Managing The Finance Function

Managing the Finance Function
Hi there, in this video we are going to walk through another topic, so might as well put
on your favorite tunes together with it and roll out from your bed as we are al going tol
learn how money in firms should be as many as the leaves we see around. And that is
basically because, firms need to afford things, from power and light that’ll give you a
clear vision of what the firm could offer and what’s lacking and of course purchase
some assets and other gifting life maybe an umbrella for your employees or a horse?
Well that’s a quirk. But if you want to know more about finances and why this is
important to learn, then turn on that interest as I will give you the tunes of our topic for
today that will hopefully be worthy of time that you can share to a friend and even
impress someone by knowing these.
So much for the intro, we are going to talk about managing the finance function. But
before we proceed to its gist of how finances really looks like, I will first give you an over
view.
So how does finance function looks on a personal scale? And to answer that, I will be
showing you a short clip right about it.
Pretty much of a chaos huh? And that’s on a personal scale! How much more on a
greater scale like firms and other big organizations?
Now to know how this goes, we must first know about what managing the finance
function really is.
Now As we all know
Engineering firms need funds to finance their operations. To be assured of continuous

supply of funds, there is a need to manage properly the finance function.
The engineering organization is expected to function properly when funds are made
available in the right time and in the right amount. Because when funds are delayed and
are not enough to finance planned activities, of course the risk of failure to achieve
objective becomes apparent.
Finance function is the most important management concern and engineer manager
must understand. He mus be fully aware of the matter because
Engineer managers must understand that finance function is a very important

management concern.
This is true because without adequate funds it will be difficult to proceed with the
production of products and services as well as the distribution of output, research and
development and it is even impossible to do all of these without the proper manage of
the finance function.
To know more about finance function I have jotted down the most emphasized matter
about the subject.
What is finance function?
Finance function
- An important management responsibility that deals with the “procurement and

administration of funds with the view of achieving the objectives of business”
Now, what does procurement means?
Procurement is the act of obtaining goods or service and this refers to the final act of
purchasing.
To know more about finance functions; here are some more elaborative explanation to
what finance function is and how important it is a management function.
- One of the three basic management functions

- The most important of all functions
- It is not possible to substitute or eliminate this function because the firm or any
organization will close down in the absence of finance
- The need for money is continuous
- The utilization of finances are very important
- The money that is received by the organization of any firm will have to be
returned also so the engineer manager should have an idea of using the finances
given profitably.
- The aim of finance function is to arrange as much funds for the business required
from time to time.
- This involves the acquiring and utilization of funds necessary for efficient
operations.
- Finance is the lifeblood of firms and organizations as it is the source to run it.
Now if you may ask, what are the objectives of managing the finance function?
Objectives of Finance functions:
1. Investment Decision
- This is where an engineer manager decides where to put the company funds.
- This refers to the management of working capital, capital decisions, management of

mergers, buying or leasing
2. Financing decisions
- This refers to where a certain firm decides where to get funds from
3. Dividend decisions
- This refers as to how much, how frequent and in what form to return cash to owners
4. Liquidity decisions
- This means that a firm has enough money to pay all necessary fund requirements
This function has following aims:
1. Acquiring sufficient funds:
- To assess the financial needs of the firm and finding out suitable sources
2. Proper utilization of funds:
- effective utilization is more important
- the funds given in a specific firm should be used in such a way that maximum benefit
is derived from them and that funds committed to various operations should be
effectively utilized.
3. Maximizing Firm’s Value
- Concern’s value is linked with its profitability.
- This includes the consideration of types of sources used for funds, cost of funds and
the condition of money.
Now if you may ask, what are the importance of managing the finance function?
The importance of finance function:
1. Identify need of finance
- This refers to an engineer manager to know how much finance is required
Whether the budget is just right, or does the firm needs more what they have
2. Identify the source of finance
- This refers to where the determination of sources of the funds needed takes place
Because of course when you need it, you have to find it. So if a firm needs funds it
certainly have to know where to get it.
3. Comparison of Various sources of finance
- This is where the firm can compare the cost and the risks involved and choosing the
best source of financing
Because we only need the best source that is absolutely of lesser risks. Does anyone
even want to risk their funds in a non-reliable source?
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If the engineer manager is running the firm as a whole, he must be concerned with the
determination of:
- The amount of funds required
- When they are needed
- How to procure them
- How to effectively and efficiently use them
In the performance of an engineer manager at whatever level, must do his or her share
in the achievement of the financial objectives of the company.
The finance Function Involves:
- Esure enough funds at a reasonable cost

- Ensure the safety of funds
- Ensure the efficicient, effective and profitable utilization of funds
- Ensure that finance funds don’t remain idle.
The finance function: A process Flow
Determination of Procurement of
Effective and
Fund Funds
Efficient Use of
Requirements
Funds
As aforementioned a while ago, that one of the objectives of managing the finance
function is that is has to pay all the requirements and by that we are going to have our
next topic which is
The Determination of Fund Requirements
Any organization, including the engineering firm, will need funds for the following
specific requirements:
A. Financing Daily Operations
The day-to-day operations of the engineering firm will require funds to take care of
expenses as they come. Money must be made available for the payment of the
following:
1. Wages and salaries

Of course the firm needs to pay their employees for their hard work for they
aren’t there for free.
2. Rent
And since your firm has a space that is given that you must pay your rent as well
as your other taxes as a law abiding organization
3. Taxes
4. Power and Light
And with great building comes great amount of electric bills and that of which one of the
fund requirement to pay for the light and power being used.
5. Marketing expenses
- Advertising, entertainment, travel expenses, telephone and telegraph, stationary and

printing, postage, etc.
And even:
6. Administrative expenses
- Auditing legal services

Any delay in the settlement of the foregoing expenses may:
- disrupt the effective flow of work in the company
- erode the public’s confidence in the ability of the company to operate a long-term basis
B. Financing the Firm’s Credit Services
It is oftentimes unavoidable for firms to extend credit to customers. If the engineering

firm manufactures products, sales terms vary from cash to 90-day credit extensions to
costumers.
Firm’s sometimes need to give a 90-day credit extension to their customers.
Construction firms will have to finance the construction government projects that will be
paid many months later.
When a new chemical manufacturing firm finds difficulty in convincing distributors to

carry their products, a credit extension may solve the problem.
C. Financing the Purchase of Inventory
The maintenance of adequate inventory is crucial to many firms. Raw materials,

supplies and parts are needed to be kept in storage so they will be available when
needed. Many firms cannot cope with delays in the availability of the required material
inputs in the production process. So these must be kept ready whenever required.
The purchase of adequate inventory however will require sufficient funding and this
must be secured.
Sometimes, inventories unnecessarily tie-up large amount of funds. The engineer

manager must devise some means to make sure this situation does not happen.
D. Financing the Purchase of major asset
Companies at times need to purchase major assets. When top management decides on
expansion, there will be a need to make investments in capital assets like land, plant
and equipment.
These assets are either tangible items or intangible.
Major assets:
Tangible:
- Vehicles
- Real estate
- Computers
- Office furniture
- Other fixtures
Intangible:
- Intellectual property
It is obvious that the financing of the purchase of major assets must come from long-
term sources.
but where do we get the funds? And that’s on for another video. Thanks for watching!

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Managing the Finance Function

Now As we all know

Engineering firms need funds to finance their operations. To be assured of continuous

Engineer managers must understand that finance function is a very important

What is finance function?

- An important management responsibility that deals with the “procurement and

Now, what does procurement means?

- One of the three basic management functions

Objectives of Finance functions:

- This refers to the management of working capital, capital decisions, management of

This function has following aims:

1. Acquiring sufficient funds:

- effective utilization is more important

3. Maximizing Firm’s Value

- Concern’s value is linked with its profitability.

The importance of finance function:

1. Identify need of finance

- This refers to an engineer manager to know how much finance is required

2. Identify the source of finance

3. Comparison of Various sources of finance

- The amount of funds required

- When they are needed

- How to procure them

- How to effectively and efficiently use them

The finance Function Involves:

- Esure enough funds at a reasonable cost

The finance function: A process Flow

The Determination of Fund Requirements

A. Financing Daily Operations

1. Wages and salaries

4. Power and Light

- Advertising, entertainment, travel expenses, telephone and telegraph, stationary and

- Auditing legal services

- disrupt the effective flow of work in the company

B. Financing the Firm’s Credit Services

It is oftentimes unavoidable for firms to extend credit to customers. If the engineering

Firm’s sometimes need to give a 90-day credit extension to their customers.

When a new chemical manufacturing firm finds difficulty in convincing distributors to

C. Financing the Purchase of Inventory

The maintenance of adequate inventory is crucial to many firms. Raw materials,

Sometimes, inventories unnecessarily tie-up large amount of funds. The engineer

These assets are either tangible items or intangible.

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