Accounting Department Functions & Duties
The accounting department manages your company's finances. Whether your company's accounting team is just one or two people or many, it plays several critical roles to ensure your business's ongoing well-being. The accounting team ensures employees get paid on time and vendor invoices get paid as agreed. The accounting department also prepares financial statements for stakeholders in your company and needs to oversee all monetary transactions.
The function of your company's accounting department goes beyond overseeing your business's day-to-day financial activities. Your accounting team also uses the financial information it has to make predictions about the company's future financial health and make suggestions that will help your business stay or move into a strong positive financial position. Let's look at the different accounting roles and how they impact your company.
Different Types of Accounting and Accounting Services
When an individual decides to become an accountant, they can specialize in one of several areas. Different types of accounting services need to follow different rules. For example, some types need to abide by Generally Accepted Accounting Principles (GAAP) while others follow Governmental Accounting Standards Board (GASB) standards. Although each category is different, there is some overlap among them.
- Government accounting: Government accounting follows GASB, which provides reporting standards for governmental entities at the local and state levels. Federal accounting departments need to follow the Federal Accounting Standards Advisory Board (FASAB). Government accounting tends to be more complex than non-governmental accounting, as governments typically have multiple categories for their funds. For example, the money used to repair a road will come from a different fund than the money used to repay debts.
- Financial accounting: One goal of financial accounting is to develop a strategy to increase a company's profitability. To do so, privately held companies typically follow GAAP standards, while publicly held enterprises follow standards set by the U.S. Securities and Exchange Commission (SEC). A financial accountant tracks all transactions at a company and makes sure everything is recorded correctly.
- Managerial accounting: The primary function of managerial accounting is to handle a company's financial planning. Generally, this type of accounting provides managers with the financial details they need to make informed decisions about their business's future. Subsets of managerial accounting can include risk management and performance management. Cost accounting is also sometimes included under the managerial accounting umbrella. It examines the cost of doing business.
- Forensic accounting: Forensic accounting aims to put the pieces together when financial information is missing. Often, forensic accounting comes into play when there is suspected fraud or a dispute about a company's finances. Forensic accounting can also apply when a company wants to switch its method, such as moving from cash accounting to accrual accounting.
- Public accounting: Public accounting is typically performed by individuals or firms that provide accounting services to other companies or individuals. For example, a certified public accountant (CPA) might manage a business's books or help a person file their taxes annually.
- Tax accounting: The focus of tax accounting is ensuring companies comply with Internal Revenue Service (IRS) rules. Members of a tax accounting department make sure a company files and pays its taxes on time. Tax accounting can also involve tax planning to minimize the burden of taxes in the future.
- Auditing: During an audit, an accountant examines a company's financial records and systems. An audit typically looks for areas of weakness or spots where there might be room for improvement. Auditing can take two forms, internal or external. During an external audit, a company shares its financial records with a third party, usually to ensure its records comply with GAAP. During an internal audit, a company typically reviews the effectiveness of its accounting processes.
Different Positions In Accounting: Key Accounting Roles
Just as there are different types of accounting, various finance and accounting roles correspond to these different categories. In some instances, accounting positions are based on seniority. For example, a manager has more years of experience than a senior or staff-level accountant. Key roles in accounting include:
- Accountants & Junior Accountants: A staff accountant typically works under a senior accountant or manager. Their responsibilities include maintaining a company's financial records and ensuring the business sticks to its budget. A bookkeeper is another example of an entry-level or early-career accounting position. Bookkeepers focus on a company's day-to-day financial details. They keep track of invoices and make sure invoices get paid on time. They also usually take care of payroll, ensuring employees receive pay as scheduled and the correct taxes get withheld.
- Senior Accountant: Senior accountants have a few more years of experience than staff accountants. Their roles in an accounting department might include supervising staff accountants and working on special projects.
- Manager of Accounting: Accounting managers usually direct senior and staff accountants. Generally, an accounting manager will have at least five years of experience and knows how enterprise resource planning (ERP) systems work. A manager will hire other members of the accounting department and have a high level of control over the budgeting process.
- Controller: Controllers are incredibly experienced in accounting and have a thorough understanding of GAAP or the accounting standards and principles that apply to their industry. Usually, they are the head of an accounting department. A controller will need to oversee, plan and develop a company's accounting department and any details related to a company's finances.
- Tax Accountant: A tax accountant might work for a company or be an individual hired by an organization to comply with tax laws. Tax accountants help businesses file tax returns on time and assist if a company gets audited.
- Certified Public Accountant (CPA): CPAs are usually third-party individuals or companies hired by a business to provide tax guidance and expertise. A CPA can help a company develop a tax strategy and assist it in completing its tax returns.
Other common accounting & finance roles include:
- Chief Financial Officer
- Chief Accounting Officer
- VP of Finance
- Director of Finance
- Manager of FP&A
- Financial Analyst
- Accounts Receivable Clerk
- Accounts Payable Clerk
- Manager of Taxation
Accounting Department Structure: How the Different Roles Work Together
Accounting departments have hierarchies based on an accountant's position and years of experience. Usually, individuals who have recently earned a degree in accounting and have a year or less of work experience start as staff accountants at a company. A staff accountant's specific duties and responsibilities depend on the type of accounting they focus on. A tax staff accountant focuses on a company's tax concerns, while a management staff accountant is primarily responsible for aiding with its financial planning.
Staff accountants typically report to a supervisor, who might be a manager or senior-level accountant. Whether a company has managers and senior-level accountants depends on its size. Larger companies are more likely to have bigger accounting departments with multiple tiers and rungs on the ladder. A small organization might have a single accounting manager who supervises and directs the activities of a small accounting team.
At the top of the hierarchy are usually the controller and chief financial officer (CFO) or vice president of accounting. However, not every company has a controller or CFO. At some businesses, a vice president might direct some aspects of the accounting department while managing other areas of the business.
Improve Your Accounting Department With Multiview Cloud ERP
Understanding the roles and functions of your accounting department is just the start. A cloud-based ERP built for accountants by accountants can help advance your corporate finance operations, easing the burden on your accounting team. Schedule a demo of Multiview ERP today to see how it works.