By Mashum Mollah
Accountancy is one of the oldest professional fields in the world. The ancient Mesopotamians were using accounting methods before the invention of the written word in around 7500 BC. Accountants do far more than just account for things. The work of an accountant has become more complex and varied progressively throughout the years, although advances in technology have helped keep the workload feasibly manageable.
There are many specialist fields within accountancy. All of them share some common roles. Here are some of the core duties undertaken by modern accountants.
Monitoring Spending
Accountants typically need to monitor expenditure and income simultaneously. The primary purpose of doing this is to ensure that expenditure does not exceed income. This is one of the features typically offered by online accountancy software. The analysis of information, however, needs to be completed by a living, breathing accountant.
Although this is a basic task that ensures that a business does not operate on a net loss, monitoring spending can also help accountants work out ways in which their clients could save money in the future. By understanding the patterns of spending made by a client, a competent accountant can ensure that plans are put in place to eliminate bad habits.
Monitoring Budgets
In a similar fashion, budgets have to be measured against expenditure. If expenditure exceeds a budget, then the entire strategic vision of a business can be compromised. One of the most important duties entrusted to accountants is to flag up when there is a likelihood of expenditure exceeding budgets. This involves the careful analysis of budgets to ensure that they are realistic.
Businesses typically use historical data to develop comprehensive budgets. This is a potentially flawed method: expenditure changes due to many factors, some of which are unpredictable. Many companies overestimate their budgets, which can lead to net loss.
Accountants have the unenviable responsibility of sifting through budget documents and assessing just how realistic they are. Budget overestimations typically result from a misunderstanding or overestimation of sales, an underestimation of expenses, or some unholy combination of the two. These miscalculations can slip under the radar if documents are not checked thoroughly by a qualified and competent accountant.
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Taxation
Taxation is simply never simple. This is why accountants are frequently called in to ease a company or individual through the tax collection process. Business taxation is an especially complex field. Businesses need to account for their expenditures, company registration type, and company size when figuring out how much tax to pay. A good accountant will always lead a company towards paying the smallest possible quantity of tax.
However, what they will not do is advise companies on how to avoid taxes that they are legally required to pay. Companies can find themselves subjected to legal sanctions and fines if they take the advice of an accountant that encourages them to break the law. Most accountants will have a good working knowledge of tax law and will be able to decipher the legal and financial jargon that peppers documents relating to it.
Financial Audits
A financial audit is an examination and evaluation of a company’s financial statements. Financial audits are some of the most time-consuming and confusing work that is handed to accountants. The aim of a financial audit is to make sure that a company’s financial statements match its actual expenditure and income streams. Almost all companies conduct an annual financial audit. There are three main kinds of financial audit:
External Audit
Although many audits are conducted by in-house accountants, external audits are conducted when a company wants to remove the chance of any internal bias affecting the results. Accountants that work for an outside firm are bought in to test a company’s financial integrity according to their own standards.
Internal Audit
Internal audits are conducted by accountants working within a company. They are typically used to assess a company’s financial integrity so that managerial changes can be made to improve performance. One of the primary jobs of an accountant working inside a company structure is to conduct internal audits.
Governmental Audits
Governmental audits may be ordered in order to check whether a company is adhering to taxation laws. An individual company can have no hand in producing or influencing this kind of report. Companies need to ensure financial integrity if, for nothing else, to prepare for the eventuality of a governmental audit.
Advice on Financial Practice
With their intimate knowledge of the finances of a company, accountants are in a perfect position to offer sage advice on how financial practices can be improved. Many companies turn to their accountants first when faced with financial irregularities or unexpected losses. Accountants typically offer their financial wisdom as part of their role. Some accountants offer this service exclusively as consultants that are bought into a company to investigate poor financial performance.
Forecasting and Risk Analysis
Accountants are key providers of forecasts and risk analysis reports. These reports use past data to build realistic models of how a company may fare and what kind of pitfalls it may face. Forecasts and risk analysis reports are essential in the development of a good business strategy. This means that accountants find themselves central to the running of a company.
Advances in technology have made developing forecasts a much more accurate business. Big data analysis using machine learning algorithms helps accountants build a picture of what the future might look like using far, far more data than ever before.
Accountants work with market research professionals and statisticians to create contingency models to help companies build plans for all sorts of potential disasters.
Calculating Payroll
Although Human Resources departments are typically responsible for calculating and distributing pay in large companies, accountants are often left to do this work in smaller organizations. Companies need to make sure that employees are adequately paid while avoiding payroll expenditure that exceeds their budget. This can prove to be an immensely difficult tightrope to walk for companies balancing fine budgets and large dynamic expenditure figures.
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