The financial sector is an important department in a company’s back office , taking care of all the management of the business’s resources .
The management of finances is very challenging to startups, and yet, regardless of the company’s size or its segment, a proper setup of processes must take place in order to ensure that the business keeps improving health and growth.
If you want to know more about what the financial sector does, the importance of this area, and how it’s possible to count on the help of technology to optimize it, you’ve come to the right content! Let’s go!
What is the financial sector of a company?
The financial sector is the department responsible for management activities of the company’s finances, involving all planning and control of resources, budgets, and business results.
The main objective is to ensure the financial health and sustainable growth of the organization, based on resource management, analysis of financial indicators and strategic decision-making to maximize the company’s profitability.
To this end, the financial sector performs accounting functions, management of accounts payable and receivable , investment analysis, budget planning, asset management, fundraising, cost control, among others.
As all the procedures associated with the company’s funds pass through this sector, it is directly associated with many other sectors of the business like management, human resources, marketing and sales.
How is the finance department relevant?
The finance sector is an inevitable wing for any business. It supports the business to strategically manage their assets and optimize production processes for increasing the business’s profitability and profitability.
After all, there is no point in achieving high sales performance if the revenue obtained does not actually generate profit for the operation.
This is where the importance of the sector comes in to carry out the business’s financial planning, maintaining cost control routines and tax obligations.
More so, it will be the department that advises on the best investments and financing to sustain the life and growth of the company in both short, medium, and long term.
What does the financial sector do in practice?
The structure and activities of each financial sector vary according to size, segment, and the business model of each company.
For example, in the case of microentrepreneurs and micro-businesses, all the duties are performed by business owners. In larger firms, the sector is tended to be stronger with some employees and teams having distinct roles.
With that in mind, learn about the main functions of a financial sector!
Financial planning
As the name itself suggests, financial planning describes guidelines for all decisions concerning the company’s finances.
It comprises processes like analyzing the scenario of a company’s finance, projecting results, structuring objectives and goals, and defining budgets to incorporate tax planning and the feasibility study of a project.
Treasury
The treasury is the area responsible for controlling cash flow , that is, all of the company’s financial transactions.
This includes managing cash inflows from sales and income, as well as cash outflows such as paying bills, taxes and salaries.
The goal is to ensure that the business has sufficient resources to meet its financial and tax obligations . Therefore, the treasury also carries out analyses of financial risks and opportunities for the business.
Accounting
Accounting management carries out the administration and documentation of the company’s assets and their variations, including the assets (goods, values and accounts receivable) and liabilities (debts and payments) of the business.
Accounting records are essential to ensure transparency when complying with tax obligations and also provide financial data for more strategic decision-making.
Account management
To ensure payment of financial commitments and receipt of amounts due within due dates, it is essential to control accounts payable and receivable.
Accounts payable includes supplier invoices, rent, employee salaries, and debts, for example. This includes processes such as debt negotiation and contract review as well.
Accounts receivable include payments from customers for products or services sold, as well as collections in the event of delays and defaults .
Inventory control
For companies that work with the sale of physical products, inventory control is another very important financial management process.
It involves recording and monitoring inventory levels in order to avoid high storage costs and loss of products due to items that are not in stock. The objective is to balance the flow of goods in and out, according to market demand.
Sales reconciliation
Sales reconciliation is an important process of comparing the company’s internal data with that provided by acquirers and other payment methods.
The objective is to avoid inconsistencies, making it possible to accurately identify the amounts received and receivable for sales made using credit and debit cards, other forms of payment .
Tax management
Tax management ensures that taxes are paid on time, as well as the submission of declarations required by the Federal Revenue Service, in accordance with the company’s tax regime .
This area is also responsible for identifying the most advantageous regime for the business’s activities and objectives, avoiding the collection of excessive taxes.
Analysis of financial indicators
Some of the KPIs that the business should track include many factors that determine the financial health, competitiveness, and growth of the business. The key performance indicators are very significant sources of insight for strategic decision-making at the company level.
Some of the financial metrics include revenue, break-even point , profit margin and contribution margin, for example.
Financial statements , such as the balance sheet, the Income Statement (DRE) and the cash flow statement , are reports prepared by the department to evaluate the performance of the enterprise in a given period.
How to optimize the processes in your financial sector?
As we have explained, each financial sector can operate in a different structure, depending on its size and business model. However, some points are essential for all companies:
- Employee engagement : all teams must understand the importance of financial management, committing to following the guidelines defined by the sector and to valuing the financial health of the business;
- Data-driven culture : data should guide all of the organization’s strategic decisions. To achieve this, it is essential to create transparent and detailed reports and define clear financial goals for the company;
- Technology support : use management software to automate processes, integrate data from different sectors and increase the productivity and assertiveness of your operation.