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This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

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Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

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Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

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Banking Essentials - Part I

This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

Greenwashing

Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

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More featured content

Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

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The Function of a Finance and Accounting Department

The Function of a Finance and Accounting Department

Paul Nichols

CFO: 20 years as a chartered accountant & CFO

In the second video to this CFO series, Paul outlines the importance of the finance team surrounding the CFO, and their key areas of responsibility in ensuring that there are key systems and processes in place to maximise efficiency.

In the second video to this CFO series, Paul outlines the importance of the finance team surrounding the CFO, and their key areas of responsibility in ensuring that there are key systems and processes in place to maximise efficiency.

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The Function of a Finance and Accounting Department

16 mins 28 secs

Key learning objectives:

  • Understand how the typical finance department is structured

  • Learn why the core accounting section is so fundamental to the whole

  • Outline the roles of the non-accounting functions of Finance

  • Identify the key stakeholders of Finance

Overview:

Given the breadth of the modern CFO’s role, it’s important that there is a sound Finance team, system and processes to support them. It’s bound together by a robust set of Financial Controls that ensure that financial risk is minimised and that the financial data are in accordance with accounting standards and can be relied upon to support the CFO’s interactions with a broad group of important stakeholders.

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Summary

How is the typical Finance department structured and why is the core Accounting section so fundamental to the whole?

The Finance department has the Accounting section at its core. This is the engine room of Finance, where all the transactions are processed and therefore provides the data from which all other financial services are leveraged for the organisation. In addition to accounting, Finance organises itself into Business Partnering, Financial Planning and Analysis, and Tax/Treasury/M&A. Binding all these activities and linking them together with the business as a whole is a set of Financial Controls.

All companies use some form of accounting system. The accounting system is organised via a Chart of Accounts that determines where each type of transaction is posted in the accounting system consistently over time. This is split into income and expense categories for the Profit and Loss account, and asset and liability categories for the Balance Sheet. The design of the Chart of Accounts and how they are used are determined by globally accepted Accounting Standards that ensure companies’ accounts are comparable and transparent.

The Accounting function is organised into Accounts Receivable (debtors ledger), Accounts Payable (supplier ledger), and General Ledger. Binding all these activities and linking them together with the business as a whole is a set of Financial Controls. These are a set of policies and procedures that minimise financial risk. Taken a level down, they are the means by which a company’s assets are safeguarded, fraud is avoided, and the company’s financial reporting can be relied upon.

What are the roles of the non-Accounting functions of Finance?

FP&A’s role is to evaluate the entirety of the company’s financial situation and to turn this into insights and recommendations that help the management team to meet its financial goals. It will produce the monthly financial statements with commentary of performance against budget and forecast. It will work with the business to produce the long term plans and the budgets and forecasts for the upcoming period. It will consider macroeconomic factors and trends that are impacting the business. It will also analyse trends within the company’s own operations compared with what was planned for the period, in order to shine a light on what current performance means and where risks and opportunities might lie.

Business Partnering - This involves partnership with non-financial departments, performance of ad hoc analysis, and recurring tasks such as maintenance of monthly financial reporting, budgeting and forecasting, and detailed analysis of department spend. The maintenance of systems and related financial processes, for example in the Sales or Customer Services teams might be carried out by Business Partners.

Tax function - Its overarching objective is to ensure the company pays the right amount of tax on company profits, and the right amount of sales or value added tax, further that tax rules are clearly understood and applied to ensure that a company or group of companies is not paying tax unnecessarily. Where an international group of companies is involved, there will be international tax planning to manage, and the concept of Transfer Pricing which determines how much profit is made in each country and therefore how much tax is paid.

Treasury - Cash management and funding ensure there is liquid cash available at all times to meet liabilities as they fall due, and to ensure that cash and foreign exchange is banked and managed optimally.

Mergers and Acquisitions (M&A) - Required where a company is developing through buying and selling, or merging with other companies, rather than organically. This brings its own set of challenges for the CFO, firstly with the selection of the target company and the management of the deal itself, and then in the integration process as the 2 companies are combined.

Who are the key stakeholders of Finance?

  • Customers: accurate, timely billing and link to customer services (sales)
  • Suppliers: timely and correct payments, negotiations, problem resolution
  • Employees: timely and correct salary payments, data, systems, processes, link to Human Resources
  • The Board and Exec Committee
  • Governance Committees, e.g. audit, remuneration, risk
  • Shareholders/Investors/Lenders
  • Other 3rd Parties including Government (HMRC/Revenue Authority), auditors, banks, insurers
  • Regulators

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Paul Nichols

Paul Nichols

Paul is a Chartered Accountant having qualified with Price Waterhouse in 1998 and has since spent over 20 years in commercial finance roles. Early in his career, Paul undertook a 10-year spell at De Beers, setting up the company's UK Business Partnering function. Following this, in 2011 Paul became European Finance Director of Coach Inc, responsible for their expansion into Europe. Finally, Paul became CFO of Chesneys Lts in 2016, coinciding with the company receiving private equity investment.

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