Often, we are asked about the difference between Accounting and Finance, because to those not professionally trained in these fields they seem to be one in the same. I would like to propose a few subtle, yet significant, differences and how we apply these to make a difference in the lives of our clients.
First Difference: Finance is in the “now” and in the future, Accounting is focused on the past. Where finance asks what is happening, what is going to happen, what I want to happen, how do I get there, and how am I tracking to plan (a shared goal with accounting). Accounting is focused on what happened, was it approved, was it transactionally correct, are there any special reporting requirements, and are the records complete?
Essentially, Finance is the game, Accounting is the scoreboard.
Second Difference: In accounting when you don’t get it right, you do it over, correct journal entries, etc. In finance there are no do-overs, and even if there is, they are not generally free or low cost.
Consider a vendor invoice. The finance end of this is: vendor selection, vendor negotiation, are we getting the right product, price, delivery schedule, is the vendor reliable, what are the minimums, factory capacity, financial stability, credit terms, and so forth, essentially making and executing the “deal”, whereas accounting will deal with do we have a vendor number, a W9, a purchase order, an invoice, and how to cost code this transaction.
I don’t want to downplay the significance of accounting, it is essential, and without world class accounting, the job of finance is difficult to impossible, much like flying a plane with no (or worse, bad) instruments. The point I want to make is that finance is the News, accounting is the newscaster and since we play both roles here at TGG, it is essential to know which capacity you are working in.
Application at TGG:
We have all made mistakes, and we will make more, however, the key is to learn from the past and not live in it. “To know and not to do, is not to know” is a principle of Steven Covey. With that in mind, at TGG we acknowledge we make mistakes and can improve. It is essential in the undertaking of improvement that we can and do speak with candor and address challenges head on, that every staff member feels open to contribute, and we get every brain in the game so we continue the collective development of The TGG Way. One of the defining characteristics of TGG is that our culture embraces candor and dealing promptly with “problems”. This results in a “no fear of failure” environment so that when things are not going well, we can acknowledge that and reach out for help and ideas so we can succeed together as a team, and continue on our path forward of constant improvement and attainment of our mission.
Am I a transaction maker or a transaction recorder? If you are a “maker” you are in the now and need to understand the rules of engagement. If you are responsible to make a tax payment, you need to know when it’s due, does it have to be paid a certain way (e.g. transaction portal), how do I get the data, etc. and client approval and what’s my lead time? Also what’s the backup plan if there is problem?
If you are responsible for submitting payroll or payroll funding, you are making a transaction, not just recording it. Know the cut-off; use a recurring Outlook reminder, a visual calendar.
I also always recommend the finance aspect of our role should come first every day, such that the tyranny of the urgent does not get in the way of the really important items which must be done. Generally the finance side has externally imposed deadlines (market closes at 4PM Eastern, Bank wire cut off is noon) which we must adhere. We need to know what these are, because much like gravity, it does not matter if you don’t know or don’t believe these deadlines, they are reality and we will need to deal with them, and plan accordingly.
I want to close on this by saying that TGG is a great organization and we are not stopping there. As we continue to grow, we have the capability to engage larger clients with more complex undertakings. Bigger may or may not be better, but can be more complex. Our job is to master this complexity, break it down, and keep things as simple as possible, but no more than that (quote by Albert Einstein).Written by: Scott Palka, CFO TGG Accounting