Any business owner will testify that a key priority for them is the generation of profit but without a proper handle on finances operating a business successfully is just not possible. This is where an accounts department comes in, and an efficient finance department is essential for the running of any business, from a small operation to the largest multinational.
The financial running of a business is by no means limited to keeping tab of monies coming in and going out. It also includes payroll provision, the preparation of financial reports, and the putting in place of financial controls to prevent errors, fraud, or theft from occurring.
Accounts payable is that aspect of a business responsible for money going out. Ensuring that suppliers get paid on time is essential. Relations with vendors extend to ensuring the firm is receiving best value for money in terms of good and services supplied, so an accounts payable section should ensure to take advantage of discounts and/or incentives for payments made quickly. Monies coming in are the responsibility of an accounts receivable section. This includes the issuing of invoices and the actions necessary to ensure collection while maintaining a good relationship with customers.
Those responsible for payroll have to make sure staff are being paid the proper amount on time and they are also tasked with paying taxes to the relevant authorities, which in the U.S. is at both state and federal level.
Reporting and the preparation of financial statements can be said to be at one remove from the day-to-day running of business with a more strategic role that includes budgeting and forecasting. At the same time, the collection of data for the preparation of financial statements that will be seen by banks, investors and other relevant stakeholders requires a good insight into the daily functions of the business. At the highest level of the finance function, the controller ensures procedures are in place to prevent fraud and theft while also ensuring compliance with accounting principles.
In the absence of a properly run finance department it is abundantly clear that a business will encounter all sorts of problems. Payments in and out will start to fall behind. The reputation of a business will suffer because vendors will see they are not being paid on time. Rules and regulations governing the accounting function may not be complied with, which can lead to a formal sanction from the relevant authorities, such as the IRS in the case of non-payment of taxes. Staff wages may be left unpaid, which directly impacts on employee motivation and their relationship to the job.
As has been demonstrated, the accounts function of a business is not something to be taken lightly. It calls for a professional approach, with a wide range of responsibilities integral to the proper running of a business. A small, one-man operation might benefit from the owner studying for a formal accounting qualification. The temptation for an entrepreneur is to focus solely on business growth and sales, often at the inadvertent expense of the day-to-day financial running of the firm so gaining an insight into what is a key business function can only be to their benefit. Larger businesses typically require staff solely dedicated to individual aspects of the business and will have at the most basic level one if not more bookkeepers. Higher up the chain, larger organizations will have financial controllers, tasked with overseeing financial management.
Big businesses will see the provision of education and training for staff as an investment that can only benefit the organization. A master’s degree in an accounting course offers training in the principles of accounting and is a pathway towards formal recognition with preparation for Certified Public Accountant (CPA) examinations. The CPA qualification is recognized across the 50 states and in many international jurisdictions. Ongoing training and education for accounting and financial staff is essential because of continuous changes in rules and regulations governing those aspects of a business.
Smaller organizations can delegate key financial functions to an external accountant but must ensure to engage the services of a fully qualified and registered individual or firm. For those starting out on the entrepreneurial road, the best time to start establishing an actual accounting department is that point at which keeping the books becomes too erroneous a task for one person as day-to-day finances start to become complicated.
Armed with full insight into its financial status a business is in a position to make informed decisions about its future so an accounts department is a must-have.