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Finance: The invisible backbone of every company

 

The success and profitability of every company solely depends upon its finance team and processes. But what do we mean by “Finance”? In this article, we explore what the various branches of finance entail, as well as the roles and responsibilities a graduate in MBA Finance should expect.

 
 

What is finance?
Very simply put, it is the fuel that powers the 4 Ms of an enterprise: Men, Machine, Methods and Materials. Anyone who can manage their money well to produce optimum use of these four resources is a great Finance professional. This is the simplest explanation of what Finance means.

The role – An overview
The role of Financial Managers is extremely critical in keeping organisations afloat. Their job is to ensure the sound financial health of the organisation. They keep an eagle eye on the numbers generated from operations. They have to collate numbers, create financial reports, and most importantly, make sense out of those numbers to advise the stakeholders of the organisation. They have to prudently invest surplus funds into income generating avenues.
Since corporate and tax laws govern every business enterprise, financial statutory compliances are absolutory mandatory. So finance professionals also work in tandem with the legal team in an organisation.
So the role of a Financial Manager is an enabling one — to lead the organisation towards the successful achievement of its goals.

Critical responsibilities
The entire corporate world is a playground for finance professionals. They can be employed in any organisation irrespective of industry. However, the burden of responsibilities is immense on their shoulders. Finance managers have to be alert all the time. They have to supervise all those who generate and compile financial reports for them, and also have the knack to sniff out discrepancies and irregular trends in data.
Theoretically, it is as simple as managing your home finances….You won’t be foolish enough to spend the money you don’t have, would you? But don’t fret; it comes easily with practice and a love for numbers.
Finance managers assume the role of a watchdog as well as bloodhound of the organisation. They have to constantly find ways and means to reduce costs, as the bottom line is their responsibility. When there is a shortfall in working capital, they have to approach banks and financial institutions to procure credit at as minimal rates of interest as possible. And then, the onus on servicing this debt is also on them!
So you see, the term Finance Manager is a very wide term. The basic duties may be the same, but depending on the industry in which they are employed, the role becomes niche.

Breaking it down: What Finance entails
Accounting is the very base of the Finance function.
Let’s take an example for each of the following instances.
In a manufacturing unit, Finance Managers usually handle the accounting and corporate functions with a team reporting to them. At the base level, they have to have an eye for detail, and ensure that each and every transaction is recorded correctly in the books of accounts. They have to draw up the balance sheet of the organisation and keep a tab on its health and continuity of business.
Liaising with banks and financial institutions to obtain the best possible credit is another responsibility. They must recognise red flags that are thrown up by the numbers portrayed in the financial statements. Rising inventory levels, falling trends in revenues and spikes in production costs are some straightforward red flags. A prudent financial manager tracks cost of production to ensure profit margins per unit produced are maintained at the desired level. This is applicable for all industries.
In a bank, Finance Managers are trained to handle treasury operations as well. In treasury operations, they have to monitor the inflow and outflow of money in various currencies as well as the cost of currency funds. They would have to manage portfolios of high net-worth individuals (HNIs) and churn their portfolio well to obtain maximum possible returns. So, in this context, they have to analyse the micro and macro-economic outlook, evaluate securities and bond markets for optimum returns and advise their clients to invest in the most prudent manner in a given scenario.
In an equity research company, Finance Managers delve deep into the equity and debt markets to hunt out the best possible investment opportunities. Their research and analysis of market data help their clients to invest and earn maximum returns. It is their responsibility to recommend investment in scrips, and also, more importantly, advise on when to exit an investment! Here, Finance Managers may also have to read balance sheets of various companies, analyse cash flow statements and strip down the window-dressed financial statements to ascertain the real financial position. They also extrapolate past and present income and expense trends to predict future earnings and profits expected to be earned.
In a merchant banking company, the Finance Managers advises companies on regulatory aspects with respect to capital markets and procurement of private financing. They actually act as a bridge between the investor and the client who requires funding. Here, they work on pricing of equity and debt instruments for issue in the markets, which are picked up by retail and corporate investors. They ensure that the fund requirement of the client are fully met with the help of subscription of different types of paper viz. Inter-corporate deposits, Commercial Paper, Equity shares, Debentures and other such instruments.
Finally, Finance Managers can also specialise in taxation. They must be aware of most of the provisions of the Income Tax Act. When handling taxation, the manager has to ensure statutory compliances, viz, TDS deductions, advance tax calculation and payments, attending assessment proceedings, liaising with tax authorities on various nuances of assessments, filing appeals if the assessments are deemed unfair or unreasonable, etc. Similarly, they have to monitor other tax regimes like GST, Customs duty, Excise Duty, VAT, etc. Given all this, compliance becomes a critical part of their Key Performance Areas.
Above all, people management is most crucial for a Finance Manager. Good communication skills and an ability to carry the team together is a given.

An MBA in Finance
The MBA curriculum for finance broadly consists of 35-40 subjects covered over two-three years, depending on the course tenure and institute. A few of the subjects are:
Accounting techniques
Business economics
Cost and Management Accounting
Strategic management
HR & marketing management
Quantitative techniques
Organisational Behaviour
Total quality management
Taxation
Business policy and planning
Information technology and its applications in business
Research Methodology
Commercial Laws
Securities Analysis
Project Planning, Finance and execution
Mergers and Acquisitions
Investment and Portfolio management
Financial Modelling
International Finance and Banking
Analysis, Interpretation and Application of Financial Statements
Capital and Money Markets
Derivatives Markets

Tech in Finance
Importance of data: Of late, technology has revolutionised the world of financial management. Data collation, processing and storage have undergone a major change over the years. Computers have ensured that data received from all functions of the business is systematically organised and displayed in a pre-determined manner.
Cloud computing: Since companies’ investment in computers, networks, servers and storage devices is phenomenally high, cloud computing has gained popularity. One of the things cloud computing needs for successful implementation is Internet bandwidth. With faster internet speeds available nowadays, companies find it very cost effective.
Another major advantage is that in case of a mishap like fire, earthquake or floods, none of the data is lost. Disaster recovery management involves mirroring of data at multiple servers in different locations around the country or even the world.
As mentioned earlier, the success of cloud storage hinges on connectivity. Besides, data will have to be downloaded on one’s individual machines if there is a need to work on it individually. As a consequence, software compatible with that on the cloud will be required to be installed on the individual machines, be it desktop, laptop, mobile or anything other such device.
Enterprise Resource Planning: Implementation of Enterprise Resource Planning has also had a major impact on analysis and business decisions. ERP is essentially software that collates and displays data in a predetermined format. This is used to effectively control costs, revenue, inventories, assets and liabilities. In an ERP, reports are generated to help the management take faster decisions. It also helps cut costs by bringing all stakeholders on one platform and reducing duplication of paperwork. It helps tremendously improve coordination between functions and departments.
Hence, vendors can bid/offer, supply and invoice for their products on the ERP platform itself, cutting down on the time and effort involved in the physical movement of documents. The entire organisation can be effectively active on ERP. Every function, viz Human Resources, Inventory, Sales, Marketing, Purchase, Customer Relationship, Production, Supply chain, Creditors and Debtors management can be very effectively handled.

How to build a great career in Finance          
There are certain basic things you should do, so that your career in financial management ends up being awesome! Here’s a look at a few of those:
Understand concepts of Accounting.
Keep abreast of current affairs in the financial world.
Develop the ability to interpret financial statements in different ways.
Fall in love with numbers.
Think on your feet and work hard on the numbers.
Develop a network of finance professionals whom you can fall back on when in doubt.
Cultivate a mentor to guide you when the going gets tough.
Learn to effectively manage people. They are your biggest strength.
Learn soft skills like efficient time management, carrying yourself confidently, improving communication, motivating your team and encouraging teamwork, facing criticism objectively and with a smile.
Maintain a positive attitude. Always.
Cut out the noise, concentrate on core skills.
Uphold good work ethics
Plunge headlong into problems and learn to solve them.
Plan your day beforehand and work vigorously towards completing all your tasks.
Read a lot of financial news; subscribe to newsletters on finance and taxation. This will help you to be aware of the latest news in your core function area.

The pecking order
The hierarchical order in a finance division gradually rises from Finance Manager to the following probable levels:
Senior Finance Manager è Chief Financial Officer è Vice-President, Finance è Financial Controller è Director, Finance
Compensation grows once experience is gained in Finance. Salaries range from `5-6 lakh per annum for a Finance Manager to `40-50 lakh at the topmost level. Multinationals pay even more, depending upon the calibre and role of the individual. More details available in the institute profiles in the following pages!

Companies you should target
Now that you know how the role of a Finance Manager changes according to the business the organization is into, it is critical to know which companies to target in order to get a great placement. The importance of your first job after your MBA cannot be over emphasised. Just as an aeroplane needs optimum speed to take off, a great placement can give you a high trajectory in your career.
Some companies are part of conglomerates, i.e., companies that own several businesses manufacturing different products or providing varied services. On the other hand, there are companies where the role of a Finance Manager may be different in two functions under the same company. For instance, in a cash-rich company like Bajaj Auto, one Finance Manager handling the production function will delve into production costing and hardcore accounting, while another Finance Manager handling treasury operations in the same company will manage cashflow, investing the surpluses, generating interest and dividend income out of these investments and providing a boost to the top lines out of this exercise.
Based on the roles discussed earlier, here is a brief list of companies that must be on your radar:
Manufacturing Sector:
Maruti Udyog , Ashok Leyland, TVS Motors, Bajaj Auto, Asian Paints, Larsen & Toubro, Apollo Tyres, Hindustan Unilever, Godrej, Cipla, Ranbaxy, Jindal Steel, Hero Honda Motors, Tata Motors.
IT Services:
Infosys, Wipro, Tata Consultancy Services, HCL Technologies, Tech Mahindra, Oracle Financial Services, Mindtree, Mphasis, Cognizant, Hexaware, JP Morgan, Accenture, Patni Computer Services, Cap Gemini.
Aviation:
Spice Jet, Indigo, Blue Dart Aviation, Go Air.
Logistics:
Blue Dart Express, Allcargo Logistics, UPS, Fedex, Mahindra Logistics, E-kart.
Banking:
HDFC Bank, ICICI Bank, Yes Bank, IDFC Bank, Kotak Mahindra Bank
 Cement:
Lafarge India, Ultratech Cement, Ambuja Cements, Birla Corp.
E-commerce:
Amazon India, Flipkart, Makemytrip, Bookmyshow.
Consumer Finance:
Bajaj Finserve, Muthoot Finance, Shriram Transport Finance.
FMCG:
ITC, Dabur India, Hindustan Unilever, Nestlé, Marico, Britannia Industries, Proctor & Gamble, Godrej.
Life Insurance:
Aegon Life, Aviva Life, Bajaj Allianz Life, HDFC Standard Life, Birla Sun Life, ICICI Prudential Life, Tata AIA Life, SBI Life, Future Generali Life, Max Life, Reliance Life, Bharati AXA Life, Canara HSBC OBC Life, DHFL Pramerica Life, Edelweiss Tokio Life, IDBI Federal Life, PNB Metlife.
General Insurance:
Bajaj Allianz General, Bharati AXA General, Cholamandalam MS General, Cigna TTK Health, Future Generali, HDFC Ergo, ICICI Lombard General, IFFCO Tokio General, L&T General, Max Bupa Health, National Insurance, New India Assurance, Oriental Insurance, Reliance General, Royal Sundaram Alliance, SBI General, Tata AIG General, Kotak Mahindra General.
Media & Entertainment:
Star India, Multi-Screen Media(Sony), Eros International, Zee Entertainment, TV Today, HT Media, PVR, New Delhi Television, Reliance Mediaworks, Bennet, Coleman & Co, DB Corp (Dainik Bhaskar), Hathway Cable & Datacom, Inox Leisure, TV18, Sun TV Networks.
Business Consulting:
Ernst & Young, KPMG, Boston Consulting Group, Deloitte Mckinsey & Co, Booze Allen Hamilton, Bain & Co, PriceWaterhouse Coopers.
Pharmaceuticals:
Cipla, Aurobindo Pharma, Lupin, Dr Reddys Labs, Sun Pharma, Glenmark, Cadila Health, Torrent Pharma, Abbott India, Jubilant Life, Glaxo Smithkline, Wockhardt, Merck, Novartis India.
There are many, many more sectors that have brilliant stars shining. But the above list should get you going. Do your homework, research company websites, understand their businesses and see if it aligns with your career goals.  Because once you get a great start, nothing less than the stars lie ahead! 

The writer holds an MBA in Finance. He has worked in the areas of accounts, taxation and financial management, with companies like Mid-Day Multimedia, Radio 1 94.3, Kotak Life Insurance, Encompass Events, TV 9 Maharashtra and Q.E.D. Films.