Supporting Business Functions in the Company

Purchasing Function:

Raw Materials needed for production of goods should be provided on economic terms. They should
be utilized in efficient manner to achieve maximum productivity. In this function the Finance manager
plays a key role in providing finance.

In order to minimize cost and exercise maximum control, various material management techniques
such as economic order quantity (EOQ), determination of stock level, perpetual inventory system etc.
are applied. The task of the finance manager is to arrange the availability of cash when the bills for
purchase become due.

Productivity Function:

Production function occupies the dominant position in business activities and it is a continuous
process. The production cycle depends largely on the marketing function because production is
justified when they are resulted in revenues through sales.

Production function involves heavy investment in fixed assets and in working capital. Naturally, a
tighter control by the finance manager on the investment in productive assets becomes necessary. It
must be seen that there is neither over-capitalization nor under-capitalization. Cost-benefit criteria
should be the prime guide in allocating funds and therefore finance and production manager should
work at the same time.

Distribution Function:

As goods produced are meant for sale, distribution function is an important business activity. It is
more important because it provides continuous inflow of cash to meet the outflow thereof. So while
choosing different distributing channels, media of advertisement and sales promotion devices, the
cost benefit criterion should be the guiding factor.

If cost reduction in distribution function is effected without compromising efficiency, it will lead to
increased benefit to the enterprise in the form of higher profit and to the consumers in the form of
lower cost.As every aspect of distributory function involves cash outflow and every distributing
activity is aimed at bringing about inflow of cash, both the functions are closely inter-related and
hence should be carried out in close unison.

Accounting Function:

All the accounting tools and control devices, necessary for appraisal of finance policy can be correctly
formulated if the accounting data are properly recorded. For example, the cost of raising funds,
expected returns on the investment of such funds, liquidity position, forecasting of sales, etc. can be
effectively carried out if the financial data so recorded are reliable. Hence, the relationship between
accounting and finance is intimate and the finance manager has to depend heavily on the accuracy of
the accounting data.
Personnel Function:

Personnel function has assumed a prominent place in the domain of business management. No
business function can be carried out efficiently unless there is a sound personnel policy backed up by
efficient management of personnel. Success or failure of every business activity boils down to the
efficiency of otherwise of the men entrusted with the respective function.

A sound personnel policy includes proper wage structure, incentives schemes, promotional
opportunity, human resource development and other fringe benefits provided to the employees. All
these matters affect finance. But the finance manager should know that organization can afford to
pay only what it can bear. It means that expenditure incurred on personnel management and the
expected return on such investment through labour productivity should be considered in framing a
sound personnel policy. Therefore, the relation between the finance and personnel department
should be intimate.

Research and Development Function:

In the world of innovations and competitiveness, expenditure on research and development is a

productive investment and R and D itself is an aid to survival and growth of the Company. Unless
there is a constant endeavour for improvement and sophistication of an existing product and
introduction of newer varieties, the company is bound to be gradually out marketed and out of
existence. However, sometimes expenditure on R and D involves a heavier amount, disproportionate
to the financial capacity of the firm in such a case, it financially cripples the enterprise and the
expenditure ultimately ends in a fiasco.

On the other hand, heavily cutting down expenditure of R and D blocks the scope of improvement and
diversification of the product. So, there must be a balance between the amount necessary for
continuing R and D work and the funds available for such a purpose. Usually, this balance is struck out
by joining efforts of finance manager and the person at the helm of R & D.
12 Months - Key Performance Indicator (KPI) are the outcomes you need to measure that have the
most impact moving your company towards its vision of success. They are the quantifiable, outcome-
based statements you’ll use to measure if you’re on track to meet your goals and objectives.

Production Volume: Production volume measures the total amount your company can produce over
time. This tracks the total number of products manufactured over a set period of time (days, weeks,
months, quarters, years) and focuses on total output. Track the quantities that you are able to
produce. A good production volume is one that satisfies demand but does not leave too much
inventory in stocks.

Production Costs: Monitor the costs implied in the production. Measure the overall costs per unit
your business has over a production cycle, and see if that makes you profitable in regard to the sales
price you want to set.

Capacity Utilization:maximize the capacity utilization so that your machines work at an ideal cycle
time and determine whether you need to scale your production or understand whether you have
issues somewhere in the process. Issues can cause monetary losses, and inefficiencies in your capacity
management, where every machine and product counts.

Defect Density: Track the damaged items right away. Try to keep your defect density as low as
possible and compare it to industry benchmarks.

Rate of Return: Measure how many items are sent back. Defects, wrong packaging, non-compliance,
etc. Analyze these reasons in order to tackle the root cause of the problem, and avoid further returns.
Doing so will not only save you money but also earn you a better image in the eyes of your clients,
which will see you as more reliable. You can also assess which products are more subjected to
returns, to polish your analysis. Try to keep the rate of return as low as possible and assess the
reasons for these returns for your different products.

On-time Delivery: Ensure your products are delivered on time and the goal should be 100%. The
customers are important, and, if they receive your products on time, satisfaction will increase and the
relationship will flourish. On a side note, if your employees manage to fulfill 100% of deliveries on
time, it would make sense to reward them and keep their motivation strong. Here it would make
sense to keep the realistic production schedule, maintain accurate material inventories, and create a
culture focused on quality – your customers will, ultimately, be grateful. The higher the percentage,
the better chances you have to increase customer satisfaction. Don’t forget to reward your employees
as well.

Asset Turnover: Acknowledge your assets in relation to your revenue. It represents the value of your
business revenue (or sales) relative to the value of your assets. It is a good efficiency indicator when it
comes to assessing if your assets are generating value or not, and is all the more important if you
evolve in an asset-heavy industry such as the manufacturing industry. Asset turnover = revenue / total
assets. The higher this ratio the better, as it means that you generate more revenue per peso of asset.

Unit Costs: Track and optimize your units costs over time, the total costs involved in the production of
one item, including the fixed costs and the variable ones. This unit cost can also be broken down to
show all the costs (labor, warehousing, equipment, material, etc.) and analyze what are the major
inputs and how much they represent in the total. Identify production processes you can optimize to
decrease unit costs over time.

Return on Assets: See how profitable your business is relative to its assets
Maintenance Costs: Evaluate your equipment costs in the long run

Revenue Per Employee: Measure the success of your workforce. Calculated by dividing the company’s
revenue by the current number of employees, this gives a strong signal for evaluating the efficiency
and productivity levels – the higher the amount, the greater the productivity. In essence, it shows the
success of a manufacturing company and it’s connected to the financial department since it directly
includes costs. Ensure your revenue per employee is steadily growing in order to ensure the whole
company is on its path to sustainable development.