Managing the Finance Function

To be assured of continuous fund supply for any operations occurring inside the firm, there should be an adequate source of funds and effective management of finance function. It is a very important concern since the production of quality products or services, distribution of output, and research and development heavily depend on available funds. Thus, the finance function is also considered the lifeblood of any business operations for it is the reason why do the organization still operates in the long run.

what the finance function is

The finance function is an important management responsibility that deals with the procurement and administration of funds with the view of achieving the objectives of business. Therefore, every engineer manager has a task to contribute in attaining the financial objectives of his/her company.

FUND REQUIREMENTS

To finance daily operations
To finance the firm's credit services
To finance purchase of inventory
To finance purchase of major assets

SOURCES OF FUNDS

Cash sales
Collection of Accounts Receivables
Loans and Credits
Sale of Assets
Ownership Contribution
Advances from Customers

short term sources of funds

Short term sources of funds are those with repayment schedules of less than one year. Collaterals are sometimes required by short term creditors. Here are the advantages, disadvantages and suppliers of short-term credits:

long-term sources of funds

Long term sources of funds are needed when the expenditures of capital assets becomes necessary. After determining the amount required for starting any operation, a decision is made based on type of sources used.

In order to determine which of the sources will be best available for the form, the following factors should be considered, which are as follows:

the firm's financial health

It is vitally important for a certain firm to be financially healthy and has a capacity to operate in a long term basis. This will be achieved by having these objectives as shown in the figure.

The financial health of an engineering firm can also be determined through the use of these three basic financial statements.

RISK MANAGEMENT AND INSURANCE

Risk is a very important concept that every engineer manager should be familiar with. He/She can use sound management practices to avoid bankruptcy threats due to losses. This will eliminate the chances of incurring losses brought by improper management of risks.

what is risk management?

Risk management is an organized strategy for protecting and conserving assets and people. Its purpose is to choose from which of the available methods will effectively eliminate the risk in order to secure the economic survival of the firm. Here are the following methods on how to deal with risks:

Avoiding risk
Risk retention
Hazard reduction
Loss reduction
Shifting the risk

VIDEO PRESENTATION LINK: https://youtu.be/97-usIfOh5c

reflection:

The finance function is a very important management activity for it addresses the various concerns regarding fund requirements. Engineer managers should consider all the potential opportunities as well as consequences of management decisions when it comes to profits and cash flows. Understanding the aspects of managing the finance function would be a great help for engineering students because it would guide us on how to effectively implement financial principles that drive an organization to its main goal. Lastly, it is of utmost importance to understand the financial indicators as well as risk management.

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