how operations and finance team works together Flashcards
Establishing
credit terms
The finance function will work with the purchasing to
liaise with suppliers to obtain a credit account and to
negotiate credit terms which are acceptable.
prices
The finance function can advise purchasing on the
maximum price that should be paid to maintain margins.
payments
Payments may be approved by purchasing but are
made by the finance function.
Data captures
Order details will be input by purchasing and details
transferred to the finance function.
inventory
Finance can help ensure that less cash is tied up in
inventory and a philosophy of just in time rather than just
in case is developed.
Budgeting
The finance function will consult with purchasing on the
likely costs in preparing budgets.
Production
It plans and oversees the
production of goods
Cost
measurement,
allocation,
absorption
Production measures quantities of materials and time used;
the management accountant gives a monetary value to
them. Costs are then allocated and absorbed to calculate
production costs based on advice given by production.
Budgeting
Production will decide how many items of what type are to
be produced. The cost of producing these will be determined
by the finance function and production together, and
incorporated into the overall budget.
cost vs quality
Production and the finance function will discuss the features
that can be included in products and the raw materials that
should be used. They should agree which better quality
materials and features justify the extra cost, and discuss
how to maximise quality and profit.
Production process
Finance can assist production in identifying inefficiencies in
the production process (such as bottlenecks) and
suggesting improvements
Inventory
Production will liaise with the inventory section of the finance
function to ensure that there are sufficient raw materials in
inventory for the production that is planned.
