are the head of finance at Woodhouse Limited, which operates a chain of six restaurants. As the head of finance, you will manage the following activities that your team are involved in during the year.
Skip to 0 minutes and 43 seconds Overseeing that the recording of financial transactions is happening properly. This may include ensuring that cash takings at each restaurant are recorded and banked, agreeing the purchases of fresh food stocks, approving orders from credit suppliers for regular orders of food and drink, ensuring that the stock levels of food and drink are being recorded in the accounting system.
Skip to 1 minute and 8 seconds Managing the organisation’s cash sources of finance and investment. This may include checking the bank balance daily, ensuring there’s enough money to pay for interest payments and bank loan repayments as they fall due. You will need to manage the cash cycle of Woodhouse Limited, so that there is enough cash to pay for wages, property rents, and supplier costs, which may be due weekly, monthly, or quarterly.
Skip to 1 minute and 35 seconds Coordinating the organisation’s planning or budgeting process and producing budgets. At the end of each year, the team will prepare financial plans or budgets for each of the restaurants for the following year and agree these with the restaurant managers, using them to set performance targets.
Skip to 1 minute and 54 seconds Providing accounting information for monitoring business performance. Compare the budget to income and expenditure so far need in each restaurant and investigate any significant differences. As the head of finance, you will also advise the rest of the board on overall business performance compared to budgets reporting on what Woodhouse is doing well and where there are problems which need to be addressed by management.
Skip to 2 minutes and 20 seconds Providing financial information to support decision making on projects. If the board are considering new projects which involve spending money, such as restaurant refurbishment or a marketing campaign, the finance team will produce analysis to help with the decision making. Producing the financial accounting information which is reported externally. At the start of the year, the team will finalise the accounts for the previous financial year, which will then be audited by independent accountants. This information will then be used by stakeholders to make decisions for the next financial year. For example, the shareholders will want to know how much they can take from the business or whether to reinvest the profits to support growth.
Skip to 3 minutes and 0 seconds Lenders will want to look at whether Woodhouse Limited is at a risk of not being able to pay interest or repay loans. The finance staff may not make or serve any food, but they provide essential support for the rest of the business, keeping the business on track. This is a continuous cycle taking place over each year a company is running. From this, we can see how finance teams have a range of roles within any established business and how financial information is used in different ways. We are now going to explore three uses of financial information in more detail.
The financial life-cycle of a business
In the last step Alice introduced the range of activities a finance team fulfils in an established business. In this video we’ll explore each of these in more detail.
All organisations have a finance life-cycle, which is usually a year long. As you’ll see in this video, there are a number of critical roles that the finance team are involved in at different points in this life-cycle. (In the downloads section below we’ve also provided a PDF version of this video you can read through in more detail.)
There are lots of different tasks going on at the same time. Alice describes this as ‘spinning plates’. All the plates (or financial activities) need to be kept in the air, without any being dropped or broken!
Now we have had an overview of the different activities of the finance team, in the next few steps of the course we will explore how organisations can use financial data to help them plan and control, monitor performance and make decisions.
Have your say
Think of a business of which you are a customer. Post a comment giving a brief description of the type of business, what plates you think the management need to keep spinning and why!
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