Why Is Finance Management Vital In Corporates by Joseph Stone Capital

 Proper management of finances is necessary for the success of any company. Finance measures like equity, debt, asset values, and profits indicate the financial health of a corporation. The finance manager is responsible for recording various things related to the finances of the corporation.

Manages External Finances

Financial management involves managing both the internal and external finances of a company. The external financial role of a company includes making timely payments to vendors, suppliers, and other stakeholders. The finance manager is also tasked to keep track of the receivables by regularly following up with customers and clients for whom the company delivered products and services.

The finance department also handles employees' social security payments. It makes payments to provident funds (PF) in India and 401(k) accounts in the US either on a monthly or quarterly basis. The company is liable to pay a penalty for delayed payments into these social security accounts.

The finance department also needs to deduct the tax of employees at the source and credit it into the respective government accounts. In the recent period, corporates are obligated to maintain and manage all of their financial functions with a single bank account. The company can avail of the services of Joseph Stone Capital to handle its financial functions for a small fee.

Managing Internal Finances

The internal financial function (IFF) of a corporation involves payroll processing. The company needs to ensure payments every month on a fixed date to its employees. Calculation of the salary involves deducting salary for unauthorized absence, deducting payments for 401(k), taxes, monthly transport, and adding benefits like medical allowance, city compensatory allowance, lunch allowance, etc. You can hire an experienced finance professional from Joseph Stone Capital for managing your internal finances cost-effectively.

The internal finance function also involves travel expenses reimbursements and other perks to employees. It needs to ensure the distribution of medical expenses after verifying the medical bills submitted by the employees every month or quarter.

The Finance Department’s Role in Budget

The company needs to estimate the funds required for the production, sales, and employees’ salaries and payments to the customers every year in advance. The finance department and planning department plays an essential role in budget preparation and ensuring sufficient funds at reduced rates for proper functioning and making profits. Therefore, financial management is highly needed for improved returns by reducing unwanted spending and ensuring funds availability for important functions like procurement of raw materials, product promotion activities, tax compliances, and making timely salary payments to the employees, who are key to improved performance of a company.

The Role of A Treasury

Both domestic and multinational companies need a treasury department to reduce the effect of forex fluctuations. The treasury department maintains an escrow account and hedging account to mitigate foreign currency fluctuations in the company finances. They are tasked to convert foreign currencies like Euros, Dollars, and  Pounds received for the sales effected in overseas countries. Many people are unaware of these departments, which operate in locations like New York, Mumbai, etc. The finance department plays a vital role in ensuring the successful functioning of a company and deriving profits.