There are frequent cases when the rights and obligations of employees are not specifically defined in the company, or they are defined, but with certain shortcomings. Such cases are especially common in small and medium-sized companies, where the formation of the organizational structure is still in the process and operational activities are more or less chaotic. Similar problems are rare, but still encountered in large companies.
We can discuss this issue from different perspectives, but this time we will review accounting and financial management, and accordingly, the functions and responsibilities of an accountant and a financial manager in a company, as well as the main characteristics that distinguish these two most important activities and positions from each other.
Accounting (financial accounting) – According to the Law on Accounting, Reporting and Auditing, accounting “is an orderly and continuous system of collecting, registering, evaluating, summarizing and reporting information reflecting economic events that affect the activities and resources of an entity and are measured in monetary terms” – simply put, accounting is the evaluation, compilation and recording of transactions carried out in a company in a form that can then be presented to management, creditors, company owners, investors, state bodies or other interested parties in the form of reports.
Financial management – Financial management is the management/disposal of a company’s finances and other economic resources. The main goal of a financial manager is to make the best financial decisions. Through effective financial management, the organization’s main commercial objectives are achieved, and accordingly, with ineffective financial management, the company may even face the threat of bankruptcy. The starting point of a financial manager is to create wealth for the company and investors, ensure cash generation, obtain maximum profit, and do all this while taking adequate risks and optimally using the organization’s resources. The main operational process of financial management is planning, control, and decision-making related to finances.
It is important to note that financial management cannot be effective if an organization does not have a proper financial accounting system, because it is based on accounting information that the financial manager makes appropriate decisions.
I will try to further clarify the difference between accounting and financial management:
#1 General definition
Accounting – recording and reporting of past financial transactions.
Financial management – managing a company’s assets and liabilities and planning for future development.
#2 Why is it important?
Accounting – provides us with information about the financial condition of the company.
Financial Management – Helps us make sound financial decisions about future projects and effectively manage assets.
#3 Who is the end user?
Accounting – management, company owners, regulatory bodies, analysts, creditors, etc.
Financial management – the company’s management and owners, i.e. individuals who are directly interested in the growth and development of the company.
#4 Main goals
Accounting – collection, systematization, and reporting of financial information.
Financial management – creating wealth; generating money; obtaining high returns; using assets efficiently.
Considering all of the above, the difference between accounting and financial management is clear and substantial, therefore, for the proper functioning of the company and the effective management of business processes, it is crucial to correctly define the rights and responsibilities of each staff member and position, so that both management and the employee themselves have the right expectations, especially when it comes to the company’s financial accounting, financial management, and planning.
In recent years, outsourcing of business processes , including accounting and financial management outsourcing, has become quite relevant – that is, transferring these functions to an external company, which takes responsibility for the correct management of the processes. If you choose this alternative, our advice is to correctly determine exactly what services you agree to receive at the stage of negotiations with the contractor company in order to avoid further complications.
