Departemens Of Finance

The finance department provides a financial information necessary for managers to make decisions within the  organization thanks for being with us few areas within a business are as mis understood as finance and accounting this is because their skill sets are closely related and they both deal with an organization's money however their functions are quite different.

The simplest explanation is that the accounting departments job is to research and present when an organization has done with its money in the past and the finance department works to determine what will be done with that money in the future accounting is usually a division of the finance department so we'll refer to the home for both of these functions as the finance department the chief financial officer oversees the Finance and Accounting functions of a business his or her main function is to provide financial reports for top officers directors and shareholders CFOs exist in public private and nonprofit organizations.

If you've heard finance executives referred to only as bean counters that stereotype is definitely going away while financial officers have a particular set of skills many executives don't not everyone can hack the math you'll see chief financial officers who are cross-training in other departments marketing operations and so on so they can aim for the CEOs job someday CFOs at major corporations not only have backgrounds in accounting and finance but they'll very likely have an MBA to match.

Let's take a closer look at the kinds of work accounting and finance executives do companies and organizations may hire four kinds of accountants public accountants work as sole practitioners or for accounting firms and handle a range of accounting auditing tax and consulting projects for both profit and nonprofit organizations management accountants record and analyze the financial information for their employers they serve the management of the organization only and they often work on budgeting and performance evaluation and handle a business or nonprofits investments internal auditors like Management Accountants also work for a single employer but they have a unique function looking for mis management or mistakes in a way an organization manages its funds.

If they're doing their job correctly they're the in-house watchdogs who make sure the entire organization is spending its money correctly finally government accountants maintain and examine the financial and tax records of government agencies but they also have a role in businesses and nonprofits that work with federal state and local governments you'll see government accountants working with firms that received sizeable government contracts or grants.

We'll conclude our discussion with a look at the most important financial statements created by the financial department the balance sheet income statement and cash flow statement but first let's talk about the two main sub departments within a County that gather and prepare the data for those statements accounts payable and accounts receivable accounts receivable is all about the inflow of cash into the company or organization when a good or service is sold accounts receivable is alerted and they create an invoice for the customer when that invoice is sent the accounts receivable team books the revenue meaning they count the revenue on the income statement even though it hasn't been deposited in the organization's bank account next the team monitors payment to determine the money comes in on time and if it doesn't it reaches out to customers to collect when payment is finally made those deposits are reported on a cash flow statement which we'll get to later.

Accounts receivable also handles credit some customers get extended payment term usually because they've always paid on time and other customers are required to pay in advance or in cash customers who want credit can apply for it and accounts receivable will decide based on their credit record and other factors if they'll receive better payment terms accounts payable is all about the money that has to go out of the organization to pay for wages supplies and raw materials basically any money that needs to cover expenses of the business it's essentially.

The reverse process of accounts receivable in most companies and organizations the accounting department serves as a support function or back-office function this means they aren't usually the people in front of customers or making spending decisions therefore they need input from people who are now to finance where the organization sets budgets and financial strategy for the whole organization again every organization handles its overall financial structure to suit its particular industry and operations but generally think of finance as an umbrella structure that ultimately handles financial reporting risk management and budgeting and strategic planning.

Let's start with financial reporting the first stage in financial reporting is collecting and tracking where funds go on a continual basis finance takes the data and analyzes it for reporting purposes to insiders and shareholders that data is released to shareholders typically on a quarterly and annual basis and this is standard in public and most private companies even though nonprofits don't report to shareholders financial reporting is also done for donors granters and beneficiaries now to risk management if you think about it every risk in an organization boils down to money when products fail there's a cost when people are hurt or killed on the job there's a cost when investments or acquisitions fail to produce a desired return.

again there's a cost risk management has an ultimate goal conserving the organization's resources virtually all departments within an organization do their own variety of risk assessment but in finance that practice can be very sophisticated finance executives develop mathematical models that predict risk based on market conditions credit conditions or operational conditions that may pose damage to an organization's business or mission finance executives apply math statistical methods and their own trained analysis to specific problems so they can measure risk in all its forms finally budgeting and strategic planning the annual budgeting.

process is often managed by the finance department in close cooperation with the accounting department during the budgeting process managers throughout the organization are asked to forecast what they expect their spending needs will be budgets are a projection of what those executives hope will happen in the next year or so in established companies the budgeting process usual build and what happened the year before in newer companies with less of a track record projections need to be created based on what they think their customers.

will need obviously the models we just discussed will play a part depending on how the organization uses them individual managers submit their team's budgets and Finance consolidates all those results creating the overall corporate budget is a very big job once it's complete the people in the finance department makes sure they have enough money to support the budget sometimes borrowing or other revenue strategies have to enter the picture this is where the strategic planning function comes in the modern finance department has evolved over the last generation into an advisory role instead of a computational one finance executives tend to be involved in the earliest stages of product development so senior management can get a shared idea of financial risk and reward as early as possible the annual budget andfinancing plan must be approved by the senior management team and the board of directors the approved budget is an important document in all organizations because it outlines what a team or department is authorized to spend and help set the organization's.

Goals the budget also sets the basis for bonus and Commission programs which are obviously important to everyone who works there so that's a portrait of the people in an organization's Finance and Accounting functions let's look next at the basic financial statements every organization uses every employee should understand.

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