INTRODUCTION

This project begins by discussing the concept of financial management and its nature, scope
and significance from the perspective of a company or business entity. Financial management
is an integral part of overall management. It is concerned with the duties of financial
managers in the business firm. Joseph and Massie have aptly defined financial management
as being “the operational activity of a business that is responsible for obtaining and efficiently
utilizing the funds necessary for efficient operations”. Thus, financial management is mainly
concerned with the effective management of funds in the business. Financial management as
practiced by business firms can be called as Corporate Finance or Business Finance. Every
business concern needs finance to meet their requirements in the economic world. Any kind
of business activity depends on finance. It is for this reason that financial management is
called the lifeblood of business organization. Whether the business concerns are big or small
they all need finance to fulfil their business activities. In this context the position of the
financial managers is highlighted and the different functions carried out by them are
discussed. The finance manager plays a decisive role in the success of the organization. His
important duties are raising funds, allocation of resources, dealing in capital market, planning
of profit, etc. If the firm has an efficient and eminent finance manager, the path of success of
a firm will be clear. The project discusses the emerging role of the finance managers in the
light of globalization and augmented complexity in the functions carried out by different
companies. The age old practice of keeping a single manager who was required to overlook
entire operations of a business have given way to the new world where there are many
managers who are required to look after specialized categories of operations. The face of
Indian economy has changed beyond recognition ever since India embarked upon the policies
of liberalization in the early nineties. There has been tremendous growth in all sectors of
economy with emphasis now on specialization to maximize the profits for any business.
Today every company has separate financial managers who are entrusted with the
responsibility of not only preparing financial reports but also to manage the investment
policies of the company. Thus In the area of finance and financial management, finance
manager is important authority. Not only to raise the finance of company, but also to perform
other critical functions.
 REVIEW OF LITERATURE

The role of chief financial officers (CFOs) has changed dramatically over the past decade.
They excelled at managing accounting, working capital, inventory, capital expenditure and
cost control, but are now being called upon to act as strategic partners to chief executive
officers (CEOs) and work towards sustainable financial growth. CFOs are being called into
boardrooms, and have to address technological challenges as services are delivered offline
also1. In article that is “The Evolving Role of Today’s CFO, Myles Corson, BusinessFinance
Magazine” it was held that the market cataclysm highlighted the need for CFOs to monitor
closely core financials such as managing liquidity and the capital agenda, controlling costs,
maintaining internal controls and delivering robust financial information. As W.W. Grainger's
CFO Ron Jadin explains, he works closely with the CEO "to figure out where we want to set
the guardrails around how fast we should grow, how much we should invest, and how far to
the left and right of those guardrails [the company] is allowed to operate. When the guardrails
are clear, growth can happen quickly."1

The basic idea conveyed through an article “Changing Role of Financial Management”
written by Robert. A. Howells is that there has been a total attitudinal change among owners
towards the finance manager. He is no longer referred to as my accountant. Instead of being a
commodity, the finance manager is now a part of the top management. The finance manager
does not cover the routine duties of finance and accounting. As a member of top management
he is also responsible for formulation and implementation of policies and decision making.
The finance manager job has vastly changed. Earlier it was a support function now it is
mainline. And finance itself has been a profit center. In these competitive times, survival
depends largely on an organization’s capabilities to anticipate and prepare for change rather
than just react to it. The role of the financial officer, thus, becomes crucial to meet these
technological, economic and political, changes.
1
The evolving role of new-age CFOs, Madhura Karnik and Malavika Joshi, Livemint.com
 OBJECTIVE

The main objectives of this project are to study about the functions and responsibilities of
financial managers and their importance for the success of the organization. The project also
aims at exploring their expanding role in the 21 st century era in the light of challenges faced
by them and the additional duties imposed on them.

HYPOTHESIS
As the financial crisis and economic challenges of the past five years have reshaped the
global business environment, they have spurred profound changes in organizations and
companies around the world. In particular, the role of the financial managers has evolved and
expanded as the finance function has come to the fore. Today their functions are no longer
limited to merely handling the finances of the company; they now advise the top management
in creating financial policy, financial planning and other management related issues. In view
of the same they cannot be referred to as being merely an accountant, their functions and
position has evolved to the point that they are now among the top management executives of
the company.

RESEARCH METHODOLOGY
This Doctrinal research is descriptive and analytical in nature. Secondary and Electronic
resources have been largely used to gather information and data about the topic.
Books and other reference material have been primarily helpful in giving this project a firm
structure. Websites, dictionaries and articles have also been referred.
 FINANCIAL MANAGEMENT:
ITS SCOPE AND SIGNIFICANCE
In modern times, we cannot imagine a world without the use of money. Money is the life
blood of the present day world and all our economic activities are carried out through the use
of money. For carrying on business we need resources which are pooled in terms of money. It
is used for obtaining physical resources, carrying out productive activities and business
operations, paying compensation to suppliers of resources etc. Hence financial management
is considered as an organic function of a business and has rightly become an important one.

A group of experts defines financial management as simply the task of providing funds
needed by the business or enterprise on terms that are favourable in the light of its objectives.
However financial management is certainly broader than the procurement of funds as there
are other functions and decisions too. Other set of experts assume that finance is concerned
with cash. Since every business transaction involves cash directly or indirectly, finance may
be assumed to be everything that takes place in the conduct of a business. Obviously this
definition is too broad.

The third set of people whose point of view has been widely accepted considers financial
management as procurement of funds and their effective utilizations in the business. Financial
management has to not only see that the funds cab be raised for installing plant and
machinery at a cost; but it also has to see that additional profits adequately compensate for
the costs and risks borne by the business while setting up the project.

Thus from the point of view of a corporate unit, financial management is related not only to
‘fund raising’ but also encompasses the wider perspective of managing the finances for the
company efficiently. In the developed state of a capital market raising funds is not a problem;
the real challenge of financial management is to put the capital resources to efficient use
through effective planning, financial organization and financial control and to deal with tasks
like ensuring the availability of funds, allocating them for different uses, managing funds,
investing them, controlling costs, forecasting financial requirements, profit planning etc.
 ORGANIZATION OF FINANCE FUNCTION
IN A COMPANY
The responsibilities for financial management are spread throughout the organization in the
sense that financial management is, to an extent, an integral part of the job for the managers
involved in planning, allocation of resources and control. For instance, the production
manager (engineer) shapes the investment policy (proposal of a new plant), the marketing
manager provides inputs in forecasting and planning etc. Nonetheless, financial management
is highly specialized in nature and for the major part is handled only by the specialists. It is
therefore essential to set up an efficient organization for financial management functions.
Since finance is a critical functional area, the ultimate responsibility for carrying out financial
management functions lies with the top management i.e. board of directors/managing
director/chief executive or committee of the board. However the exact nature of the
organization of financial management differs from firm to firm depending on factors like size
of the firm, nature of its business, financial philosophy, ability of financial officers etc.
Similarly the designation of the chief executive of the finance department also varies widely
in case of different firms. In some cases they are known as the finance managers, vice
president (finance), director(finance) or the chief financial officer(CFO) etc. He reports
directly to the top management. His job is not concerned only with routine aspects of finance
and accounting. Being a member of the top management he is closely associated with the
formulation of policies and decision making2.

Again under him in the finance department, functions are distributed between other mangers
such as the treasurer and controller. They might be addressed by different names in different
companies. The main concern of the treasurer is with the financing activities of the company.
Included in his range of functions are obtaining finance, banking relationship, investor
relationship, short term financing, cash management, credit administration, investment,
insurance etc. The functions of the controller is related mainly to accounting and control such
as financial accounting, taxation, internal audit, management accounting and control,
budgeting, planning and control, economic appraisal and so on3.

2
Fianacial Management, Tata McGraw-Hill Education, Khan And Jain
3
Ibid
 FUNCTIONS OF FINANCE MANAGERS
To achieve the objective of financial management, that is to maximise the owner’s wealth, the
financial executives have to perform a variety of functions to discharge their responsibilities.
With the evolution of finance from being a mere descriptive study to one that is a highly
developed discipline, the role of financial managers has also undergone a sea change. In the
light of different responsibilities of the financial managers he performs mainly the following
duties.

1. Forecasting Financial Requirements: It is the primary function of the finance manager.

He is responsible to estimate the financial requirement of the business concern. He
should estimate how much finances are required to acquire fixed assets and forecast the
amount needed to meet the working capital requirements in future.
2. Raising Funds: Raising funds is one of the very important functions played by the
finance manager. It is the responsibility of the finance manager to make arrangement of
necessary funds from various sources. Funds can be raised by the way of equity and
debt. Maintaining excellent balance between debt and equity is the responsibility of
finance manager4.

3. Allocation of Resources: As the financial decisions influence other management

activities, proper allocation of funds is very much significant. After raising funds from
various sources the finance manager has to allocate the funds wisely in the best
possible manner. While allocating funds he has to consider some important points such
as size of the firm and its growth capacity, status of assets whether they are long term
or short term, mode by which the funds are raised, etc.

4. Dealing in capital market: Finance manager must understand the ins outs of capital
market. Risk is always involved at the time of trading securities in the stock markets.
Hence the finance manager has to understand and calculate the risk involved in
trading of shares and debentures. The decision of a financial manager about the

4
Vol. 1 | No. 1 | July 2017 www.garph.co.uk, FINANCIAL MANAGEMENT FOR THE
ORGANIZATIONAL SUCCESS: CHALLENGE BEFORE FINANCE MANAGERS, International Journal
of Advanced Research in Management and Social Sciences ISSN: 2278-6236, Dr. Ravindranath N. Kadam.
distribution of dividend is also the one of his important functions.

5 Planning of Profit: The main motto and function of business organization is profit
earning. Profit earning is essential for the survival. Profit planning means appropriate
handling of the profit earned by the business organization. Profit earning of the firm is
determined by the product pricing, competition, demand and supply, cost of production
and output level, etc. The proper and healthy mix of variable and fixed factors increases
profitability of the business organization. A slight negligence in the management of the
determinants of profits leads to reduce profitability which harms the sustainability of the
firm. Hence planning all these things is the responsibility of the finance manger.

6 Managing Assets: The function of asset management focuses on the decision- making
role of the financial manager. Finance personnel meet with the other officers of the firm
and participate in making decisions affecting the current and future utilisation of the
firm’s resources. They will not only identify the best composition of assets but also
identify the ways to use existing assets more effectively.

7 Interrelation with other Departments: Finance manager deals with the various functional
departments such as marketing, production, personnel, research, department etc. Finance
manager should have sound knowledge not only in finance related area but also well
versed in other areas. He must maintain a good relationship with all the functional
departments of the business organization. Clearly, the clout of the finance manager is
growing along with the change in his role and reforms in the financial sector gather
speed, this trend will only increase.
 CHALLENGES FACED BY THE FINANCE MANAGERS
Reflecting the emerging economic and financial environment in the post- liberalisation era, the
job of financial requirements in India has become more complex, important and demanding.
The key challenges are inter alia, in the areas specified below5:

1) Investment Planning: Investment planning focuses on effective investment strategies

and to analyze the risk associate with it. Finance manager is responsible for analyze the
risk and help management to reduce this risk so that it does not affect the financial goal
of an organization.
2) Financial Structure: Financial structure is the way in which company assets are
financed such as short term, borrowings long term debt, and equity. Finance manager
analyze the government rules and regulation, banks norms, capability of the
organization and the available options in the market to finance the company’s assets.
That helps management to decide which option is profitable for the organization.

3) Treasury Operations: Treasury operations is basically the overall responsibility for

administering the banking functions of organization, cash management and investment
services. These all activities are directly linked with the growth of
organization and profit.

4) Investor Communication: Finance department provides investors with an accurate

account of the company's affairs. This helps investors to make informed
buy or sell
decisions.
5) Management Control: Control is one of the managerial functions like planning,
organizing, directing etc. It basically includes the three steps, to set the standards,
measure actual performance and taking corrective action. Finance manager help
organization to set the targets and helps organization to achieve that target by
continuously monitoring the actual performance with set standards.

5
Vol. 1 | No. 1 | July 2017 www.garph.co.uk, FINANCIAL MANAGEMENT FOR THE ORGANIZATIONAL
SUCCESS: CHALLENGE BEFORE FINANCE MANAGERS,
International Journal of Advanced Research in Management and Social Sciences ISSN: 2278-6236, Dr.
Ravindranath N. Kadam
 EMERGING ROLE OF THE FINANCE MANAGERS

Over the last 80 years, the role played by the financial managers has changed dramatically,
driven, in great part, by events and changes external to the association. Initially the role of the
key financial executive was primarily that of an accountant. Businesses were generally small,
local and not terribly complex. Closing the books manually, providing some reports to
management and filing tax and other regulatory requirements was the job. These activities do
not contribute much of anything to value creation.

To some extent, the idea of ‘controlling’ was beginning to creep into the job. Larger
companies such as GM had already begun to utilise what has become known as the “DuPont
System of Controls6.” This came about because of former DuPont Treasurer F Donaldson
Brown, who became GM’s treasurer and worked closely with its CEO Alfred P Sloan Jr to
implement a system of internal controls to run what was then one of the largest corporations in
the world. But many companies lacked the size or sophistication of GM. As companies grew
in size, complexity and reach into the 1970s, the role changed to controller in a big way.

By the 1950s, too, there was increased interest in financial analysis, managerial accounting and
management controls. Thus the job of the financial manager changed from emphasis on
accounting and control to more financial analysis and planning as companies were becoming
more strategic. During the 70s and 80s, financial executives continued to focus on planning,
both long-range and operating and control.

In 1990, Patrick J Keating and Stephen F Jablonsky undertook a research project for Financial
Executives Research Foundation (FERF)—the research arm of FEI—which led to the
publication of The Changing Roles of Financial Management, which made a sharp distinction
between the role of the finance executive as controller, or ‘cop’ and ‘business partner’. It was
the idea of finance getting out of its centralised role of orchestrating the planning, budgeting
and measurement cycle and actually working closely with line managers. For some companies,

6
The Changing Role of Fianacial Management, Robert.A.Howell, Issue( March 2014), CFOinstitute.com.
 this meant actually physically relocating finance personnel closer to the line managers and
operations. The skills required for these assignments were frequently different from those in
the central office, requiring teamwork, analytical skills and the ability to make and implement
decisions rather than giving directions and expecting responses from the field. Some
companies, such as GM, had difficulty breaking from the old model of centralised
control. Others, such as Toyota Motor Corp, had their finance personnel sitting right on the
factory floor so that they could be close, to understand and contribute to value- creating
actions7.

Several other trends were occurring in the 1990s. Companies were reengineering their
processes (also called business process redesign or BPR) to become more efficient and
effective, based on the Japanese lean production model. In a number of companies, especially
those where the concept of business partnering had taken root, finance personnel partnering
with line manager colleagues were actively involved in the BPR efforts. In those companies
where finance partnered with the line managers, the CFO and other senior financial executives
began to take on more “strategic partner” roles, working with CEOs and other top management
executives. Issues such as the best ways to grow the business (whether internally or by
acquisition); major investment and divestiture decisions; and such key financing issues as
leverage, stock repurchases and dividends became areas where finance managers had much to
add to the discussions and decisions; which role has continued to date8.

The final evolutionary role for the financial leader is coach, making sure that those within the
entire enterprise are financially proficient. This doesn’t mean that everyone must be a financial
expert, but that virtually every key manager throughout the organisation thinks in terms of the
financial implications of decisions they are confronted with.

7
The Changing Role of Fianacial Management, Robert.A.Howell, Issue( March 2014), CFOinstitute.com
8
The Evolving Role of Today’s CFO, Myles Corson, BusinessFinance Magazine
 CHANGED POSITION OF THE CFO UNDER
THE COMPANIES ACT 2013
The Indian Companies Act, 2013 is going to make a big impact on Indian corporates in areas
including Administration, Accounting & Reporting, Internal Control, Corporate Social
Responsibility, and Governance structure. The Chief Financial Officer (CFO) of the company,
due to his pivotal position and significant responsibility, is expected to play a critical role in
the changed environment.
The traditional role of a CFO as an accountant responsible only for book keeping and
recording debits and credits has changed significantly and the areas of compliance, planning
and financial analysis have now become part of his job responsibilities.In the 21st century,
globally this role has been transformed to include aspects such as stakeholder’s management,
risk management, strategy building, developing business models, business planning etc9.The
Companies Act, in India, has enhanced the responsibilities of the CFO manifold by formally
recognising this transformed role.For the first time, the Act defines the CFO as a person
appointed as the Chief Financial Officer of the Company and also stipulates that each company
belonging to the prescribed Class of Companies is required to have a CFO on a full time basis.
The person appointed as the CFO under the Act is also considered as a Key Managerial
Personnel (KMP). Being a KMP under the Act, the CFO is appointed, remunerated and
removed only through a board resolution. The importance accorded to the role of a CFO is
primarily due to the onerous responsibilities and obligations imposed by the Act on the CFO.
Now, wherever CFOs are appointed under the Act, they will have to mandatorily sign the
financial statements of their companies along with those authorised by the boards. This is in
line with the theory of making those responsible for execution to formally acknowledge their
responsibilities and accountability to the stakeholder group.The responsibilities of the CFO for
the preparation of the financial statements have also increased due to the various new
requirements such as consolidation, separate reporting on the operating effectiveness of
internal controls, enhanced disclosure requirements, etc. CFOs are also responsible for

9
The Evolving Role of Today’s CFO, Myles Corson, BusinessFinance Magazine
 providing various inputs for meeting the enhanced board report requirements10
The Act casts tremendous responsibilities on the Audit Committees and the Board and the new
requirements include ensuring effective internal control environment, setting up a solid
regulatory and compliance framework, formulating a strong risk management platform,
providing a robust vigil mechanism, creating a fool proof mechanism for reporting of frauds,
and ensuring timely approval for related party transactions. CFOs have an important role to
play in all these areas and they will act as the backbone of corporates in discharging these
regulatory responsibilities in a seamless manner. Also the corporate social responsibilities of
the board would not only require the involvement of CFOs in ensuring compliance with the
Act, but also in analysing and maximising the value proposition of the same. Along with all
the importance gained, now CFOs are made responsible and liable for penalty and/or
prosecution for non-compliance with various provisions of the Act such as maintenance of
books of account, preparation & filing of annual accounts, disclosure of financial information
in offer documents, risk management, internal control etc.

10
Indian CFOs by the new Rule, Sriraman Parthasarthy, Hindubusinessline.com
CONCLUSION
“As CFO, I’m in a unique position within the organization, at the absolute centre of the
universe. The only other executive besides me that has the same presence at the centre is the
CEO”. – Bruce Besanko, OfficeMax.

In addition to overseeing the company’s financial health, financial managers are increasingly
involved in setting operational and commercial strategy, navigating their companies safely
through tighter credit markets, more complex regulation and unstable trading conditions.
Financial managers execute and support company strategy using their financial expertise,
enable that strategy by funding growth or leading key initiatives and develop and communicate
overall strategy along with their organization’s CEO and board of directors.

As organizations continue to adjust to market volatility and economic uncertainty, financial

managers must increasingly provide expert advice to support boardroom decisions. They are in
an exceptional position to offer this level of strategic counsel because of their ability to gather
information from disparate parts of the company.
However it was aptly stated by Xerox CFO Luca Maestri “Core skills in finance are the
foundation. They are non negotiable. If you are no good at financial analysis, you cannot be
the CFO.” Thus despite the expansion of the job, CFOs must nonetheless maintain a laser
focus on vital financial responsibilities, which remain particularly essential to avoid any
financial crisis.
BIBLIOGRAPHY
 The Evolving Role of Today’s CFO, Myles Corson, BusinessFinance Magazine
 Changing Role of Financial Management” written by Robert. A. Howells.
 Indian CFOs by the new Rule, Sriraman Parthasarthy, Hindubusinessline.com
 Vol. 1 | No. 1 | July 2017 www.garph.co.uk, FINANCIAL MANAGEMENT FOR THE
ORGANIZATIONAL SUCCESS: CHALLENGE BEFORE FINANCE MANAGERS,
International Journal of Advanced Research in Management and Social Sciences ISSN:
2278-6236, Dr. Ravindranath N. Kadam.

 Fianacial Management, Tata McGraw-Hill Education, Khan And Jain.

 The evolving role of new-age CFOs, Madhura Karnik and Malavika Joshi,
Livemint.com