Why is the finance department of a company important? There are many, many reasons that this is true but there’s also a common thread that explains why. The finance department is the backbone of any organization’s growth, no matter the size of the organization.
From basic bookkeeping to helping with strategic decision-making, a finance department plays a leading role in keeping a company healthy. Bookkeepers handle day-to-day transactional accounting such as tracking transactions and government reporting.
Cash flow management
Healthy cash flow is an essential aspect of any organization’s strategy. There need to be enough funds to meet payments.
This area also encompasses the credit and collections policies for the company’s customers, to ensure the organization is paid on time, and that there is a payment policy for the company’s suppliers,” writes Smythe LLP about why is the finance department of a company important.
A regular forecast (that is frequently revisited) to keep track of cash needs is absolutely mandatory to any organization’s vitality.
Secures long-term financing
The finance department sources long-term financing, which can be done through several different means including such as banks or private lenders.
Public share offerings are another means to secure funding, though this is usually done in a larger organization. In the case of a PSO, the finance department prepares documentation but usually needs outside help as well.
Prepares budgets and forecasts
The finance department also helps prepare budgets and forecasts to keep track of financial performance and make predictions for the future. This is no easy task.
Ensuring compliance is also vital to any company’s success. “Do the financial practices of the organization meet generally accepted and industry-accepted financial management standards? Compliance with accounting and auditing standards is important, and an internal audit of finance should usually include a review of the organization’s accounting policies and practices. Where departures in accounting policy or practice do arise—and sometimes an exception to common practice does make sense for a specific company—has that departure been explained and approved by the proper managers?” writes Compliance Week.
In more sizeable organizations, a finance department will prepare financial statements with an external auditor.
“This information can be used to plan staffing levels, asset purchases, and expansions, and cash needs, before they become necessary. Some organizations often ‘plan’ by the seat of their pants, while organizations know it is important to have some idea of where you want to go before you start going there,” says Smythe LLP.
Helps make strategic decisions
The finance department is a strategic decision-maker. They make decisions like which projects are worth pursuing and what’s worth leaving behind. Finance departments are an invaluable resource to managers when it comes to effectively running a business.
“With the growing popularity of outsourced finance departments, it is possible for even small businesses to have access to all of the benefits of a full finance department, through part-time professionals, at a fraction of the cost of employing a full time [sic] finance department,” according to Smythe LLP on the finance department structure.
This is where firms like ours come in. Goodbookkeepersoncall.com was founded in 2016 as part of Nazaire & Co, a Garden City, New York accounting and business consulting firm.
Our bookkeepers and accountants are certified QuickBooks ProAdvisors in bookkeeping, equipped with anywhere from three to more than 15 years of experience and vast expertise in QuickBooks software. Whether you require on-site or remote assistance, our bookkeepers can track every penny that enters and exits your business.