In almost all companies, the finance department has two most important jobs:
- to record and report all financial transactions of the company, and
- manage the company’s financial resources.
Recording and reporting of financial transactions in a company’s books of account is referred to as accounting, managed by the accounts department.
Effective management of a company’s resources is managed by a team within the finance department, in certain companies it’s referred to as regional or business finance.
The Accounts department works within the finance department.
In small companies you will not find separate accounts departments. In bigger companies, they establish separate accounts departments in order to have better internal controls.
The head of the finance department is referred to as chief financial officer (CFO), who directly reports to the board of directors of the company and works under the chief executive officer (CEO). Both the accounting and finance department will be under him.
Every company will have their organisation chart, which can tell you who does what.
Finance Department:- How it helps businesses
Depending on the company, a finance department can manage a diverse function which effectively uses the company’s resources to make profit.
Here are areas finance department manages;
- Internal auditing: it’s like policing activities of a team within the finance department. They safeguard assets of the company by properly accounting them. They make sure that effective internal controls are in place to prevent misuse of assets.
- Pricing and contract administration;
- Insurance and risk management;
- Internal management reporting;
- Treasury activities such as investment, cash and fund management;
- Merger and acquisition, corporate action;
- Investors relation and more.
Accounting department: how it helps a company
Recording and reporting all financial transactions are done by the accounting department of the organisation. Head of the accounting department reports to the chief financial officer (CFO).
People working in the accounting department record all the financial transactions as the company does its business. Based on data available various reports are prepared using different softwares that helps the company’s management and outsiders to understand the impact of those transactions on the company’s profitability.
Reporting is automated in almost all companies. Therefore the most important part is recording of all financial transactions that have occurred in day to day businesses of the company.
The accounting department is responsible for organising all the data that it collects from the financial transactions and to present it to the management and different stakeholders to make effective decisions.
The most important part of a company’s management is accuracy and timely reporting. These reports are used by the management and outsiders to understand the company’s financial past and to make decisions on its financial future.
Here are the most important financial statements prepared quarterly and yearly to present the company’s financials before the stakeholders in addition to number of other reports prepared and circulated by the finance department;
One of the main purposes of effective reporting is to give a snapshot of a company’s accurate financial condition to various outsider stakeholders such as investors, creditors, government agencies and others who don’t have a direct role in the company.
