Practically every business needs some form of accounting or other. But “accounting” is a very broad term indeed and encompasses a number of key functions. We extracted five of the key roles of accounting to help you understand the roles and responsibilities of your accountant and accounting department. Let’s take a look at each one in more detail.
Accounts receivable
One of the first roles of an accountant or accounting department is to track all receivable money into the business’ account. This helps ensure that there is sufficient liquidity and cash flow to ensure an uninterrupted and smooth business operation. This is also done by tracking the profits of the business on a regular basis, seeing where funds are coming in and going out of the business.
Accounts payable
Every business has expenses. These relate to the company’s bills and may range from utilities to paying suppliers. The role of the accountant is to ensure that all payments are made on time and that only legitimate expenses are paid for. Usually, paying bills is done on a particular date(s) and this is a crucial function because it further helps with making important decisions regarding the business’ outgoing funds and how they compare with the incoming ones.
Payroll
As companies employ more and more employees, the role of an accounting department becomes more complex as there are multiple salaries to pay out. Usually, a special fund is created for the purpose of remunerating employees and this is carried out in conjunction with calculating all the necessary deductions such as those for social or pension-related contributions. Salaries can affect the levels of a company’s profits and this makes it another important responsibility of an accountant to track effectively.
Financial controls
According to sources, “financial controls are the procedures, policies, and means by which an organisation monitors and controls the direction, allocation, and usage of its financial resources.” Therefore, the accounting department plays a pivotal role in ensuring that everything related to the flow of funds in and out of the organisation is accurate, precise, timely and done in an optimal manner to ensure efficiency for the company.
Financial reporting
It’s important to distinguish between listed/public and unlisted/private companies. The reason for this is that publicly owned companies are required, by law, to prepare, submit and publish financial reports to their shareholders. This is done on either a quarterly or annual basis. Privately owned companies, although they do not have the same responsibility, still benefit from clear and accurate reports related to the business’ profits, losses, assets, etc. This function of accounting helps decision makers understand the financial resources of their firm.
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