Sunday, 28 December 2014

Need for good relationship between Finance and Accounts fields

Finance and accounts are closely interrelated with each other. Finance deals with the funding and managing of a business concern|corporate whereas accounting deals with the recording and keeping records of the funds utilized in the business operations. So, there needs a good relationship between finance and accounts.

Finance department frequently utilizes the data recorded by accounts for preparation of its financial statements and reviews. Accounting department utilizes the financial guidelines and formats set up by financial managers in order to record the transactions in a very concise and useful manner for the company's overall benefit.

Better administration is possible through linking of Finance & Accounts
Finance and Accounts need to be mutually cooperative with each other for a better administration of the company. In many companies, the Finance Manager is entrusted with the responsibilities of both Finance and Accounts departments in which case he needs to be both an MBA and Chartered Accountant. He will supervise or work along with the Accounts Managers and Accounts Officers in controlling the Accounts and Finance wings. He will guide them in the proper maintenance of accounts books and records and during the preparation of final accounts and financial statements of the company. He can prescribe various formats for providing accurate information and work out the financial ratios and other inputs to the management for better governance of the business. So, a good relationship between finance and accounts is necessary.

Efficient management of Working Capital is possible
Finance people can manage the funds and working capital of the company efficiently if they are linked intimately with the accounts department. As the accounts department keeps records of all expenses, they can provide the information in whatever form the finance manager may require from them and thereby accurate and concise information is gathered by the finance people in preparing various statements for the management. So, the finance department will be in a better position to know how much funds are required for each process and activity of the business and can be able to procure the funds required for working capital of the company timely.

Preparation of Budgets and Fund Flow Statements
Finance department needs to prepare budgets and Fund Flow/ Cash Flow statements on monthly basis and annual basis also for a better administration of the funds of the Company. For this, they need to study the trends in past and be able to know the amount of expenditure incurred for each and every activity. This information is available with accounts departments as they are keeping the accounts. So, with proper cooperation of the accounts personnel, the finance department can prepare a more accurate budget and Fund Flow statements and thereby keep the management with more accurate knowledge in governing the business.

Profit maximization and growth is possible
A better relation and cooperation between Finance and Accounts leads to the growth of the company as well as profit maximization. By keeping accurate records, the accounts people can provide more reliable information at every stage of the business under different time groups and variable circumstances as per requirements of the study by the finance people. So both these departments combined can produce very minute and sensitive information to the management for controlling expenses at every stage of the product and thereby can locate wastages and excessive spendings. Thereby, bottlenecks in activities can be removed leading to efficient production and growth of the company yielding profits.

There can be much more areas where both accounts and finance need to cooperate in their functioning. For example, investments by company or issue of shares and debentures for the raising of working capital, valuation of company property for any purposes or facing legal suits and litigations - all these areas require cooperation and good relationship between finance and accounts departments.

No comments:

Post a Comment