Accounting department responsibilities
/What Does the Accounting Department Do?
The accounting department is responsible for a large number of administrative functions within an organization. Though considered "back office" activities, these functions are essential to the proper operation of a business. The most common responsibilities of the accounting department are as follows:
Billings Function
A billings group assembles information from the shipping and customer order departments to create invoices that are sent to the company's customers. It is essential to issue billings on time, in order to enhance cash flows.
Budgeting Function
The department assists the rest of the company with the formulation of a company-wide budget, which is used to plan for expenditures in the coming year, including the purchase of fixed assets. The previous year’s budget may be used as a baseline to formulate the budget for the next year.
Collections Function
The accounting department is responsible for keeping track of overdue invoice payments from customers, and uses a variety of methods to extract payment from them, including dunning letters, phone calls, and attorney letters.
Financial Statements Production
A reporting group within the department creates adjusting journal entries to bring the company's initial financial results into compliance with the applicable accounting framework, writes footnotes to accompany the financial statements, and releases financials following the end of each reporting period.
Internal Reporting Function
A cost accounting staff can provide considerable value by calculating the profitability of various products, product lines, services, customers, sales regions, stores, and so forth. The areas of analysis may change on a regular basis, so that management can view different aspects of the business, with an emphasis on improving financial results.
Accounts Payable Processing
The payables staff collects supplier invoices and employee expense reports, verifies that the billed amounts are authorized for payment, and issues payments to recipients on scheduled payment dates. These employees also watch for early payment discounts, and take the discounts if it is economical to do so.
Payroll Processing
A specialized group collects time worked information from employees, as well as pay rate information from the human resources department, calculates tax and other deductions from employee pay, and issues net pay amounts to employees, either in cash or via checks, pay cards, or direct deposit.
Tax Function
A specially-trained group of accountants estimates the amount of taxable income that the business is likely to generate, and periodically remits income tax payments to the government, based on this estimated amount. The tax group also issues tax filings in a number of other areas, such as franchise taxes, sales taxes, use taxes, and property taxes. The tax group may also advise management on how to adjust operations to generate fewer income taxes, or at least to defer them until a later period.
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Additional Responsibilities of an Expanded Accounting Department
There are several additional areas in which there is some question regarding which department should take responsibility. They are as follows:
Credit. The granting of credit to customers can be considered a treasury function, but is usually placed within the accounting department in smaller companies where there is no treasury staff. A properly-functioning credit group balances the need for more sales with the risk of generating more bad debts. It is generally unwise to put the credit function under the control of the sales manager, since this puts too much pressure on the credit staff to grant credit to marginal customers in order to increase sales.
Human resources. The human resources function generates a large amount of paperwork, some of which is used by the payroll staff to determine employee gross pay and pay deductions. This function could be placed within the accounting department, or maintained as an entirely separate department, perhaps reporting to the CFO.
A large number of control responsibilities will likely be integrated into the preceding areas.