Ask Andi: A partner handles the role of finance for a long time. The job evolved as we grew. Now we’re changing things up. We have to define what is the finance role and who does it. Any suggestions?
Top Thoughts: The role of finance involves managing the firm’s money. Figuring out who is responsible for what in finance is crucial. Not everything has to be handled by a partner or executive of the firm. Make sure that controls are in place to audit and monitor what’s going on.
Defining the role of finance
Results of an accounting study: Employees with post-graduate degrees commit errors with losses five times greater than those with high school degrees. Fraud was estimated at 6% of a typical company’s total revenue. Most small businesses start out with informal, unwritten, or incomplete job descriptions. Often the job gets to be too big for one person. Or the person doing the job wants to move on. Make this an opportunity to better define what has to happen, and who is responsible.
An outside accountant usually handles tax accounting. A bookkeeper usually handles preparing records for the accountant. A bookkeeper usually handles data entry of vendors’ bills and customer invoices.
Routine accounting tasks include answering questions about what’s on a bill and what’s outstanding. Verifying bills are correct takes time and initiative. Decide if accounting or customer service handles customer invoice questions.
Involve different departments in negotiating prices for the materials and services they use. Some people are better at negotiating. Centralizing negotiations may result in better pricing, as one person or department has a more global view and hones their negotiating skills.
Plan, organize and govern all things financial
If the company has inventory, make sure that 2 or more people keep track. People from accounting and operations match records for inventory regularly. A formal system for checking inventory in and out can reduce questions.
Someone needs to regularly prepare and analyze reports. That is to say, profit and Loss. Balance Sheet. Cash Flow Statement. This person should be good at excel. Comfortable with ratios. And able to compare performance from one period to the next.
Firstly, data entry is a detailed job. Secondly, includes issues of privacy and discretion. Further, the ability to reason through to a logical conclusion. Moreover, be sure to assign payroll to someone who can keep pay rates and personnel issues confidential.
In addition, the analysis person should like figuring out puzzles. How does last year’s spending compare to this year’s? Ask this person can to put together a budget and forecast. Communication skills come into play. Budget includes working with all departments. Gather input and negotiate end results.
What needs to happen financially to achieve its short- and long-term goals
Meanwhile, the owner level best handles company banking relationships. Having a good relationship with the company’s bankers is crucial. Build that relationship with regular updates. Where the company is? How things are going, What needs are likely to come up short and long term? Make sure the owner is well informed and prepared for banking meetings.
Perhaps some tasks require a higher level of security and trust. Opening up client payments, entering them into the accounting system, entering credit card details, cutting checks for payments to vendors, and making deposits and withdrawals at the bank, are all high-security items. Whenever there’s a need for security, consider having an audit system in place.
Likewise, the #1 rule in accounting is, “respect what you inspect. Double-checking includes a bookkeeper overseeing a clerk’s work. An auditor can come in monthly or quarterly. Verify all transactions.
Separate functions. For example, anyone with accounting access is not allowed to participate in an audit. All bank and credit card statements are opened by the owner. Scan for accuracy before going to data entry.
In conclusion, make sure that everyone knows there is an audit system. Use feedback from audits. Improve performance. Have the team meet regularly. Discuss what has to happen in finance.
