22 Jul

The Role of Finance in the IT Sector of America

Finance in the IT Sector of America

The IT industry continues to be one of the strongest performing sectors in the US economy. Financial controllers in the IT industry continue to be big influencers in the direction their companies should take. In 2015, Factset reports that major tech companies like Microsoft and Apple spent $150 billion buying back their own shares, no doubt a decision by their CFOs.

Capital raising

Finance departments have the responsibility of keeping their companies liquid. Crunchbase has shown that venture capitalists are committing an average of $20 million in buying start-ups. Companies that have CFOs have shown to attract more investment as investors are able to see a sound financial model and clear projections. The CFO articulates the company’s vision, negotiates for funding and closes the funding deals.

When IT companies need refinancing, financial controllers deliver accurate on-time financials that show cash flow and management. Companies that show good financials stand better chances of more financing and attracting new investors.

Company management

Apple’s CFO Peter Oppenheimer is known to be a big influence on major decisions by the tech giant. For instance, the buyback of shares in 2015 was largely attributed to him as the financial head. CFOs influence administrative and financial decisions in many IT companies. They make arrangements needed for smooth running of business operations like insurance and legal services. Ancillary departments linked to finance like accounting and HR are under the CFO making him a major decision maker in the company.

Strategy formulation

Technology and finance are inseparable. Business growth in IT companies hinges on availability of funds. Having a financial plan that will merge into the company’s strategic plan is crucial for realisation of the strategic goal. Finance departments have made or broken IT companies. Google’s phenomenal rise is an example of how financial might can be used to leverage dominance in the industry.

Change

The fortunes of IT companies largely depend on how innovative they are. Having good financial management also counts in survivability as the company can buy into new start-ups. Facebook has strategically acquired Instagram, hoping to cash in on this innovation in social media. CFOs have changed fortunes of drooping companies with sound financial planning. Yahoo! Is a good example of a company that never dies contrary to expectations.

Risk management

The IT industry is very  fluid with risks from several fronts. Getting fined for violation of tax regulations is a good example. The finance department has a role of ensuring the company complies with regulations like tax and audit regulations to avoid loss.

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