In fact, there can be several relationships, as illustrated above. In a large corporation, the functions of Finance are not tied to the day-to-day decisions made by Functional Areas. In fact, they rarely, if ever, are consulted until the company is in trouble. In such a case, it is common for the CEO to “de-value” the functional areas, and put them under the guise of Finance.
In the case of a small or medium sized company, where most of the functional areas are located on the floor of the office, such de-valuing may take place without the CEO knowing about it. It is the responsibility of the CEO to make sure that all decisions impacting the company’s assets, liabilities, revenues, and expenses are made in an orderly fashion. If there is a deviation from this rule, there may be a problem that will need to be resolved quickly. As such, the CEO must make sure that he or she keeps informed about the areas of his business which are affected by Finance. By doing so, the CEO can make informed decisions to solve problems in those areas. This will in turn create long term value for the company.
When the CEO engages in financial activities of his company, the company should expect results in the form of positive cash flow, gross profit, and competitive advantage.
However, if the results are less than desired, then the CEO needs to re-examine his or her decisions regarding the management of the functional areas of the company. For example, if the company is having difficulty paying its bills, then the CEO may want to take a look at the cash flow statement to see what is causing the problem. If there is an error made in the billing process, then this could cause the company to incur excessive expenses, which will impact cash flow.
In addition to these areas, the CEO should consider the overall health of the company. If it is not performing up to standards, then the company may need to examine its cash flow, cash reserves, and other operational aspects. By doing so, the CEO can create an accurate picture of how well the company is performing financially. This can also show the CEO how to improve areas of the company that are not performing as well as they could.
Another area that the CEO should be keeping in mind when analyzing the relationship between functional areas in a business and finance is the goals of the company. If the company’s goals change with the changing economy, the CEO should reassess the way he or she manages the various functional areas of the company. By reviewing these areas of the company, the CEO can determine whether the company needs to adjust its methods or its strategies in order to meet the new goals.
Finally, the analysis process of the relationship between functional areas in a business and finance should also consider the relationships among employees. After all, people will change positions within a company for different reasons. Therefore, the skills and the attitudes of the people will also affect the effectiveness of the company’s efforts to manage the various aspects of the company. For example, if the company has several managers who do not communicate well with the other managers, the communication between the managers may suffer. By paying attention to this aspect of management and how it affects the company, the CEO can ensure that his or her efforts to manage the business effectively are successful.