Accounting Department Structure in Brief
- 1. Accounting Department Structure This presentation is sample from the “Financial Training for Business Owners and Non- financial Managers” developed by me. Big part of this material was collected from different open online resources, links and references can be provided at request. If you are interested in the full content of this training or just want to say “hi”, please contact me. Aslan.umarov@gmail.com.
- 2. Key Definitions: • Accounting is measurement, processing and communication of financial information about economic entities. Accounting, which has been called the "language of business", measures the results of an organization's economic activities and conveys this information to a variety of users, including investors, creditors, management, and regulators. Practitioners of accounting are known as accountants. The terms 'accounting' and 'financial reporting' are often used as synonyms. • Finance is a field that deals with the study of investments. It includes the dynamics of assets and liabilities over time under conditions of different degrees of uncertainty and risk. Finance can also be defined as the science of money management. Finance aims to price assets based on their risk level and their expected rate of return. Finance can be broken into three different sub-categories: public finance, corporate finance and personal finance.
- 3. Who is in charge of Accounting and Finance? Depending on Company size • For large and mid size companies it is CFO (Chief Finance Officer) • For small companies even Vice president for finance or a controller For small and mid-size businesses accounting and finance functions are usually combined. Same goes for accounting and finance roles…what stays the same is the function itself… • Record transactions • Prepare reports • Maintain the accounting software • Process all the paperwork • Record transactions in general ledger Typical Roles of Accounting people: • Insurance • Risk management, • Contract administration • Pricing, • Internal auditing, • Investor relations, • Cash management • Bank relations Typical Roles of Finance people:
- 4. Role of accounting: • Develop accounting policies and procedures • Establish and maintaining record keeping processes • Daily record transactions in business systems Classifies and records activities (transactions) in monetary terms: • Measure business performance over a period of time • Show in numbers how business is doing at given date Interprets and presents these records to: • Projects, in monetary terms, future activities depending on course of action considered by organization Projects future financial performance
- 5. Collect data bookkeeping Prepare reports Plan Budgeting and forecasting Make decisions Execute Requirement to accounting information Key to success is repetition. Most common repetitive process in accounting in monthly closing cycle. Closure helps to see how the company is doing in terms of its objectives, including profitability. • Depends on user needsAccurate • All info needed for decision is includedComplete • Cost of info provision is less than benefitCost effective • So non-accountant is able to understandUnderstandable • Only important information is providedRelevant • Available when neededAvailable • Provided at appropriate timeTimely • Provides summary and diagramsEasy to use Requirements for Information Provided by Accounting and Finance Company Working Cycle from Accounting Perspective
- 6. Different users need different type of accounting Management Accounting Financial Accounting Users of information and purpose: Internal decision makers: managers, to plan, control, make decisions External decision makers: shareholders, banks, government, to make investment decisions etc. Format of information Any form useful for business managers Regulated by law, US GAAP, IFRS etc. Content Historical information and future predictions Only historical information Level of detail Depending on management needs Prescribed by legislation Frequency of reporting Annually, Quarterly, monthly, weekly, Annually, quarterly
- 7. What else about Accounting? • Besides the fact that accounting is boring, in this particular presentation you will learn: • Purpose of accounting department • Key roles in accounting department • Key processes assigned for each role • Key performance indicators
- 8. Chief Finance Officer Accountable for the administrative, financial, and risk management operations of the company, to include the development of a financial and operational strategy, metrics tied to that strategy, and the ongoing development and monitoring of control systems designed to preserve company assets and report accurate financial results.
- 9. •Strategy formulation and execution •Established commercial credentials •Analytical experience (not only financials) Strategic Leadership •Operational finance, including FP&A (financial planning and analysis) •Treasury, balance and financing skills •Control, accounting and cost cutting skills Core Finance Areas •financial and non-financial risks (e.g. cyber risk) Risk Managing Skills •Technical finance experience in structuring deals •Change and project management •Funding, capital market experience •Investor relations Merger and Acquisition •Transformation and change management Management Skills •Able to manage legislative and increasing tax requirements •Technology and automation •Cross-cultural, cross-market business and finance experience Other CFO Skills and Experience CFO should have strong background in business and art, to turn accounting actions client-centric and accounting information useful for decision making
- 10. •Financial Performance •Financial Control •Risk Management •Financial Operations Holds the Vision for: •Delivers business expectations to the team Represents the Interests of the Business •Understands & delivers the ultimate support role for the business units •Delivers the expectations of the BU managers Represents the Customers •Sets right priorities for the team based on relevant metrics, Boards and Management team expectations Owns the Priorities: •Renovate, reissue and maintain the accepted practices and standards best fitting current and ever changing business environment Creates Acceptance Criteria: CFO Leadership Role CFO takes part in strategic decisions, sets financial goals and priorities for the company and provides leadership role model for the support services and company staff in general
- 11. • Assist in formulating the company's future direction and supporting tactical initiatives • Monitor and direct the implementation of strategic business plans • Develop financial and tax strategies • Manage the capital request and budgeting processes • Develop performance measures that support the company's strategic direction Planning • Participate in key decisions as a member of the executive management team • Maintain in-depth relations with all members of the management team • Manage the accounting, human resources, investor relations, legal, tax, and treasury departments • Oversee the financial operations of subsidiary companies and foreign operations • Manage any third parties to which functions have been outsourced • Oversee the company's transaction processing systems • Implement operational best practices • Oversee employee benefit plans, with particular emphasis on maximizing a cost-effective benefits package • Supervise acquisition due diligence and negotiate acquisitions Operations • Oversee the issuance of financial information • Personally review and approve all regulatory filings and reports with the Securities, Taxes and Exchange Commission • Report financial results to the board of directors Financial Information Tools Daily/Weekly Cash Report Flash Report Projections Fluctuation Analysis Ratio Analysis Business, strategic, and contingency plans Human resource tools Cash management Cost reduction strategies Ratio analysis and benchmarking Lean management techniques Risk analysis Mergers and acquisitions Key performance indicators Open source software Project management software Workflow Tools Dynamic Benchmarking Tools CFO KEY DUTIES CFO has number of duties that require high level of professional knowledge such as core finance and management accounting
- 12. • Understand and mitigate key elements of the company's risk profile • Monitor all open legal issues involving the company, and legal issues affecting the industry • Construct and monitor reliable control systems • Maintain appropriate insurance coverage • Ensure that the company complies with all legal and regulatory requirements • Ensure that record keeping meets the requirements of auditors and government agencies • Report risk issues to the audit committee of the board of directors • Maintain relations with external auditors and investigate their findings and recommendations Risk Management • Monitor cash balances and cash forecasts • Arrange for debt and equity financing • Invest funds • Invest pension funds Funding • Participate in conference calls with the investment community • Maintain banking relationships • Represent the company with investment bankers and investors Third Parties Ratios Industry Goals Owner's Equity Ratio (Equity To Asset) Net Operating Return on Assets Net Operating Return on Sales Asset Turns Total Expenses to Total Net Sales Pre-tax Return on Equity Gross Margin Percent - Total Total Direct Expenses to Total Net Sales Total Indirect Expenses to Total Net Sales Sales per Employee Equity to Sales Gearing Interest Leverage Debt Service Ratio Quick Ratio Current Ratio Average Collection Period Receivables Turnover Accounts Payable days taken Working Capital Working Capital Turnover Breakeven Sales Total Inventory Turns Days' Sales in Inventory Sales to Inventory CFO KEY DUTIES, Continued
- 13. • On business KPI’s. KPI’s must be client-centricFocus • Partnership with business operationsStrengthen • Improve processes aligned with focusAchieve • Provide stakeholders with timely and accurate financial information and forecasts Access • Cost effectiveness and improved business efficienciesIncrease CFO Role in General • Have net margins and key financial ratios improved? • Are overhead costs in line with industry peers? • Has days sales outstanding (DSO) been reduced? • Is needed financing in place at attractive rates and terms? • Is the cash flow cycle running smoothly? • Are effective tax reduction strategies being utilized? • Does the finance department have input into the company’s strategic direction? • Is finance making value-added contributions to the company’s bottom line? • Is the CFO an active and visible part of the executive management team? • Is the information generated by the finance department accurate, timely and actionable? • Is the company’s supply chain operating smoothly and efficiently? CFO should be able to answer following basic questions:
- 14. Chief Accountant Guides the team to ever-higher levels of cohesiveness, self-organization, and performance. Apart of usual job routine, Chief accountant deliverable is a high-performing, self-organizing accounting team.
- 15. Key Duties • Verify, allocate, post and reconcile transactions • Produce error-free accounting reports and present results • Analyze financial information and summarize financial status • Provide technical support and advice on management • Review and recommend modifications to accounting systems and procedures • Participate in financial standards setting and in forecast process • Provide input into department’s goal setting process • Prepare financial statements and produce budget according to schedule • Direct internal and external audits to ensure compliance • Plan, assign and review staff’s work • Support month-end and year-end close process • Develop and document business processes and accounting policies to maintain and strengthen internal controls Leadership Role • Expert in Accountancy and advisor • Coach • Impediment bulldozer • Facilitator Key Competencies • BA/BS in Accounting • Supervisory Experience • PC proficient • ERP experience • Strong communication skills • Cost accounting • Tax, transfer pricing Chief Accountant Summary Tools Chart of Accounts General Ledger ERP Plans: Strategic plan Business plan Budgets Cash-flow forecast Organizing: Accounting and financial manuals Job descriptions Controlling: Internal control policy Authority delegation policy Internal and external audit Fixed asset register Vehicle policy Insurance policy Monitoring: Evaluation report BvA Audit reports Financial statements Management reports
- 16. The best chief accountants rise up through the ranks and earn a spot at the management table. The person in this role needs to develop effective communication skills that translate beyond his/her immediate financial staff to relay company objectives to the entire staff as well as being able to translate complicated financial terms to senior managers or board members. Timeliness KPI’s # Days to close the books and sign off the month # Days to close the books and sign off the year # Time to process invoices # Time to process transaction /payment # Time spent for input data per week # Payroll processing time % Financial reports submitted on time % Travel expense accounts processed in three days # Days in accounts receivable Quality KPIs % Input errors detected % Invoices accuracy % Accuracy of transactions /payments # Factual errors identified in reports # Errors reported by outside auditors % Audit recommendations implemented % Transaction items requiring reconciliation % Collection rate of outstanding amounts Generic KPIs # Internal complaints received # Internal customer satisfaction index with accounting services % Tasks finalized on time % Internal procedures updated % Processes optimized # Accounting employees to FTEs ratio # Accounting employees engagement index KPI’s Related to Department Management
- 17. Accounts Payable Clerk The payables clerk is accountable for verifying proper payment approval, processing payments in a timely manner, and ensuring that discounts are taken.
- 18. Key Skills 2+ years of Accounts Payable experience Detail oriented, professional attitude, reliable Must be able to follow standard filing procedures Key Performance Indicators # Days to close the books and sign off the month % Input errors detected % Accuracy of transactions /payments Key tasks • Match supplier invoices to authorizing purchase orders and proofs of receipt • Take all economical supplier discounts • Obtain payment approvals for non-cost of goods sold invoices • Enter all supplier invoices into the payables software • Issue notices to suppliers regarding rejected invoice line items • Process expense reports • Process procurement card payments • Notify managers when budgeted expenditure levels have been exceeded • Pay supplier invoices when due • Update the supplier master file • Reconcile accounts payable to the general ledger Tools • Budget • Payment approval policy • Vendor Discount • Travel Expense policy • Docs Requirements for disbursement • Payment processing guidelines • ERP AP Journal • Month end closure guidelines • Year end closure guidelines • Account Reconciliation procedures • Reports, KPI’s, Dashboards • Other policies, procedures & reports Accounts Payable Clerk Summary
- 19. Purchase order Invoice Match Invoice to P.O. Copy and distribute CodeFile Record Data entry and allocation Queued for processing ApprovePayArchive Send Invoice Accounts Payable Daily WorkflowRelevant Metrics and KPI’s Admin Metrics: • Number of Invoices Processed Per Day Per Operator • Average Cost to Process an Invoice (By Invoice Time) • Exception Invoices as a Percentage of Total Invoices • Average Time to Approve an Invoice from Receipt to Payment • Discounts Captured as a Percentage of Discounts Offered • Erroneous Payments as a Percentage of Total Payments • Electronic Invoices as a Percentage of Total Invoices • Duplicate payments Financial Metrics: • Accounts Payable Turnover Ratio • Accounts payable days AP Metrics and Work-Cycle examples
- 20. Task Deadline Verify all invoices have been entered and updated for the month being closed Verify that all invoices received have been updated Verify any necessary invoice adjustments have been updated for the month being closed Verify all standard entries have been updated for the month being closed Verify the Accounts Payable total is in balance Transfer the General Ledger data to the General Ledger for period being closed Verify the General Ledger transactions have successfully transferred to the General Ledger Accounts Payable Aged Trial Balance in Detail Vendor Status Report Other Reports Accounts Payable Month-End Check-list
- 21. Accounts Receivable Clerk Accountable for collecting the maximum amount of overdue funds from customers, which may include a variety of customer location techniques, collection methods, legal claims, and the selective use of outside collection services.
- 22. Accounts Receivable Clerk Summary Key Skills Information management Verbal and written communication skills Problem analysis and problem solving skills Key Performance Indicators Debt coverage metrics Budget vs. Actual billing & Balance Aging Summary vs. Age overdue target Key tasks • maintain up-to-date billing system • generate and send out invoices • follow up on, collect and allocate payments • carry out billing, collection and reporting activities according to specific deadlines • monitor customer account details for non-payments, delayed payments and other irregularities • generate age analysis • review AR aging to ensure compliance • maintain accounts receivable customer files and records • investigate and resolve customer queries • develop a recovery system and initiate collection efforts • communicate with customers via phone, email, mail or personally Tools • AR Journal • Credit Policy • Collection guidelines • Budget • Audit management letter • AR Month/Year End Check-list • Internal Control policy • Customer information • Billing policy • Customer Sales reports • Aging Report • Other reports Receivables are second big part in Balance Sheet freezing the Cash that can be used for other important items, all ratios should reviewed carefully
- 23. Customer makes purchase Create Customer Invoice Print and send customer invoice Did customer pay in time? Apply early discount if applicable Receive and apply payment Record Deposit Print A/R Report Assess financial charge if applicable Print and send financial charge invoice Print statements Did customer pay? Print AR aging schedule report Is this invoice uncollectable? Write off sale as uncollectable YES NO YES NO YESNO AR Relevant Metrics and KPI’s Credit and Collection Measures • Collection Effectiveness Index (CEI) • Days Sales Outstanding • Days Average Collection Rate • Prior Month's Past Due Collected • Percent Over 61 Days -- or Percent of Any Age Category • Bad Debt to Sales Department Performance Metrics • Active Customer Accounts per Credit and Collection Employee • Operating Cost per Employee • Cost per Sales • Cost of Collections • Transaction Turnover per Accounts Receivable Employee • Operating Cost per Transaction AR Relevant KPI’s and Work-Cycle Example
- 24. Accounts Receivable Month End Check List Check Task Deadline Verify that all Sales have been posted for the month Verify that all cash receipts have been posted for the month Verify all adjustments to customer accounts have been posted Verify all inventory receiving have been posted Apply unapplied credits to customer accounts Process finance charges and print invoices Print an Accounts Receivable trial balance in detail Review the trial balance for accuracy Make all necessary corrections to accounts before running statements Print statements Print Monthly Sales Analysis Reports Transfer the General Ledger Distribution to the General Ledger Reconcile the General Ledger Accounts Receivable balance to the Accounts Receivable month end balance
- 25. Payroll Clerk The payroll clerk position is accountable for collecting timekeeping information, incorporating a variety of deductions into a periodic payroll, and issuing pay and pay- related information to employees.
- 26. Key Skills • Experience of payroll processing • Working knowledge of relevant software • Understanding of basic accounting principles Key Performance Indicators • # of mistakes in payroll calculation • Time be-weekly payroll processing • Overtime vs. regular salary per employee • Overtime vs. regular salary per department • Total cost of work force • Management Span Control • High performer turnover rate • Career path ratio • New hire high performer rate • Percent of high performers Key tasks • Collect, compile and enter payroll data • Review and verify source documents • Calculate and post payroll deductions • Process payroll by established deadlines • Issue statements of earnings and deductions • Reconcile employee deductions • Investigate and correct payroll discrepancies and errors • Update payroll records by recording changes including insurance coverage, salary increases • Process new employees, terminations, transfers and promotions • Prepare and print payroll reports of earnings, hours worked, taxes, insurance, leave • Address employee's pay-related concerns and provide accurate payroll information • Complete requests for pay-related documents including statements and verifications • Produce federal, state and local tax payments • Develop, manage and maintain comprehensive payroll records • Ensure compliance with federal and state regulations and guidelines Tools • ERP Payroll module • HR policies and procedures • Payroll dashboards Payroll Clerk Summary Payrolls and taxes should be paid in time. This is very important to make sure that deadlines are met. No excuses!
- 28. Payroll Clerk Month End Check List Check Task Deadline Verify that all paychecks and payroll tax batches have been posted Print monthly total reports Verify the totals and make any adjustments necessary. Reconcile paychecks Accrue vacation hours Clear month to date totals Transfer the G/L distribution to the General Ledger
- 29. Fixed Asset Accountant The fixed asset accountant position is accountable for recording the cost of newly- acquired fixed assets (both tangible and intangible), tracking existing fixed assets, recording depreciation, and accounting for the disposition of fixed assets.
- 30. Key Skills • Fixed asset accounting experience • BA in accounting • Detail oriented Key Performance Indicators • Sales to fixed assets • Fixed assets (net) to net worth ratio • Percentage of IT expenditures to related fixed asset costs • Frequency and amount of unreconciled items • Amount of fixed asset losses from employee theft • Depreciation to Fixed Assets ratio Key tasks • Create and monitor a system of controls, procedures, and forms for the recordation of fixed assets. • Record fixed asset acquisitions and dispositions in the system. • Track the compilation of project costs into fixed asset accounts, and close out those accounts once the related projects have been completed. • Reconcile the balance in the fixed asset subsidiary ledger to the summary-level account in the general ledger. • Calculate depreciation for all fixed assets. • Review and update the detailed schedule of fixed assets and accumulated depreciation. • Investigate the potential obsolescence of fixed assets. • Conduct periodic physical inventory counts of fixed assets. • Recommend to management whether fixed assets should be disposed of. • Conduct analyses related to fixed assets as requested by management. • Prepare audit schedules relating to fixed assets, and assist the auditors in their inquiries. • Track company expenditures for fixed assets in comparison to the capital budget and management authorizations. Tools • Fixed Assets Journal • Capital Budget • FA accounting policy and procedures • Verification guidelines Fixed Assets Accountant Summary Make sure that all assets are present and properly used for business purposes. Periodic verifications help. FA accountant should be always involved in CAPEX decisions
- 31. Fixed Assets Accountant Work-Cycle Example Business modeling Capital budgeting Procurement InstallationCapitalizationOperation Maintenance Capital improvement Decommissioni ng Disposal
- 32. Inventory accountant accountable for the ongoing analysis of process constraints, target costing projects, margin analysis, and tracing costs back to underlying activities. The cost accountant must also construct and monitor those cost-effective data accumulation systems needed to provide an appropriate level of costing information to management
- 33. Key Skills • Excellent analysis skills • Communication skills • Familiar with production operations Key Performance Indicators • Distribution Cost per Unit Shipped • Distribution Costs as a Percent of Sales • Inventory Quality Ratio • Inventory Turns • Gross Margin • Return on Investment • Turn-Earn Index • Inventory days • Slow moving inventory level • Fill Rate Key tasks Inventory • Coordinate physical inventory counts and cycle counts • Investigate cycle counting variances and resolve issues • Update standard costs in the bill of materials • Review standard and actual costs for inaccuracies • Validate the cost of goods sold as part of the month-end close • Accumulate and apply overhead costs as required by generally accepted accounting principles • Work with the materials review board to locate and dispose of obsolete inventory Analysis • Report on breakeven points by products, work centers, and factories • Report on margins by product and division • Report on periodic variances and their causes, focusing in particular on spending variances • Analyze capital budgeting requests • Perform cost accumulation tasks as a member of the target costing group Tools • Inventory Turnover • Inventory Accuracy • Units per Transaction • Slow moving inventory level Inventory Accountant Summary Inventory holds most of the cash. It is very important that comprehensive and systematic process is in place to make sure that cash is not buried in slow moving inventory and customer demand is fully met
- 34. Some Inventory metrics: • Backorder Percentage • Inventory Service Level • Carrying Cost of Inventory • Inventory to Sales Ratio • Inventory Accuracy • Inventory Turnover • Units Per Transaction • Back Order Rate • Order Tracking • Rate of Return • Perfect Order Rate • Order Status • Stock outs • Stock Cover • Receiving efficiency • Lead Time • Put-away • Order picking/packing • Inventory Turns or Inventory Days on Hand
- 35. Inventory Accountant Month End Checklist Check Task Deadline Verify all inventory receiving have been posted Verify all inventory adjustments have been posted Verify all inventory transfers and vendor returns have been posted Print an Inventory trial balance in detail. Review the trial balance for accuracy. Make all necessary corrections to accounts before running statements Print Monthly Inventory Sales Analysis Reports Print Inventory Valuation Report Reconcile the General Ledger Inventory balance to the Inventory Journal month end balance Reconcile sales, cost of goods sold, inventory, and other General Ledger account totals
- 36. Tax Accountant The tax accountant position is accountable for the collection of tax-related information, reporting to taxation authorities at the federal, state and local levels in a timely manner, and advising management on the tax impact of various corporate strategies. • Devise tax strategies to defer or eliminate tax payments • Create tax data collection systems • Complete required tax reporting in a timely manner • Prepare and update tax provision schedules • Update the company sales tax database as tax rates change • Coordinate audits by various taxation authorities • Research and correct process errors that caused incorrect tax filings • Negotiate with tax authorities over tax payment issues • Research the basis for tax positions to be taken • Advise management regarding the tax impact of corporate strategies • Advise management on the impact of new laws on tax liabilities • Coordinate outsourced tax preparation work • Identify tax savings in prospective acquisition scenarios
- 37. ERP Specialist
- 38. Reduce Error Reduce Expenses Auto Report Generation Accuracy Automation Reliability Easy document production Quick processing time User Friendly Security of Data Instant Access to Data Helpful for staff Clarity Realtime transactions One time entry Key tasks • Perform an application support for ERP systems users • Work with ERP systems users and management to determine appropriate system configuration and setup. • Assist ERP systems users with data conversion. • Assist with testing new releases of ERP systems prior to use in a production environment. • Create documentation and procedures guidelines for ERP systems users. • Assign appropriate system access to users at different levels • Design, develop and maintain automated workflow processes. • Work as a Systems Analyst with knowledgeable persons to help define user needs and develop data processing solutions. • Analyze and troubleshoot ERP system issues reported by end users. • Design, develop and maintain reports used by technical staff and ERP systems users. Key Skills • Understand ERP data schema • Understand business practices and procedures • Communication skills ERP Specialist Summary KPI’s • % of severity • % of incidents resolved • Call abandon rate • Customer satisfaction All business units are customers for accounting department. All accountants are customers for ERP specialist.