hi I’m Jerry Fuller executive director of the associated colleges of Illinois welcome to the fifth segment of our business basic series the Finance department
provides the financial information necessary for managers to make decisions within the organization thanks for being with us few areas within a business are as misunderstood as Finance and
Accounting this is because their skill sets are closely related and they both deal with an organization’s money however their functions are quite different the simplest explanation is that the Accounting Department’s job is to research and present what
an organization has done with its money in the past and the Finance department works to determine what will be done with that money in the the future
Accounting is usually a division of the Finance department so we’ll refer to the home for both of these functions as the href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance
Accounting functions of a business his or her main function is to provide Financial reports for top officers directors and shareholders CFOs exist in public private and nonProfit organizations if you’ve heard style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance
Financial officers who are cross trining and other departments marketing operations and so on so they can aim for the CEO’s job someday CFOs at major corporations not only have backgrounds in Accounting and bold; color: #1a73e8; text-decoration: none;">Finance but they’ll very likely have an MBA to match let’s take a closer look at the kinds of work a County and none;">Finance Executives do companies and organizations May hire four kinds of accountants public accountants work as sole practitioners or for Accounting firms and handle a range of Accounting auditing tax and Consulting projects for both
Profit and nonProfit organizations management accountants record and analyze the financial information for their employers they serve the management of the organization only and they often work on Budgeting and performance
eValuation and handle the business or nonProfits Investments internal Auditors like management accountants also work for a single employer but they have a unique function looking for mismanagement or mistakes in a way an organization manages its
funds if they’re doing their job correctly they’re the in-house Watchdogs who make sure the entire organization is spending its money correctly finally government accountants maintain and examine the financial and tax tax records of government agencies but they also have a role in
businesses and nonProfits that work with federal state and local governments you’ll see government accountants working with firms that receive sizable government contracts or grants we’ll conclude our discussion with a look at the most important Financial
Statements created by the financial department the Balance Sheet Income statement and Cash Flow statement but first let’s talk about the two main subp departments within a county that gather and prepare the data for those statements
accounts payable and accounts receivable accounts receivable is all about the inflow of cash into the company or organization when a good or service is sold accounts receivable is alerted and they create an invoice for the customer when that invoice is sent the account’s receivable team books
the Revenue meaning they count the Revenue on the Income statement even though it hasn’t been deposited in the organization’s bank account next the team monitors payment to determine the money comes in on time and if it doesn’t it
reaches out to customers to collect when payment is finally made those deposits are reported on the Cash Flow statement which we’ll get to later accounts receivable also handles Credit some customers get extended payment terms usually because they’ve
always paid on time and other customers are required to pay in advance or in cash customers who want Credit can apply for it and accounts receivable will decide based on their Credit record and other factors if they’ll receive better payment terms accounts
payable is all about the money that has to go out of the organization to pay for wages supplies and raw materials basically any money that needs to cover expenses of the business it’s essentially the reverse process of accounts receivable in most companies and organizations the
Accounting department serves as a support function or back office function this means they aren’t usually the people in front of customers or making spending decisions therefore they need input from people who are now to style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance
think of Finance as an umbrella structure that ultimately handles financial reporting Risk Management and Budgeting and strategic planning let’s start
with financial reporting the first stage in financial reporting is collecting and tracking where funds go on a continual basis Finance takes the data and analyzes it for reporting purposes to
insiders and shareholders that data is released to shareholders typically on a quarterly and annual basis and this is standard in public and most private companies even though nonProfits don’t report to shareholders financial reporting is also done for donors granters and
beneficiar Aries now to Risk Management if you think about it every risk in an organization boils down to money when products fail there’s a cost when people are hurt or killed on the job there’s a cost when Investments or Acquisitions fail to produce a
desired return again there’s a cost Risk Management has an ultimate goal conserving the organization’s resources virtually all departments within an organization do their own variety of Risk Assessment but in href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance
mathematical models that predict risk based on market conditions Credit conditions or operational conditions that may pose damage to an organization’s business or Mission none;">Finance Executives apply math statistical methods and their own trained analysis to specific problems so they can measure risk in all its forms finally Budgeting and strategic planning the annual Budgeting process is often managed by the href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance
forecast what they expect their spending needs will be budgets are a projection of what those Executives hope will happen in the next year or so in established companies the Budgeting process usually Builds on what happened the year before in newer companies with less of a track
record record projections need to be created based on what they think their customers will need obviously the models we just discussed will play A Part depending on how the organization uses them individual managers submit their team’s budgets and style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance
and the board of directors the approved budget is an important document in all organizations because it outlines what a team or department is authorized to spend and help set the organization’s goals the budget also sets the basis for bonus and commission programs which are obviously
important to everyone who works there so that’s a portrait of the people in an organization’s Finance and Accounting functions let’s look next at the basic
Financial Statements every organization uses every employee should understand them
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Finance has alot more than this explanation.. but thank you for your informative explanation
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Precise and clear!
Nice
Smart summary
Tnx
Thanks for the video. Very clear. Helped me a lot 🙂
Amazing! Thank you!
Very good thanks