Corporate Finance and Other Functional Areas | Relationship with Marketing, Production, and Human Resource Department

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Corporate Finance and Other Functional Areas | Relationship with Marketing, Production, and Human Resource Department

Corporate Finance and Other Functional Areas

There are different functional departments in an organization. The number and types of these departments depend on the size and nature of the business. In a typical manufacturing firm, the common departments are production, marketing finance, and human resource departments. These departments work in close coordination. The functions of the finance department are intimately related to the functions of other departments. For example, if the production department plans to expand the production facility it requires funds for the expansion project which must come from the finance department. Similarly, if the marketing department plans a big marketing campaign, again it requires funds which must come from the finance department. Not only that, when the finance department faces a fund crunch, the programs in other departments (for example, expanding production facilities or launching marketing campaigns) will have to be revised or postponed. Thus, there exists a close relationship among functional departments in an organization.

Relationship with Marketing Department

The financial manager closely works with the marketing manager. The marketing manager involves in product surveys, demand analysis, and forecasting of sales. S/he also involves in new product development, expanding marketing territory, pricing of the products, etc. These functions of the marketing manager have financial implications. The financial manager should closely work with the marketing manager in these issues to analyze the financial implications of these proposals. For example, the marketing manager may develop new promotion and pricing strategies and suggest extending the credit period to meet the sales targets. But, the credit manager must analyze alternative credit policies and suggest the appropriate one. Similarly, the inventory manager may suggest the best inventory policy.

Relationship with Production Department

The production department is responsible for the development, manufacturing and quality control of a firm’s products. The production manager may propose replacing the existing plant for capacity expansion or for better quality control. The financial manager should work in coordination with the sales department and production department to decide whether the existing plant should be replaced with the new one or not. The capital budgeting manager collects the revenue forecast from the sales department, production volume, and costs from the production department to analyze investment alternatives. Thus, there is a close relationship between the production department and the finance department.

Relationship with Human Resource Department

Human resource management involves the recruitment and selection of employees. It definitely involves cost. The costs of human resources are analyzed in capital budgeting decisions by the capital budgeting manager. Similarly, the treasurer works closely with the human resource department regarding pension fund management and different incentive policies to the employees.

There could be other departments like the research and development department in an IT company or an engineering department in the airline business. But these departments and the finance department will have to work in coordination to realize the organizational goal.

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