Organization of Finance: Core Modern Principles
Alina Koval
Advancing Digitalization and AI | Integrating Reliable, Scalable Tech Solutions | Driving Efficiency Through Client-centric Approach
Amidst global financial, economic, and geopolitical crises, we are all looking for ways to optimize our budgets, and technology can assist us in doing so. AdvantISS helps companies build and implement software that meets modern standards and principles for organizing financial flows and role distribution within the company. Here, I will share the key principles that form the foundation of financial management software.
Understanding these principles help companies to manage brand’s finances more effectively and use them to their fullest advantage, such as maximizing return on investment, among other benefits.
Core Principles of Modern Financial Organization
Proper financial planning can be an effective tool for companies, whether they are emerging businesses or large corporations.
To create a quality plan, you will need:
Centralization vs. Decentralization
There are many forms of business, just as there are numerous methods for distributing financial flows. However, none of them are 100% effective on their own. In almost any case, a company will face challenges that may lead to additional expenses or other undesirable outcomes.
When it comes to classical financial systems, there are only two main approaches:
Modern business is about how to skillfully combine these models and take advantage of the strengths of each. Therefore, it's essential to create a hierarchy of financial flows in which the company can achieve both investment and operational flexibility while also ensuring stability.
In other words, the optimal model is to balance centralization and decentralization of finances in proportions that correspond to the business’s capabilities.
Alignment with Business Strategy
Any expenses or investments must align with the business strategy. For example, if your brand focuses on software development and QA, there is no reason to take an extreme approach and invest in a startup that works in a new niche.
On the other hand, if there’s a clear prospect of profitability for a project, such an investment could be justified and successful in terms of profitability — but only if the concept aligns with the company's established business plan.
Risk Management
A risk management program should be in place at every modern enterprise. In the context of finance, it includes the following aspects:
Thus, if you aim for financial reliability, implementing a risk management program at your enterprise is essential.
Transparency and Accountability
Black bookkeeping not only has questionable effectiveness but is also a source of various problems, both with tax authorities and other institutions. Moreover, it can lead to misunderstandings about the actual state of the business and result in decisions that do not align with its capabilities.
Therefore, transparency and accuracy in bookkeeping are crucial today. It is also one of the cornerstones of a successful modern business.
Key Roles and Responsibilities in Modern Finance
While the approaches and principles may be clear, determining who is responsible for financial organization within the company can sometimes be confusing. In some cases, different departments handle accounting and bookkeeping separately, with each responsible for different tasks, leading to role duplication.
To avoid this in your company, roles must be clearly defined, with specialists assigned specific operations and held accountable for them. Let’s now explore the key roles in financial organization.
Chief Financial Officer (CFO)
The CFO is the primary officer responsible for the company’s budget. Their responsibilities include:
In essence, this specialist oversees the financial component of the enterprise comprehensively, sets global goals, and monitors the path toward achieving them.
Treasurer
The treasurer is responsible for the company’s budget, having access to the business’s finances and managing financial flows. This specialist’s duties include:
Thus, the treasurer literally operates the company’s finances, setting priorities at the mid- to high-level financial planning stages.
Controller
Often referred to simply as the accountant, the controller's duties are fairly standard:
This specialist may be responsible for a specific area or department, managing allocated finances at a particular level and reporting on the use of funds, profits, etc.
This creates a clear vertical hierarchy of financial organization within the company. However, sometimes this is not enough, and additional tools and technologies are required. Let’s now discuss those.
Technology's Role in Modern Finance
Modern digital systems, particularly ERP, offer a range of tools and modules to ensure fast and transparent financial accounting for the enterprise.?
With such digital infrastructure, your company can gain numerous advantages, including faster financial flow processing, a system of segregated access to this information, and more.
Just imagine how your accounting and bookkeeping could transform by integrating a suite of corporate solutions into your business.
Automation and Efficiency
You won’t have to spend time and effort on routine accounting processes and financial calculations. Most data will be automatically imported into the system.
This way, you’ll reduce costs associated with manual calculations, eliminate human error, and gain a clear view of the company’s current financial status.
Data Analytics and Insights
With ERP systems and corresponding modules, you’ll be able to work with large data sets. Data is a valuable resource for businesses and allows for well-informed and effective decision-making.
Imagine getting comprehensive data on market conditions, the company’s budget, etc., with just one click.
And if you add a specially trained LLM (Language Learning Model) to your digital infrastructure, you could gain a qualified consultant. It would instantly find and retrieve the necessary information, analyze data sets, and generate valuable suggestions, including those related to cost savings, efficient capital investments, and investments in promising startups.
Cloud Computing and Collaboration
Another feature of digitalization is the improvement of a company’s operational capabilities. For example, you can store data in large, isolated network storage spaces and work with them remotely.
Furthermore, this will increase the speed of your specialists' work, especially those in finance, who can operate data in the cloud, analyze it, and develop new business development and funding plans.
Another advantage of this type of technology for financial organization is the powerful collaboration capabilities. Imagine no more paperwork, office transfers, and dozens of corporate stamps.
These systems allow multiple authorized individuals to work on documents simultaneously, sign electronically, and even remotely certify documents with notaries.
The cherry on top is a controlled access system for documents and data. It prevents unauthorized access to information and minimizes risks, including those outlined by Petro Samoshkin in the article "Enterprise Mobility: Core Cyber Threats."
Conclusion
The modern principles for building a high-quality and efficient financial organization within enterprises are not perfect. However, they can optimize several operations, establish clear boundaries of influence and responsibility for personnel, and ensure transparency and traceability of financial flows.
Furthermore, if you choose to digitize financial processes, for instance, through ERP systems with relevant modules, you can further optimize them. This includes automating the collection, analysis, and calculation of all financial operations, eliminating human error, and improving the accuracy of calculations.
I also suggest learning more from the experiences of other companies in implementing technologies for managing their finances. For example, you can explore the use case of AdvantISS on the Finance module for a custom ERP system.
Perhaps you are already on the path to such optimizations? Share your experiences in the comments!