What Is the Purpose of Accounting and Finance in Business?
Accounting and finance are two disciplines that are essential for any business no matter how small or big it may be. Accounting is the “language of business” and in this context “finance” can be viewed as the “literature” behind the language. Finance helps interpret the accounting information provided in the financial reports and statements to help business owners and management make strategic business decisions.
Understanding the importance of small business accounting, accounting standards, small business bookkeeping, and accounting policies is a must for any business owner. Abiding by these accounting policies and financial disciplines can have many advantages for a business; both in the short and long-run. Before we delve further into why Finance and Accounting are equally important for a business’s success let’s first understand the basics.
What Do Accountants Do?
In a nutshell, an accountant is a certified professional responsible for recording, tracking, and interpreting business financial data. Accountants are key individuals that handle a wide range of finance-related tasks that include:
- Ensuring that all financial records are accurate and in compliance with Canadian accounting standards and accounting policies
- Compiling and preparing important financial data
- Preparing annual tax returns
- Preparing forecasted statements and risk analysis assessments
- Consult on best practices helping the business run more efficiently
- Find issues, discrepancies, and inaccuracy in record keeping
- Offer strategic solutions based on financial data for profit maximization, cost-cutting, and revenue generation
It is safe to say that accountants have the best insight into the actual condition of a business’s financial health. They can be perceived as the doctors of any business model. Their job is to not only constantly ensure that the business as a whole is running smoothly but also identify any problems that can hamper its ability to run efficiently. Like doctors, they identify the problem and provide a solution based on the financial data available to them.
Different Types of Accountants
You would think that all accountants are the same. However, this is far from accurate. They are in reality many types of accountants that specialize in various niches of what is a diverse and ever-expanding field. Let us take a look at some different types of Canadian accountants:
A staff accountant’s primary responsibilities include the creation and analysis of financial reports and data. They report to the CPA and their qualifications usually entail a bachelor’s degree in accounting. Depending on the size of the business, a staff accountant can also be responsible for other accounting-related tasks such as bank reconciliation, budget creation, and bookkeeping.
Chartered Professional Accountant (CPA)
CPA’s are highly specialized accountants that generally handle state and federal taxes but are also hired by organizations to manage staff accountants. Their extensive education and knowledge of accounting policies, accounting standards, audits, and much more often make them the financial advisors to the business.
An investment accountant primarily works in the financial industry normally with a brokerage or asset management firm. Apart from accounting prowess they also possess knowledge on how to identify investment opportunities and improve an organization’s financial strategy.
As the name suggests such accountants are hired to work on a particular project for a set duration of time. They help ensure that from an accounting and financial perspective the project runs smoothly and is completed within the assigned deadline.
Small Business Accountants
Small business accountants specialize in handling a lot of the more mundane accounting tasks such as record keeping, invoicing, inventory management, and preparing financial statements for tax purposes. A lot of the responsibilities of a small business accountant are similar to that of a staff accountant.
A cost accountant specializes in cutting down production costs for large manufacturing companies to help improve their bottom-line. They do this by finding inefficiencies in the production process and eliminating excess costs to help improve profitability, efficiency, and productivity.
These accountants specialize in analyzing the financial data of an organization and predicting what its outcome likely means for the organization as a whole. They offer consultancy, advice, and recommendation on how to better improve a company’s financial health.
An auditor’s role is to ensure that all financial information recorded within an organization is being done accurately and in accordance with all applicable financial regulations.
Financial advisors and CPAs are quite similar in terms of what they do. Their main objective is to always help improve a client’s financial standings by offering sound financial advice and recommendations that will help them attain their financial goals.
A financial consultant specializes in helping individuals and/or businesses make sound financial decisions based on their current financial standings.
Differences Between Accounting and Finance
The main difference between accounting and finance is that accounting is more geared towards handling the day-to-day transactions or flow of money into and out of a business, whereas, finance looks at the bigger picture by identifying areas of future growth.
What Is an Online Accounting Firm?
An online accounting firm is another phenomenon that is taking the accounting world by storm. Apps such as Quickbooks and other online resources have made many bookkeeping tasks a largely automated process. This has helped many small businesses cut down on administrative and bookkeeping costs as less man-power is now required for record-keeping purposes.
Importance of Accounting & Finance For Small Businesses
No matter how small a business may be; accounting and finance are two disciplines that will forever be important for its success and growth. Whether you need the help of one of the top accounting firms in Canada or simply make do with online platforms such as Quickbooks; the importance of accountants can never be underestimated.
Financial accountants, financial advisors, general accountants, staff accountants, and Canadian accounting consultants like Kinden CPA can all help business owners make sounder financial decisions and ensure that their business is in compliance with Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS), and/or Accounting Standards for Private Enterprises (ASPE).
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