Financial management accounting is a portmanteau term for financial accounting and financial management. Accounting and management are two different departments that rely on each other. The two departments contribute to a business’ growth, and we shall see how later on. An organization can’t employ a financial manager and leave out the accountant and vice versa. By enlisting the services of experts, you can focus on your business while they handle the numbers side of things.
Entrepreneurship has slowly become popular, with many people ditching their 9 to 5 jobs. Entrepreneurs claim that they can make much more money on their own. The statement is true, but other entrepreneurs soon declare bankruptcy. It is not uncommon to hear that some businesses make financial losses. Many losses occur due to various reasons, but it all comes down to using the money you earn.
Some entrepreneurs admit not knowing how to grow their businesses. It is for this reason that they employ an accountancy firm to handle financial tasks. An accountancy firm will provide the two services earlier identified, and you are going to learn their differences below.
Differences between accounting and financial management
Accounting is mainly concerned with recording financial transactions and then processing data. Its main objective is, therefore, to report financial information. Financial management, on the other hand, suggests measures to handle finances well. Financial managers rely on the data from accountants to come up with suggestions for managing money. Their objective is, therefore, to maximize profit.
Accounting looks into the past, while financial management looks into the future. If a worker wishes to confirm a transaction on a specific date, the accountant will refer to their books of accounts where they recorded it. Financial managers then use this information to suggest better ways they could have made a particular transaction.
Accounting is an activity that is conducted within a particular time frame, whether monthly or yearly. You may have seen annual reports of financial institutions such as banks. Financial management, however, is not time-bound and can offer their services anytime they feel like it.
It also measures funds on an accrual basis, while financial accounts measure funds on a cash flow basis. Accountants determine the accumulation of finances, whether profits or losses. They do not concern themselves with where the funds went or what the funds were used to buy. Financial managers, however, are concerned with the movement of cash in and out of the business or organization. They must know how the funds are being used.
Most businesses can survive without a financial manager but not without an accountant. All companies or organizations need to record their transactions if any future financial dispute may occur between traders. Financial managers mainly advise businesses on how they can grow their business. Some companies do well despite not growing as fast as other businesses.
Lastly, accounting reports are concise. By their nature, the information indicates the time transactions took place. For financial management reports, they tend to be very detailed and specific. The details would include several suggestions that may make a company grow; hence they do not merely look at the accountant’s data but also explain it.
Why should I hire the two departments?
You have realized how important the two departments are in your business. Now that you have agreed to hire them, you may be wondering whether it is the right move. Here are some essential tips to consider before hiring them:
• Ensure they have a degree in accounting and finance. You cannot teach yourself financial skills without going to school; these skills are not soft skills. There are online platforms that allow you to post a job position. In the post, you will detail the requirements needed to be hired.
• Only consider hiring them if you are looking to expand your business, particularly a financial manager. Some entrepreneurs are comfortable running a small kiosk as opposed to building another branch.
• Ensure you can pay them since the salaries of the two departments are pretty high. No worker wants to work for an organization that underpays them or delays their compensation.
• Make sure they know how to handle tax matters. The two departments process tax reports on your behalf, so you do not need to worry about filing tax returns. What you do not need is for your government to label you a tax evader.
• Some financial workers prefer to do things the ‘old school way’ such as having files. Make sure they are tech-savvy. You can use your computer for bookkeeping as opposed to using a pen and paper. Furthermore, it is not environmentally friendly to rely on paper.
As an entrepreneur, you have to admit that you do not possess all the financial skills. If your organization is making enough money, then you will need these departments to assist you. After all, making more profits is what every business desires.
Has worked for many Internet marketing companies over the years, and has contributed to many online publications. If there is a story, he will find it.