An accounting department of any given company plays an important role in managing money, gathering payments and collecting receivables, paying bills on time and ensuring the company keeps a positive net worth value. Accountants often set goals and objectives for the entire department to ensure the business performs the best possible accounting practices at any given time. These objectives and goals may differ for each given company.
An accounting system is an organised collection of computerised and manual accounting processes, procedures and controls created to collect, record, classify, summarise and interpret accurate and reliable financial data for decision making by management. The main purposes of an accounting system are to prevent and detect fraud, waste and theft and to generate financial statements for managers, creditors and lenders.
To work as an accountant means that you’ll help your employer maintain the business’ financial accounts. No matter the specific type of accounting you were hired for, you will be expected to have a high level of information about your employer’s financial operations. To obtain this knowledge, you’ll have to keep track of financial transactions in balance sheets, profit and loss statements and a general ledger. Your analytical skills help you figure out where accounting discrepancies have begun.
Your employer may also want you to make recommendations on various financial actions they may want to take. Expect to justify your recommendations to your employer.
The real purpose of your accounting department is to help you accomplish two overall objectives in your business:
Everything we do in the accounting department ultimately fits under these two objectives (although most people do not look at it this way).
Every day you and your management team are out there executing strategies and tactics designed to grow the business and drive profitability and cash flow. When your accounting department sees themselves as a part of that same team, they look for ways to help and support the team. One of the most effective ways to help the team is to provide them with fast, accurate, and insightful financial information.
Of course, the accounting department is not out there on the front lines with customers closing sales. Their role is more about supporting the company goals and influencing good decision-making. When the accounting department plays that role well, they can make a big impact on the quality and speed of business decisions and financial results, in the field.
Insightful financial information helps create a crystal clear link in each manager’s mind between what they set out to achieve (the financial goals and targets), what actually happened (actual results on the key metrics that drive performance), and what’s about to happen (a reliable financial forecast that provides the view through the financial windshield of the business). That way, the team in the field can quickly and easily see what they need to do (or change) in order to get the results they are responsible for achieving.
If your accounting department was slow in paying vendors, sent out inaccurate customer invoices, ignored accounts receivable, seldom reconciled the cash accounts, had no controls related to expenditures, and no safeguards around company assets, your accounting function would quickly become the enemy of everyone inside (and outside) the company.
They would be killing your ability to improve profitability and cash flow. They would be driving results down all by themselves. They would be defying the inherent promises you have made to vendors, driving cash flow from customers down, and seriously hurting profitability.
Operational excellence is important throughout your company — and that includes the accounting department. Being good at transactions processing because it supports the larger goals of the organisation. Sloppiness in the day-to-day work in any part of the company will create problems and distract everyone from the more important work that needs to be done.
Running an accounting department where the overall goal is to support the company in its goal to survive and thrive financially, together with excellence in how the department executes on its day-to-day transaction processing and risk mitigation responsibilities, is how the accounting department (and the CFO that leads the department) adds value in an organisation.
The accounting department’s role in attracting capital is two-fold. First, as the company gets better and better at improving its results every month, every quarter and every year, it becomes easier to attract capital. Lenders and investors love to find financially solid companies to lend to and invest in. And they love to see improving results. As the company successfully improves financial results, it becomes easier to attract capital.
Lenders and investors quickly see that the leadership team knows how to make money. They see their investment in the company performing well. That’s a recipe for continued access to capital.
Second, attracting capital requires that you instil confidence, credibility, and trust in the minds of lenders and investors who can provide the capital you need to grow. From a CFO perspective, I like to look at this objective by considering the people and institutions that can help us financially as my “customers”. That includes existing lenders, shareholders/owners, the Board of Directors, and our leadership team. It could even include various regulatory bodies—basically, everyone who has a vested interest in our current and future financial success.
Lenders and investors value and appreciate insightful and accurate financial information more than most people. It’s important to remember that most of them are financially oriented people. They respect a professional approach to accounting and financial reporting that helps them monitor the key drivers of the company’s performance. They know the difference between sloppy financial management and one that is tight and serious-minded. They know what a high functioning accounting department looks like.
Your accounting function must be on top of its game every day to earn the trust and confidence of lenders and investors. Once someone invests in the company, they want to know that their money is being managed by smart people who know exactly what’s going on at all times. A sloppy accounting function kills credibility and destroys your ability to attract capital.
No lender or investor will touch a company that produces slow and inaccurate financial statements and tax returns, has no safeguards around cash and other assets in the business, and generally doesn’t have the financial side of the business under control.
Time is a resource that should never be wasted since it can never be recovered. An accounting system that is timely is an asset to any organisation because it presents information to users as and when required. A timely accounting system is able to produce the required reports for decision making just in time to make major decisions.
Accounting systems have the goal of saving costs, especially when training staff. When implementing a new accounting system, the cost of operating it should not be greater than the benefits it provides. It is therefore essential to tailor the accounting system to the specific needs of the firm to avoid waste generated by a system with functions that the company will not need.
The primary goal of an accounting system is to ensure that management, the board of directors and other users of financial statements get sufficient information necessary to enable them to make informed decisions for the business. Information is power, and a firm with a highly informative accounting system is able to make effective plans to make the firm grow in its industry. In short, an informative accounting system should be able to satisfy the needs of various users like managers, creditors, owners and government.
A reliable accounting system produces information that is free from bias. It faithfully represents what it seeks to represent. This information should be trustworthy and dependable so that users can make decisions. For the information to be reliable, it must be neutral and faithful in representing the general condition of the firm.
The accounting department is responsible for managing and updating all payroll information for existing employees in a given business. One objective is to provide accurate payroll information and payments to employees. Employee earnings must be tax-deducted before being issued to the workers in question. In addition, the accounting department must have the goal of sending out these payments in a timely manner despite other projects or deadlines at hand.
Accounts receivables describe the accounts for customers who owe the company money. Customers buying products and companies buying continuous services from the given business fall into this category. One objective for all accountants working in the accounting department is to follow up on all outstanding receivables, meaning contacting the buyers to see when the payments will be made. At the time of sale, an invoice is issued with the payment date. Still, busy companies or individuals may require additional notice, which is a common goal for an accounting department in keeping the company’s finances balanced.
Board members and executives often have meetings surrounding the issues of increasing profits without harming the quality of production. If budgetary changes need to be made, the accounting manager often offers his input on the changes, as he knows how the company stands financially. One objective is to offer changes and solutions that keep the company’s net worth balanced and ensure the budget has a positive profit figure each month despite the changes made.
The accounting department keeps updated entries of company income and outgo and provides that information as the basis of preparing the company’s quarterly and annual financial statements. The department ensures that financial reporting adheres to accounting standards.
Since accounting representatives often contact accounts receivables to collect payments, a common goal is to provide customer services and information whenever possible. Common department goals include answering inquiries or emails within 24 hours, paying invoices to the company within 10 business days of receipt, addressing any surcharges made to customers who missed a payment deadline, and offering information regarding current invoices.
Prepare to enter a university or college accounting program, because you’ll need to start with an Associate’s In Accounting (AA) or an accounting bachelor’s degree (BAcc), at the least, to work as an accountant. If you are looking to become a CPA, you are also going to want to pursue a master’s degree in accounting.
In your profession, you should possess communication skills, the ability to think critically and good analytical skills that enable you to take apart financial questions.
Prepare yourself for an accounting career by polishing your organisational skills, communication and interpersonal skills, ability to solve problems, expanding your business knowledge, polishing your numeracy and being very comfortable with the IT side of your profession.
In general, from one state to the next, accountants’ salaries range from $65,000 to about $150,000. The accounting profession is growing rapidly because it’s one that companies and individuals rely on heavily as they gain an understanding of their financial position. Learn more about the average accountant salaries by state.
Deal with your education by earning credits in every required accounting class. Next, pass your state’s certification examination and obtain your license to practice accounting.
Accounting is a profession where you can work in a public or private setting, for a large organisation or a small business. Accounting is everywhere!
Your options may include certified public accounting, government accounting, forensic accounting and investment accounting.
Accounting is an old profession with a wide variety of career options, so you will never be bored or run out of ways to use your accounting certifications.
As you grow in your career, you can teach and mentor others, become a member of one of the many accounting organisations, and even volunteer your time to many nonprofits or fundraisers who are always looking for people with accounting skills to help out.
As you can see, there are many areas within the field of accounting that you can be a part of. Starting with the right education, you can add certification and licensure, continuing education and on-the-job experience to enter your desired career and make a difference while working as an accountant.
The fundamental role of accounting is to maintain a systematic, complete, accurate and permanent record of all transactions of a business which could be retrieved and reviewed whenever necessary.
A reliable financial record is the backbone of any accounting system without which all other objectives of accounting will be compromised.
Organisations need to plan how they intend to allocate their limited resources (e.g. cash, labour, materials, machinery and equipment) towards competing needs in the future. An effective way of doing so is by using various forms of budgets.
Budgeting is a major component of managerial accounting. Budgets enable organisations to plan ahead by anticipating business needs and resources. Budgeting helps in the coordination of different segments of an organisation.
Accounting helps managers in making a range of business decisions and developing policies to make the organisational processes more efficient. Examples of management decisions that are based on accounting information include:
Accountancy helps in determining how well a business is performing by summarising the financial information into quantifiable measures (e.g. sales revenue, profit, expenses, etc.).
Organisations need to have a reliable source of measuring their key performance indicators so they could improve by comparing themselves against their past performance as well as against competitors.
Financial statements show the financial position of a business. The financial position reflects the financial condition of a business at that time and shows, for example:
Mismanagement of cash is often the reason for failure in many businesses. Accounting helps businesses in determining how much cash and other liquid resources are at its disposal to pay for their financial commitments. This information is necessary for working capital management and helps organisations to reduce the risk of bankruptcy through the timely detection of financial bottlenecks.
Accounting information is necessary for securing finance. Whether an organisation applies for a bank loan or an investment by shareholders, it will be required to provide the historic financial record (e.g. profit or loss for past five years) as well as financial projections (e.g. forecast sales for the next 3 years). In many cases, such information will be required by the financiers to be verified by external accounting experts known as auditors.
One of the key objectives of an accounting system is to place sufficient internal controls within an organisation for the safeguarding of its valuable resources. Assets of a business (e.g. cash, buildings, inventory, etc.) are susceptible to losses arising from theft, fraud, error, obsolescence, damage and mismanagement. Accounting ensures that such risks are reduced to an acceptable level by placing various checks across the organisation. For example, the accounting policy of an organisation may require payments above a certain threshold to be approved by a senior member of management to ensure the accuracy and minimise the risk of fraudulent payment.
Accounting provides a basis for performance assessment of a business over a period of time which promotes accountability across several tiers of an organisation.
Shareholders can ultimately hold the directors responsible for the overall performance of their company based on accounting information published in the financial statements.
Accounting is a legal requirement for most businesses. Law requires businesses to maintain an accurate financial record of their transactions and to report their financial results to shareholders, tax authorities and regulators.
Accounting also helps organisations to determine their financial rights and obligations accurately by recording the correct amounts of payable, receivables, payments, and receipts.
Setting goals for your Accounting team that are effective and easily measured can seem like a lot of work, but it doesn’t need to be. Follow some of the advice of the Accounting Managers we have worked with, and not only will the business as a whole reap the fiscal benefits, but your Accounting team will enjoy being part of a collaborative and engaged team working towards an achievable vision.
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