Proactive Finance Department Structure: The Ultimate Guide (2024)

10 April, 2023

4 Min

Your chief financial officer (CFO) holds the key to your company’s cash and budgets. Alongside the CFO works an army of executives to help with various tasks such as managing ledgers, preparing invoices, and collecting cash. Together with the CFO, these finance professionals constitute the ‘office of the CFO.’

But how do you organize this finance team so that your workflows run smoothly? Businesses that do not have well-defined finance structures will find it difficult to manage workflows such as procurement and accounts receivables (AR) management as they grow.

The office of the CFO comprises six broad departments – procure to pay, order to cash, treasury, financial planning and analysis, tax and compliance, and record to report.

These departments, which can be further divided into sub-teams, deal with multiple responsibilities that include reporting the company’s financials, collecting receivables from clients, and paying suppliers.

• Procure-to-pay: The procure-to-pay department consists of your accounts payable and purchase teams. This finance function handles all the processes involved in the purchase of goods or services for your company. This starts with the evaluation of vendors, purchase order (PO) release, and ends with the receipt of goods and payment of invoice. After this process, the procurement department also looks at reconciliation, quality, and finance audits, and ensures statutory compliance.
• Order-to-cash: The order-to-cash (O2C) department takes care of all the financial aspects involved in fulfilling a customer’s order. The order-to-cash process involves receiving the sales order, processing the invoices, collecting the payments, and recording the transaction in the books. The key responsibilities of the O2C team include order management, credit management, order fulfillment, order shipping, customer invoicing, accounts receivable management, payments collection, and reporting and data management.

• Treasury: Treasury department manages the money and financial risks of the business. The treasury team develops short and long-term strategies to ensure that the business has money to meet its day-to-day business obligations as well as investment plans. They are also responsible for maintaining relationships with banks to facilitate cash management and funding. Cash management, risk management, and corporate finance management are the treasury department’s main responsibilities.
• Financial planning and analysis (FP&A): The financial planning and analysis team is responsible for transforming your company’s strategies into annual operating and capital budgets. It sets key performance indicators (KPIs) and forecasts the company’s financial performance. Key responsibilities of the FP&A team include planning, budgeting, integrated financial planning, performance reporting, forecasting, and modeling.
• Tax and compliance: The tax department is responsible for managing the company’s tax returns and compliance. The tax department also supports the invoicing and other teams in the accurate calculation of taxes.
• Record-to-report (R2R): The record-to-report team is responsible for collecting, processing, and reporting accurate financial data. The R2R team provides strategic, financial, and operational information to the management and other stakeholders about the performance of the company.

Note: Small and midsize businesses may have a different finance organization structure with a definite overlap between departments. They’re very likely not to have treasury departments or a separate function for reporting. In very small businesses, the same person or team may be responsible for both accounts receivables and accounts payables. The number of departments and sub-teams you have will vary based on your business size and complexity.

The finance department typically includes a team of professionals who are responsible for financial planning and analysis, accounting and financial reporting, treasury and cash management, tax and compliance, internal audit, financial operations, risk management, and investor relations.Corporate finance departments manage their enterprises’ financial activities and investment decisions. Some of the key roles that you must look at having in your corporate finance department structure are chief finance officer (CFO), finance manager, financial controllers, corporate treasurer, accountants & bookkeepers, payroll manager, and procurement manager.

Chief finance officer (CFO): The CFO (Chief Financial Officer) is a key executive responsible for managing a company's financial operations and strategy. The CFO's role is critical in ensuring the financial health and stability of the organization.

The CFO is the head of your finance department and usually is hierarchically third in an organization, after the CEO and the COO. Based on the size of the company and the terminologies used, the head of the finance department may be referred to as CFO, finance director, or VP-finance. In a bigger company, the finance director and VP-finance could be secondary roles supporting the CFO. The CFO is responsible for the company’s overall financial strategy, investor relations, shareholder reports, and broad strategies to increase profits and reduce costs. It is very important that CFOs follow best practices to ensure that the finance team understands the industry wherein the firm operates and the macroeconomic factors impacting corporate decisions. It is also imperative that CFOs set up effective financial frameworks to help finance teams adhere to business goals, track their progress, ensure compliance, and achieve higher profits.

Finance manager: Within the finance team, finance managers are responsible for the company’s cash and investments. They decide the budget ranges and work with other functions such as sales, marketing, and HR to optimize the use of finances. Finance managers know how to handle cash assets, analyze investments, track debt, monitor credits and collections, and prepare financial reports and forecasts.Financial controller: The finance controllers are responsible for money transactions in a more hands-on manner. They track all financial transactions. They also collect receipts, invoices, and other documents from the concerned departments to record the transactions correctly. Unlike the finance manager, who looks at broad budgets and spending, the financial controller tracks the actual spend.Corporate treasurer: The corporate treasurer is responsible for the company’s exposure to credit and currency risks. The corporate treasurer is a corporate risk management expert, who analyzes budgets, monitors the company’s corporate investments, makes refinancing decisions, manages cash reserves and foreign exchanges, and oversees cash flows.Accountants & bookkeepers: Also known as account managers and account clerks, they are responsible for maintaining the financial records accurately. Their job requires great attention to detail and a knack for spotting anomalies in transactions and supporting documents. Every company needs to keep financial records, and hence accountants are integral to any finance team. Today, accounting software has automated several bookkeeping functions, saving accountants much time and effort.Payroll manager: The payroll manager is responsible for making sure that the staff are paid on time and correctly. The payroll manager calculates payroll taxes, provides detailed payslips, and identifies and resolves salary-related issues. They also look at ways to automate the process. While the payroll manager has oversight over the whole process, assistants and clerks may help with discrete steps such as calculating taxes or resolving employee issues.Procurement manager: Also known as the purchasing agent or the procurement officer, this person is responsible for overseeing the buying of new supplies and software services. They collaborate with various departments to negotiate deals, process purchase orders, and manage healthy relationships with suppliers.Note: Small and midsize businesses may not have all the roles discussed above. For example, the role of corporate treasurer is more common in large enterprises’ finance teams than in SMBs. The finance manager at a small business may don multiple hats and be responsible for procurement as well. Small businesses may not even have a full-time CFO, and the finance controller may be managing day-to-day activities, including bookkeeping.

What is the optimal number of finance professionals you should hire? How much should you spend on your finance functions? These are some natural questions that follow once you know the key finance functions and responsibilities.

Your finance team strength will depend on the size of your business and any specific needs that you have. Here we’ve compiled some stats to help you plan your finance team structure, based on studies done by several research houses.

Now that you know the teams that make up a finance department and the key job roles in it, here are some tips to help you structure your finance team better.

• Align similar functions together: When you’re a smaller organization, it is common for your finance manager or accountant to don multiple hats. But as you grow, you need dedicated finance teams to manage different workflows. For instance, you’ll need separate teams for A/R, AP, procurement, and budgeting. You’ll also need managers for each of the finance department functions as well as group managers to look after related functions (e.g. procurement and AP)
• Have SMART goals: To ensure efficiency in your finance team, have SMART (specific, measurable, achievable, realistic, and time-bound) goals for the different functions. Some examples of SMART goals for your finance teams include reducing DSO by 20%, improving CEI by 15%, or reducing cash posting errors by 40%. Along with these SMART goals, fire up your finance teams to think strategically to support the growth of the company, reduce costs, and improve profits.

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• Build for the future: Future-proof your finance organization by combining your human resource capabilities with technological advancements such as robotic process automation, machine learning, and artificial intelligence. 39% of SMBs use financial automation solutions for invoicing, data collection, financial report generation, document storage, and compliance management.

Start planning for your cfo office early. Look at building a financial strategy covering investment plans, cost reduction strategies, revenue growth, and cash management.Technology holds the key to building an efficient and able finance function. CFOs should not shy from investing in advanced technologies, such as artificial intelligence (AI) and machine learning (ML), to improve the efficiency of finance teams. Innovating finance functions by implementing advanced technologies enables enterprises to unlock working capital, optimize resources, and enable 360-degree visibility of global health processes.

What is a finance team?

A finance team manages an organization’s financial operations, including budgeting, accounting, financial reporting, and analysis. They may also oversee cash management, investments, and financial planning. The finance team plays a key role in ensuring the financial health and stability of the organization.

How big should the finance team be?

The number of people in internal finance departments companies varies based on the size of the company. However, in general, for companies in the $500 million – $5 billion, it ranges between 44 and 50 people.

What is the hierarchy of finance positions?

In a typical finance team structure, the Chief Financial Officer (CFO) heads the finance departments. The CFO is the highest-ranking finance officer in the company. Generally, from a hierarchical organizational structure perspective, the CFO ranks third, after the Chief Executive Officer (CEO) and Chief Operating Officer (COO). In most organizations, the CFO reports to the CEO.

What is the typical structure of a CFO team?

The CFO team structure typically includes the CFO, VP or Director of Finance, Controller, and Treasurer. Other roles may include financial analysts, tax professionals, and risk management specialists, depending on the size and complexity of the organization.