Managing Finance: Relationship between financial and other functional areas within organizations

MANAGING FINANCE

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY ..................................................................................................................................3
Relationship between financial and other functional areas within organizations........................4
Impact of financial objectives on decision-making.....................................................................6
Difference between management accounting and financial accounting......................................7
Impact of organizational and regulatory frameworks on financial management approaches.....8
Financial challenges faced by the organization...........................................................................9
The differences between budget setting and financial forecasting............................................10
Evaluations of budget methods used by the organizations........................................................12
Formulation and justification of budget for an area of management responsibility..................14
Analysing the impact of different factors on budget management............................................16
Corrective actions in response to budgetary variance................................................................17
Reporting procedures for authorizing corrective actions to a budget........................................18
CONCLUSION..............................................................................................................................19
REFERENCES................................................................................................................................1

INTRODUCTION
Preparing budgets of different departments in order to know the expected income and
expenses is the prime role of the responsible person of that department. In this report, we will
understand the relationship between financial function with other functional area. This report
will also state the differences between management accounting and financial accounting or
budget setting and financial forecasting. This report will also include the impact of financial
objectives on decision-making and organizational and regulatory frameworks on approaches of
financial management. Nowadays, organizations are facing financial challenges and mostly small
organizations in UK. This report also includes evaluation of different budgets along with
formulation and justification of budgets in order to cope with the financial challenges. This
report will also state the impact of different factors on budget management. The report will study
the corrective actions in case of budget variance in order to minimize and eliminate the budget
variance if any. This report will also understand the reporting procedures for authorizing
corrective actions to a budget.
MAIN BODY
» LEARNER EVIDENCE
1.1 Analyse the relationship between the financial function and other functional areas
within organisations

Relationship between financial and other functional areas within organisations
Finance management is a part of management indulge in planning, organizing and controlling
the financial resources of the organization. For this purpose, every organization hires finance
managers. The relation between finance function and other functional areas (such as
production function, human resources function and marketing function) states maintaining
coordination among the departments in order to utilize the resources. (Nawaz, and Koç, 2019).
For example, Sainsbury company always focus towards maintaining flexible relationship
between all departmental managers in order to achieve the goals and objectives of the
organization.
 Relationship with production management: In organizations, the role of production
manager is to analyse and monitor the production and development process of the
product and services. For this purpose, they have to stay connected with inventory and
sales manager to know about the stock availability and sales quantity. In this respect,
production manager has to coordinate with the finance manager to provide information
about the cost of production of product. So, after receiving and analysing the
information related to the cost of production, finance manager choose an appropriate
investment plan out of various alternatives in order to arrange capital for converting
the raw material into finished goods.
 Relationship with HR management: The role of human resources management is to
organize, control and motivate the employees of the organization. To motivate the
employees includes various incentive policies, HR managers also look out the pensions
of retired employees (Monden, 2019). So for all this purpose, there is a requirement of
funds which is going to be arranged by finance mangers. Finance manager and HR
manager are interrelated with each other in order to arrange and conduct training and
incentives plan.
 Relationship with marketing management: The role of marketing manager is to
analyse the demand of the product in the market by conducting various surveys. Due to
continuously increase in competitions, finance managers and marketing managers have
to work together in order to increase the market share of the company. To increase the
profit of the company, marketing managers have to promote the products of the
company into the market. Promotion and marketing activity required funds to further

proceed. This indicates that how marketing and finance managers are working together
to increase the profitability of the company.
1.2 Examine the impact of financial objectives on decision making within
organisations

Impact of financial objectives on decision-making
Generally, there are various financial objectives of the organizations but the main financial
objectives of all the organization is revenue, cost, profit, cash flow and capital structure
objective. The impact of all the financial objective on decision-making of the organizations
such as Sainsbury company is that the finance managers have to take three important decisions
(Kumar, and et.al., 2017). The three decisions such as financing, investment and dividend
decisions help the finance manager to maximize the profit and wealth of the company.
 Financing decision: Financing decision involves the decision related to selection of the
best alternative to acquire funds from the market for investment and managing working
capital purpose. There are various sources of finance is available to the managers of the
company. Selecting the alternatives keeping in mind the objective of low cost of
acquisitions is a crucial decision taken by the managers.
 Investment decision: It involves the decision relating to selection of the best project in
order to earn the higher returns. Finance manager can use different investment appraisal
techniques to know the best investment plans. The decision of selection of plans of
finance manager is based upon the objective that the return from funds invested is
higher than the cost of funds. They must take all decisions keeping in mind the
financial objectives.
 Dividend decision: It involves the decision of finance manager i.e. whether to
distribute the earnings available for equity shareholders between them or to retained it
for the purpose of future development or both (Roychowdhury, Shroff, and Verdi,
2019). Taking the appropriate decision keeping in mind the objectives of finance
management is must for finance managers to increase wealth of the company.
1.3 Differentiate between management accounting and financial accounting