Everything you Need to Know about Corporate Accounting
Accountants are accountants are accountants, right? Wrong! Within the field of accounting, there are two main divisions: corporate accounting and public accounting. Also known as bookkeeping, accounting involves the collection, analysis, classification, verification, interpretation, and finally the presentation of financial information. There are different types of accountants. Corporate accountants tend to manage the accounts and finances of one financial entity or business, making sure they comply with the various regulations and laws, while also monitoring key financial KPI’s (Key Performance Indicator) such as profit and cash flow. Public accountants sell accounting services such as auditing to other companies and perform services for many different firms. Today we will be exploring the world of corporate accounting.
Corporate accounting deals with processes such as the preparation of cash flow statements, financial records, company balance sheets, and more. A corporate accountant employed in industry (i.e. not by a large accounting firm) is typically focused on making sure the financial and operational activities of a company are correctly recorded, controlled & monitored and that management has the information necessary to make the best business decisions. Below we will discuss the main functions of corporate accounting within a business.
The Creation and Upkeep of Company Accounting System
Corporate accountants are tasked with creating, managing, and maintaining the corporate accounting system of a company. Today, this is likely to be via a software program, that may even span the entire firm, such as an ERP system (Enterprise Resource Planning) like Omni Accounts & ERP. The accounting department creates separate accounts to handle business elements such as assets, income, liabilities, and expenses. Having done so, they assign each account with general-ledger codes and set the overall system to record specific transactions into the matching accounts automatically. If the business has a more advanced ERP system, corporate accounting also involves the regular creation of a variety of reports that are used by management to assess the state of the company’s assets, liabilities, and cash flow. These reports are made using real-time data and information. These financial statements for the company are also produced for the purpose of auditing by regulatory bodies (and public accountants!).
Managing Accounts Receivable
The sector of corporate accounting also handles accounts receivables. This is the area of financial administration that deals with, and records, money coming into a company, typically from customers. This area of the business will also monitor which customer accounts are due for payment, and monitor the ageing on the accounts. They are also often responsible for collections and also managing default accounts (late payment). Sometimes they will work with a specialist agency to work on extremely late defaulted payments. This area of the business also feeds back to the management team about cashflow forecasts in terms of the timing of cash entering the business.
Managing Accounts Payable
Corporate accountants also deal with receiving and processing the invoices that come into the company for payment. The department then proceeds to make payments to contractors or suppliers according to the indicated means of compensation, as well as in agreement with the payment terms negotiated with the supplier. Examples of these include bank transfers, checks, and credit card payments. The payments can be of 2 main sorts: fixed and variable costs. Fixed costs and invoices generally relate to costs incurred every month regularly such as rent and utility bills. Variable costs would include things like raw materials, finished goods or one-off professional services.
Processing Employee Payroll
The calculation of staff salaries falls into the scope of corporate accounting, although some firms do outsource this payroll task. Corporate accountants calculate wages for staff according to various work periods. This can be weekly, bi-weekly or monthly. They also calculate any benefits, perks or other sundry items (such as expense refunds) that are due to the staff member, as well as calculate the taxation that needs to be deducted and submitted to the tax authority. Staff typically receive payroll direct deposits into their bank accounts on the agreed date.
Corporate accounting is highly necessary for any business. Not only does it ensure that money comes in and out of the business as and when it is due, but by recording the transactions, corporate accountants help to ensure that management is aware of the true state of their business’s liquidity and profitability. Corporate accountants also have a great responsibility to ensure that businesses stay compliant with local financial regulations. With such a great responsibility it is little wonder that software packages such as Omni Accounts are invaluable to this sector.