The Impact of Technology on Pension Funds
Technology is the elephant in the room as far as pension funds are concerned. There is no meeting or conference where pension funds are discussed but the manner in which technology impacts these pension funds is not discussed. There are many experts who believe that technology is the future and hence pension funds must prioritize […]
Myths of Business Ethics
Practically business ethics at the workplace connotes an alignment between what the organization values and how to go about it. It means that the all the day to day operations or activities carried out by employees are in tandem with the organizational policies without any deviations. There are however lots of myths that surround business […]
SWOT Analysis of China Mobile
Introduction China Mobile is a Chinese Telecom major that has been in the news in recent years because of its jaw dropping growth rates as well as its ballooning subscriber base. Once considered as a protected state owned enterprise incapable of efficiency, it has now transformed itself into a domineering company in China with global […]
What is Acqui-Hire?
Acqui-hire is a different type of acquisition strategy which has come into existence with the emergence of technology-based start-ups. For many start-up companies, employees are now their biggest assets. Hence, it should not be surprising that other companies may want to acquire this employee base to meet their own business needs. Hence, if a tech […]
Germany: An Economic Powerhouse
Germany has always been an economic powerhouse. In fact, in the last century, the economy of Germany has been completely annihilated by the world wars that it fought. However, it has still managed to bounce back. Today Germany is the biggest economy in Europe. It is also the second largest exporter in the world and […]
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.
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 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.
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.
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.
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