What is the Importance of the Finance Department of an Organization?

Being employed in the finance department of an organization comes with many responsibilities. Why? This is where all the cash of the business is handled, and if a slight error occurs in this department, the impact it makes on the overall business operations may be titanic, no matter how small it was at the initial stage. Therefore, handling the finances of a company should be done very carefully and the most qualified and specialized individuals must be employed to carry out these activities for the company. This article highlights the importance of this department and shows you why the finances need to be handled carefully.

Book keeping

As this department is responsible for the preparation and presentation of the financial accounts of a business, there are several areas that they cover in this department. One such area is book keeping. What really happens in book keeping? This is primarily involved in tracking sales and purchases of a company as well as the capital transactions. With the development of technology, all such transactions are now recorded in the computer, but they are still referred to as ledgers for that was the distinctive term used in the days when book keeping was actually done in books.

Preparing income statement and balance sheet

Financial statements are a crucial art of the business. These help determine the profit/loss and the financial position of a business at a given period of time, typically a year. Therefore, according to the relevant company’s acts of the country and financial requirements as per the organizations, these should be provided in regular intervals. While sales and purchases are recorded in the profit and loss account, the trial balances of the ledger accounts are taken and put into the balance sheet to determine the assets and liabilities of a business at the end of an year.

Providing information

In order to make operational and strategic decisions, managers are in the constant need of information. While some information has to be found externally from the organization, the rest can be obtained within the organization. The fiancé department of the company has to provide them such information whenever decision making comes to light as you compare the actual operations and costs with an expected new product and make relevant estimates.

Wages and raising finance

This section of the finance department is liable to calculate all wage related transactions as well as the taxes that should be paid by the company. It is also responsible to carry information on how the business raises finance in terms of loans and how they need to be paid back along with the interest.

Therefore, the finance department of a company carries out a complex set of activities.

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