Managing an accounting system is no minor task. Depending on the size of your business you may have multiple full-time staff keeping it up to date day to day. That is a lot of resource and expense; do you use the information you get out of it for the best possible uses?
Compliance is only a small part if its use; most leaders have much higher expectations of their accounting function. Let’s look at how a multiskilled accounting function can provide critical support to enable the best business outcomes.
Objective 1: Business Decision-making (Management Accounting)
Accountants generate financial statements (usually monthly) for internal use. These financial statements are customised to the needs of the business. For example, management may decide to closely track expenses, and the financial statements will reflect this.
This is known as Management Accounting (or managerial accounting) and it relies on an understanding of what management is trying to accomplish as well as their levels of financial literacy. Business requirements change over time and a management accountant will be alert as to these changes and modify their approach accordingly.
Objective 2: Reporting to Outsiders (Financial Accounting)
Most businesses are responsible to people outside the company, such as investors, lenders, government agencies, potential acquirers, auditors, etc. These people (or entities) often keep track of the business’s financial health and profitability by viewing periodic financial statements.
This is known as Financial Accounting and it requires an understanding of the goals of the people who will view these financial statements.
Objective 3: Tax Minimisation (Tax Accounting)
A business must adhere to tax laws and pay its fair share… but no more!
Tax Accounting ensures that taxes paid don’t exceed the amount required by law. A tax accountant will have a thorough understanding of tax laws as well as practical steps a business can take to achieve a more advantageous tax position.
Objective 4: Increasing Profits (Cost Accounting)
Business leaders want to increase profit. A common way to do this is to analyse the costs associated with producing a product or service, leading to better decisions on pricing, investment, and inventory management.
This is known as Cost Accounting and can result in increased margins for a business. Cost Accountants provide forecasts to managers who decide which course is best for the business. They also explain the risks associated with each option.
Objective 5: Managing Cash (Credit Accounting)
Cash flow is critical in any business. Cash flow management requires a good understanding of the debts and liabilities of a business so that cash is used in the most efficient way. For example, negotiating different payment terms can free up cash for some other productive purpose.
These are just the main activities of a multi-skilled accounting function. A business may also require access to ‘specialist’ accountants such as Auditors, Forensic Accountants, Investment Accountants, Project Accountants and Financial Advisors, to name a few.
Are you making sure you are getting the full range of benefits a strong, multiskilled accounting function can offer?