Many people are unaware of the difference between the accounting and finance departments. While both departments play a vital role in keeping the company’s money well-managed, they have different functions.
In general, accounting departments focus on the daily financial activities of the company. It deals with all the accounting information processes, records accounts receivables and payables, payroll, fixed assets, and many more.
On the other hand, the finance department’s primary function is to manage the company’s liabilities and assets concerning its future plans. Small businesses commonly combine the two departments, but big enterprises ensure to have both departments perform different functions.
Regardless of the size, a business needs an accounting team to take care of its cash flow. The accounting department is the center and lifeblood of any company. Let’s take a look at the essential functions of the accounting department.
Accounts Payable
Accounts payable is also known as cash disbursement. It refers to all the money that the organization uses and is considered a liability. The accounting department’s job is to record every purchase the company made and ensure that the company pays all these expenses on time.
Moreover, the accounting department is also responsible for keeping track of payment schedules of the organization, such as payroll and inventory. It obtains the invoices from sellers, then processes and records them.
Accounts Receivable
Accounts receivable refers to cash, money, or receipts the company receives. Here, the accounting department must keep track of the money paid by their customers. The team also creates invoices and sends payment reminders to customers, ensuring they pay on time.
Payroll and Timekeeping
Payroll is one of the most critical functions of your company’s accounting department. They ensure that employees get their pay on time. In addition, the accounting departments also play a role in ensuring that employees get their earnings at the right time. They basically compute the employee’s monthly salary after removing appropriate deductions.
Record Keeping and Cash Collections
Your company’s accounting department is also responsible for tracking, identifying, and recording all cash from sales and other sources. Aside from recording in the database, the team also confirms that the money is deposited into the proper accounts.
At this point, the accountants ensure a stable cash flow in the company for its daily operations. Lastly, balancing the checkbook is also a critical part of their tasks.
Legal Compliance and Financial Control
Another crucial function of the accounting department is tracking and ensuring that the company stays compliant with the law.
- The team is tasked with managing tax responsibilities. They keep track of the company’s taxable income, set aside the money for it, and pay it on time to avoid penalties.
- Keep track of the financial records of new clients, including their credit reports, tax problems, and many more, to prevent fraud and theft.
- The accounting department is also in charge of keeping the company on the right tax processes.
- The team also carries the struggle of maintaining control of the organization over its finances.
Financial Statements and Reporting
The accounting department is also tasked to deliver an accurate financial statement. The primary reason the team gathers all valuable financial data is to create accurate financial statements and reports.
These reports need to be accurate as the company will depend highly on them to make more sound financial decisions and prepare its budget for the coming year. These reports submitted by the accounting department must also include internal communications. It helps determine loss or profit to sustain the company’s cash flow.
Also, the accounting department must submit year-end financial statements as these reports help the company determine potential leads. It allows them to communicate better with other professionals and investors who contribute to the company’s growth.
Budgeting
The company’s accounting department is responsible for ensuring that all other departments do not exceed the company’s budget. It keeps a record of the expenses and transactions to protect the company’s money. This is important to prevent bankruptcy and ensure that the money goes to its proper allocations. Why is effective budgeting vital? Here are a few reasons:
- Real-time awareness into spending
- Proper cash management
- Accurate performance assessments
- Correct decision-making processes
As you can see, the accounting department has several functions. That’s why most accounting departments contain more than one employee. In general, the team’s roles and responsibilities are time-consuming, large, and demanding, making it pivotal for the department to have a proper organizational structure.
Each function the team performs can be handled by specific individuals for increased productivity. The department’s structure can determine if the team can handle significant financial issues the company might encounter.
In conclusion, companies must invest in the structure of their accounting departments to enhance business efficiency.
No comments yet.