The Finance Function and the Project Office
Contemporary organizations need to practice cost control if they are
to survive the recessionary times. Given the fact that many top tier
companies are currently mired in low growth and less activity
situations, it is imperative that they control their costs as much as
possible. This can happen only when the finance function in these
companies is diligent and has a hawk eye towards the costs being
incurred. Apart from this, companies also have to introduce efficiencies
in the way their processes operate and this is another role for the
finance function in modern day organizations. Further, there must be
synergies between the various processes and this is where the finance
function can play a critical role. Lest one thinks that the finance
function, which is essentially a support function, has to do this all by
themselves, it is useful to note that, many contemporary organizations
have dedicated project office teams for each division, which perform
this function. In other words, whereas the finance function oversees the
organizational processes at a macro level, the project office teams
indulge in the same at the micro level. This is the reason why finance
and project budgeting and cost control have assumed significance because
after all, companies exist to make profits and finance is the lifeblood
that determines whether organizations are profitable or failures.
The Pension Fund Management and Tax Activities of the Finance Function
The next role of the finance function is in payroll, claims
processing, and acting as the repository of pension schemes and
gratuity. If the US follow the 401(k) rule and the finance function
manages the defined benefit and defined contribution schemes, in India
it is the EPF or the Employee Provident Funds that are managed by the
finance function. Of course, only large organizations have dedicated EPF
trusts to take care of these aspects and the norm in most other
organizations is to act as facilitators for the EPF scheme with the
local or regional PF (Provident Fund) commissioner. The third aspect of
the role of the finance function is to manage the taxes and their
collection at source from the employees. Whereas in the US, TDS or Tax
Deduction at Source works differently from other countries, in India and
much of the Western world, it is mandatory for organizations to deduct
tax at source from the employees commensurate with their pay and
benefits. The finance function also has to coordinate with the tax
authorities and hand out the annual tax statements that form the basis
of the employee’s tax returns. Often, this is a sensitive and critical
process since the tax rules mandate very strict principles for
generating the tax statements.
Payroll, Claims Processing, and Automation
We have discussed the pension fund management and the tax deduction.
The other role of the finance function is to process payroll and
associated benefits in time and in tune with the regulatory
requirements. Further, claims made by the employees with respect to
medical, and transport allowances have to be processed by the finance
function. Often, many organizations automate this routine activity
wherein the use of ERP (Enterprise Resource Planning) software and
financial workflow automation software make the job and the task of
claims processing easier. Having said that, it must be remembered that
the finance function has to do its due diligence on the claims being
submitted to ensure that bogus claims and suspicious activities are
found out and stopped. This is the reason why many organizations have
experienced chartered accountants and financial professionals in charge
of the finance function so that these aspects can be managed
professionally and in a trustworthy manner. The key aspect here is that
the finance function must be headed by persons of high integrity and
trust that the management reposes in them must not be misused. In
conclusion, the finance function though a non-core process in many
organizations has come to occupy a place of prominence because of these
aspects.
