BSCI111 Role of Finance Function P1
BSCI111 Role of Finance Function P1
BSCI111 Role of Finance Function P1
LEARNING OUTCOMES
On completion of this study unit you should be able to:
Discuss the roles of the finance function in organisations;
Explain how the finance function enables the creation and preservation of value;
Discuss and explain how the finance function shapes the creation and preservation of value;
Discuss and explain how the finance function narrates the creation and preservation of value
THE CONTEXTS ORGANISATIONS OPERATE IN
Type of organisation
Business sector
Mission, vision, & objective
Business environment
BUSINESS SECTORS AND TYPES
What is an organisation?
social arrangement
collective goals
controls its own performance
has a boundary separating it from its
environment.
Boundaries can be physical or social.
BUSINESS SECTORS ANDTYPES
Private Sector
Owned and operated by private individuals or institutions.
State-owned industries:
• Government Employee Pension Fund
• Transnet
• South African Airways (SAA)
BUSINESS SECTORS ANDTYPES
Non-Governmental organisations :
Private organisations that operate in the public sector by providing services to the community or protecting the
environment
Main features
• Generating a profit is not a primary goal
• Not directly linked to the government
The World Bank defines these as 'private organisations that operate in the public sector and pursue activities to relieve
suffering,
promote the interests of the poor,
protect the environment,
provide basic social services, or
undertake community development.’
Many of the largest NGOs are charities such as Oxfam and the Red Cross.
Activity: private or Public?
Company/Activity Sector and type
North-West University
Eskom
Use of Technology
• What type of technologies are used
ORGANISATIONALVISION, MISSION AND OBJECTIVES
Our vision is to craft the brands and choice of drinks that people love, to
refresh them in body & spirit.And done in ways that create a more sustainable
business and better shared future that makes a difference in people’s lives,
communities and our planet.
Mission Vision
ORGANISATIONALVISION, MISSION AND OBJECTIVES
Business Objectives
Why should an organization have objectives?
In order to implement strategy and manage performance, an organisation needs specific objectives and targets.
Specific
Measurable
Achievable
Relevant
Time-related
An example of SMART objectives for a company:
The MACRO environment covers all the factors that can influence the organisation indirectly, and generally,
the organisation has no control over these factors AND
The PESTEL model is used to analyse these factors.
An example of a PESTEL analysis for a hypothetical company
Political: Technological:
• Changes in government policies could affect the company's operations • Technological advancements could present new opportunities for the
and profitability. company to innovate and improve its products or services.
• Changes in trade agreements or tariffs could impact the company's • Changes in technology could also disrupt the industry or create new
ability to import or export goods. competition.
Economic: Environmental:
• Fluctuations in exchange rates could affect the company's profitability • Changes in environmental regulations could affect the company's
if it imports or exports goods. operations and production processes.
• Changes in interest rates could affect the company's borrowing costs • Climate change could also impact the company's supply chain and
and investment decisions. sourcing of raw materials.
Social: Legal:
• Changes in consumer preferences could impact the demand for the • Changes in labour laws or regulations could affect the company's
company's products or services. employment practices and costs.
• Changes in societal values or norms could affect the company's • Changes in intellectual property laws could impact the company's
reputation and brand image. ability to protect its products and services from competitors.
PESTEL
Analysis of…
CLASS EXAMPLE - PESTEL
Substitutes
CREATIONAND PRESERVATION OFVALUE BYTHE FINANCE FUNCTION
THE CONCEPT OF VALUE
ECONOMY, EFFICIENCY & EFFECTIVENESS
Value depends on the type of
organization CONCEPT DESCRIPTION
ECONOMY The concept of performing an activity for the
minimum at cost, e.g. a process that costs £100
to produce a unit of output is more economic than
Profit-making organisation one which costs £200 to produce the same output
Increasing shareholder wealth EFFECIENCY The concept of performing an activity by
consuming the minimum resources of input,
e.g. a process that uses 1 labour hour to produce a
unit of output is more efficient than one which uses
Not for profit organisation 2 labour hours to produce the same output
EFFECTIVENESS The concept of achieving the maximum
Achievement of goals and objectives output given the resources of input, e.g. a
Benefit to members and or society process that generates 10 units of output is more
effective than one which generates 5 units of output
for the same input of resources
THE ROLE OF ACCOUNTANTS INTHE DIGITALWORLD
Preserve value Create value collecting, cleaning and connecting data into assembled information
(such as financial and management accounts and returns)
Analysis for insights
Communicatio
information
Data
Value analysis
analysis of
required impact
VALUE ACTIVITIES OF THE FINANCE FUNCTION
Planning and Performance
Resource allocation Management Financial reporting
forecasting
and control
Planning takes and An organizations resources This enables stakeholders
organization's strategic include everything that it Performance
to assess the value-adding
objectives, goals and critical can use to meet its management involves the
abilities of the organization.
success factors and turns objectives.These include monitoring of
them into a detailed organizational
obvious resources such as
roadmap to get it form performance over time.
where it is to where it financial capital, but also
wants to be. human resources and
technological resources as Control involves
well. taking corrective
Forecasts are used to
estimate, or predict, certain action and making
factors, so that they can be the most of
used to drive the budget. performances which
exceed expectations.