To outsiders, accounting and finance may as well be synonyms. After all, accounts is finance which equals money. Decision makers in organisations of all sizes simply don’t have the luxury of this misconception. Instead, they need to be aware of the clear differences between the two disciplines, where they cross over and where they differ.
Dealing with the Past – Accountancy
Accountancy is all about record keeping of expenses and income made. A trained and qualified accountant is not only able to keep the books of a company (a role largely more suitable for a less highly paid bookkeeper) but is also able to advise on the payment of taxes as well as provide an overall assessment of the performance of the firm.
In short, accountancy is about where all the money went. In terms of seniority, accounts is generally seen as a subset of finance which provides the essential information that financial managers need in order to make decisions about the future.
Into the Future – Finance
Finance is focussed more on the current and future management of money within the organization. Deciding how to invest in assets and stocks, and projecting the expected revenues are all responsibilities of the financial officer or officers of an organisation.
Finance itself is a huge field covering a variety of field such as investments, loans, stocks and many more, of which accounting is one. Nevertheless, the results from the actions taken by a finance team must be recorded and passed on accurately to the accounting team who will appraise the results for the next report to inform future decisions.
What a Financial Manager Needs to Know About Accounting
To perform their job correctly, a financial manager needs a basic understanding of how accounts are prepared and the ability to read the reports provided to them by the accounting team. While the financial manager does not need to know the particulars of say, tax, they nevertheless need to have a basic understanding of how such things are likely to impact future plans.