Accounting Department Definition
Accounting department refers to the division in a firm that looks after the preparation of financial statements, maintenance of general ledger, payment of bills, preparation of customer bills, payroll, and more. In other words, they are responsible for managing the overall economic front of the business. It is impossible for any business, whether a small firm operating out of home or a large multinational company, to function for too long without an accounting department of any kind.
Functions of Accounting Department
- To maintain and record all business transactions accurately and comprehensively in a systematic way such that it could be retrieved and reviewed at any time.
- To maintain adequate internal controls within the organization to safeguard its valuable resources.
- To provide a basis for performance assessment and create accountability across the organization.
- To keep track of costs incurred by the company costs and advise the modification of existing operations with the intent to reduce operating costs.
- To support senior management in the decision-making process through the appropriate presentation of the financial data.
- To plan based on anticipation of business needs and expected availability of resources.
Roles & Responsibilities
- One of the primary responsibilities is to properly collect all the financial data and then prepare the financial statements/ reports. These reports are used in the preparation of budgets, forecasts, and other decision-making reports. Additionally, these reports are also used for communication with lenders, investors, and other stakeholders.
- Maintenance of a healthy relationship with the vendors by ensuring that they get paid on time. However, they should look for opportunities to save money by availing of discounts/ incentives due to timely or advance payments. At the same time, the accounting department should also ensure that the minimum amount of money goes out per payment, but without any late payment charges.
- Track account receivables and outstanding invoices, and advice in case any collection actions are required. The accounting department should ensure that the customers pay the invoices on time and maintain a cordial/ friendly relationship with them.
- It is solely responsible for the payroll function. They have to ensure that all the employees get paid timely and accurately. Additionally, the department should also make sure that employee taxes are assessed accurately, and the payments are made timely to the state and federal authorities.
- They need to maintain financial controls via reconciliations and adherence to the applicable standards of accounting, such as US GAAP. All of these practices are implemented to prevent any fraud and theft. As a finance controller, the department should ensure proper maintenance of the procedures without any slack.
Accounting Department Structure
Most companies have more than one staff member in their accounting department, and hence they have to set an organizational structure to streamline its management. In general, it comprises of Chief Financial Officer (CFO), Financial Controller, Managers, and Accountants. The structure is as follows:
- The CFO is at the top of the department and reports directly to the owner of the business or the Chief Operating Officer (CEO).
- The Financial Controller reports to the CFO and has more specific responsibilities within the department.
- The Finance Controller generally has a team of Managers – Payroll Manager, Accounts Receivable Manager, and Accounts Payable Manager.
- Each division manager usually has a team of Accountants.
Value of Accounting Department
The accounting department plays a vital role in running a business as it helps in tracking both revenue (money in) and expenses (money out) while ensuring compliance with all statutory requirements. Additionally, it also provides quantitative financial information to management, lenders, investors, and other stakeholders, who use it for making informed business decisions.
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Key Positions of the Accounting Department
The following are some of the key positions:
- Chief Financial Officer (CFO): The CFOs are usually at the top of the finance department of large corporates. They are responsible for overseeing the financial health of the business and managing the overall finance department, which includes financial planning & reporting, short & long-term business strategy, auditing, internal risk management, etc. They also help senior management understand the financial implications of various ongoing activities – within and outside the organization.
- Financial Controller: The Financial Controllers work alongside the CXOs, and they are responsible for financial accounting as well as the preparation of reports on project management, budget, and more. However, their major focus is on managing immediate financial issues.
- Treasury Manager: The Treasury Managers help in the formulation and development of various treasury policies, which include identification of best investment opportunities, optimized usage of credit facilities, reduction of financing costs, etc.
- Accounting Manager/ Chief Accountant/ Accounting Supervisor: These managers are responsible for maintaining and reporting all the financial transactions. They also establish and enforce the accounting principles based on the auditing policy and statutory requirements.
- Accountant: The Accountants play a vital role in an accounting department as they are involved in the measurement and interpretation of all the financial information.
This has been a guide to Accounting Department and its definition. Here we discuss the objectives, roles & responsibilities, and structure along with a detailed explanation. You may also have a look at these articles for enhancing your knowledge in accounting –