What Financial Managers Do
Financial managers perform data analysis and advise senior managers on profit-maximizing ideas.
Financial managers are responsible for the financial health of an organization. They produce financial reports, direct investment activities, and develop strategies and plans for the long-term financial goals of their organization.
Financial managers typically do the following:
- Prepare financial statements, business activity reports, and forecasts
- Monitor financial details to ensure that legal requirements are met
- Supervise employees who do financial reporting and budgeting
- Review company financial reports and seek ways to reduce costs
- Analyze market trends to maximize profits and find expansion opportunities
- Help management make financial decisions
The role of the financial manager, particularly in business, is changing in response to technological advances that have substantially reduced the amount of time it takes to produce financial reports. Financial managers’ main responsibility used to be monitoring a company’s finances, but they now do more data analysis and advise senior managers on ways to maximize profits. They often work on teams, acting as business advisors to top executives.
Financial managers also do tasks that are specific to their organization or industry. For example, government financial managers must be experts on government appropriations and budgeting processes, and healthcare financial managers must know about topics in healthcare finance. Moreover, financial managers must be knowledgeable about special tax laws and regulations that affect their industry.
The following are examples of types of financial managers:
Chief financial officers (CFOs) are accountable for the accuracy of a company’s or organization’s financial reporting, especially among publicly traded companies. As head of a company’s entire financial department, they manage the lower level financial managers. They oversee the company’s financial goals, objectives, and budgets.
Controllers direct the preparation of financial reports that summarize and forecast the organization’s financial position, such as income statements, balance sheets, and analyses of future earnings or expenses. Controllers also are in charge of preparing special reports required by governmental agencies that regulate businesses. Often, controllers oversee the accounting, audit, and budget departments of their organization.
Treasurers and finance officers direct their organization’s budgets to meet its financial goals. They oversee the investment of funds and carry out strategies to raise capital (such as issuing stocks or bonds) to support the firm’s expansion. They also develop financial plans for mergers (two companies joining together) and acquisitions (one company buying another).
Credit managers oversee their firm’s credit business. They set credit-rating criteria, determine credit ceilings, and monitor the collections of past-due accounts.
Cash managers monitor and control the flow of cash that comes in and goes out of the company to meet the company’s business and investment needs. For example, they must project cash flow (amounts coming in and going out) to determine whether the company will have a shortage or surplus of cash.
Risk managers control financial risk by using strategies to limit or offset the probability of a financial loss or a company’s exposure to financial uncertainty. Among the risks they try to limit are those that stem from currency or commodity price changes.
Insurance managers decide how best to limit a company’s losses by obtaining insurance against risks, such as the need to make disability payments for an employee who gets hurt on the job or the costs imposed by a lawsuit against the company.