Role and responsibilities of a finance manager have undergone a remarkable transformation during the past four decades. Not too many years ago, finance manager had a very limited role in a business enterprise. Finance manager was responsible only for maintaining financial records, preparing reports on the company’s status and performance and arranging funds needed by the company so that it could meet its obligations in time. Finance manager, as a matter of fact, was regarded as specialized staff officer in the company concerned only with administering sources of funds.
Finance manager was called upon only when his specialty was needed. For example, when the company experienced the problem of dearth of funds, the management expected the finance manager to locate suitable sources of funds and procure additional funds. However, the finance manager transcended his traditional role of garnering external funds for the enterprise following technological changes in major industries, increased business complexities, tightening money market conditions and despondent state of stock market, and has now become part and parcel of general management. He occupies the role of an executive who is actively associated with problems and decisions related to wise application of funds. He deals with the total funds deployed by the organization, allocation of funds among varying projects and activities and with evaluation of results of each allocation. He is, therefore, directly concerned with production, marketing and other activities within a business enterprise whenever decisions are made that Involve commitment of funds to new or ongoing uses.
Role of finance managers has increased tremendously and their tasks have become complicated following cataclysmic changes in recent times in the entire global economic environment and the world market place resulting in globalization of business and increased competitiveness. The multinational corporations of today conduct their operations world-wide as if the entire world were a single entity with a major thrust on quality, cost and speed. So as to cope with challenges stemming out of globalization of world economy and to exploit tremendous potential opportunities, most of the developing countries including India have, of late, decided to liberalize their economic policies and open the floodgates of their domestic markets to multinationals. Various economic and financial policy reforms have been introduced with a view to freeing business from the grip of administered growth and demolishing the protecting walls of yesteryear’s. The combined impact of all these measures has resulted in swelling wave of transnational from Japan, USA, Germany and France pouring in India in every conceivable product segment posing serious challenges to the very survival of Indian corporate who were hitherto operating in highly sheltered and closed economy. In order to face these challenges and to ensure their survival many Indian corporate giants have desperately formed strategic alliances with global majors and some of them embarked hurriedly on internal restructuring.
Since ferocity of competition is likely to deepen further, it would be worthwhile for Indian companies to take strategic measures for their survival and growth. They should formulate strategy to achieve the competitive advantage and sustain their edge over the rivals. The focal points of such strategy have to be on quality and cost which together contribute significantly to organizational effectiveness.
In translating this strategy into action the finance manager has to play a very effective and integrated role by helping the top management in making financial decisions to reduce cost, improve productivity and maximize corporate value.
To handle the new responsibilities the finance manager must have clear conception of the corporate objectives of his organization as he has to act in conformity with these objectives. Furthermore, he has to evaluate the effectiveness of financial decisions in the light of some standards. Corporate objectives of the organization provide such standards. The finance manager should also have stronger grasp of the nature, functions and scope of financial management.
Further, finance manager needs a variety of qualitative and quantitative skills so as to carry out his complex and diverse responsibilities.