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What should your ideal accounting department look like? It’s a common question among businesses. It’s important to know proper roles and responsibilities along with how to best structure it. When it comes to accounting, a multi-layer structure is critical to provide appropriate internal controls and to produce accurate and timely financials to manage your business.
Functions of the Accounting Department
The accounting department is an essential part of any organization. The accounting team assumes the responsibility of recording all financial transactions, including the expenses, revenues, and investments of a company.
They maintain an accurate record of all finances that is up-to-date and free of errors, which enables other departments to make informed financial decisions. The accounting department will assist in providing financial reports, such as income statements, balance statements, and cash flow statements, which are used to analyze and assess the financial health of a company.
Furthermore, this department ensures compliance with accounting standards and regulations, while managing the company’s tax payments, audits, and payroll.
Given the vast importance of the marketing department, it is vital for a company to have an accounting department structure that is both stable and reliable.
How Do You Structure an Accounting Department?
Structuring an accounting department involves several key considerations to ensure that the department functions effectively. The accounting department structure should be divided based on the accounting department hierarchy, which may include designated teams for accounts payable, accounts receivable, payroll, and financial reporting.
It is important to establish reporting lines in the accounting team structure, with the accounting department typically reporting to the CFO. The department’s manager should oversee the team’s activities and be responsible for ensuring that the department meets its objectives.
Proper communication channels should be implemented to facilitate timely and accurate reporting of financial information. This may include accounting software, financial dashboards, and regular team meetings.
Each staff member should have the necessary qualifications, training, and experience to perform their roles effectively, given that all accounting roles require precision and attention to detail.
If you’re debating whether your should hire an accounting manager vs controller or both, we can help. Both roles are equally important to the success of a company.
Accounting Department Structure: Key Accounting Roles
THE STAFF ACCOUNTANT
The first place you’ll want to start at is the lowest level in an accounting department which is a Staff Accountant (also referred to as a Bookkeeper, Data Entry Clerk, etc.) This person does the daily accounting tasks, such as data entry, paying bills, invoicing, bank reconciliations, and other similar work. Their primary job is to correctly input transactions into the accounting system. They should be using systems and processes, checklists, and other tools to ensure accuracy and thoroughness. The Staff Accountant should be an accountant because there are many transactions requiring basic accounting knowledge and understanding. They also must be thorough, have great attention to detail, and know fundamental accounting principles.
THE ACCOUNTING MANAGER
The next level up is the Accounting Manager. This person understands financial accounting in-depth – and including all of the accounting requirements, GAAP rules, how to accrue for things properly, etc. They also are responsible for overseeing and reviewing the work of the Staff Accountant; this provides appropriate checks and balances and greatly reduces the chance for fraud or theft. This also significantly improves accuracy of the accounting. Their key deliverable is accurate, timely financials. They are expected to implement operational efficiencies in the department, document standardized procedures, and take on special projects in the department. Accounting Managers are accountants and typically have 3-7 years of experience.
THE CONTROLLER
Most businesses need a Controller. The question is for how many hours? A Controller is responsible for translating the story told by the numbers. The Accounting Manager builds the financials, so the Controller can review and approve the work, understand the implications, and then put it into language that can be used to manage the business. It is not the business owner’s job to be an accountant. The owner (or any business leader) should manage the business based on the numbers, but should not be responsible for producing the financials. The Controller is also responsible for forecasting, budgeting, and benchmarking. This should include metrics and Key Performance Indicators (KPIs), ideally communicated through charts, graphs, and trend analysis. The goal is to provide accurate, timely financial reporting and analysis for the business owner to better understand the overall health of their business and drive strategic decisions.
THE CFO
The CFO acts as a coach and adviser and should be focused on discussing and supporting is there for your to discuss your business goals for the business. They are there to guide the business to safety, bring ideas on strategy, and help you execute on your goals. The CFO’s job is not to do the accounting, but to use the financials to give the business guidance. They should be focused on strategy, financing, M&A transactions, high-level analysis, capital expenditure decisions, and most importantly, provide financial leadership. In addition, you should expect them to oversee both accounting and finance along with finalizing any budgets, forecasts, or financial recommendations. The CFO should have an accounting degree, CPA, or advanced degree along with extensive experience in your industry (and ideally a few other industries as well to be able to share new ideas!).
A TEAM APPROACH: HOW TO RUN AN EFFECTIVE ACCOUNTING DEPARTMENT
Given all of these roles within the accounting department, you may be asking if you really need to have all of them? The answer is yes because each should be responsible for different areas. You need the Staff Accountant to enter everything correctly so the Accounting Manager can review and do more complex accounting. The Controller will produce the final financial statements and other financial reporting, tell the story, and identify and key drivers in your business while the CFO can be there for you to align your goals with strategy, and lead major financial decisions. You also need a team to mitigate risk, handle different roles and responsibilities, increase timeliness, and ensure accuracy and continuity. What happens if someone leaves? A team will still ensure that the accounting and business can still run smoothly.
Should You Outsource Your Accounting Functions?
Outsourcing accounting functions can be a smart choice for many businesses, especially small and medium-sized ones. When you outsource accounting, you hire an outside company or professionals to handle tasks like bookkeeping, payroll, and preparing financial reports. This can save your business time and money because you won’t need to hire and train full-time employees.
One of the biggest advantages of outsourcing is the expertise you get. Many outsourced accounting services employ professionals who specialize in different areas of accounting, from taxes to audits. This means you’ll have access to skilled accountants without the overhead costs of keeping them on staff.
However, outsourcing isn’t for everyone. Some businesses prefer the control and immediate access that comes with having an in-house team. Communication can sometimes be slower with an outsourced team, especially if they’re in a different time zone. But for businesses that want to focus on growth without getting bogged down by day-to-day accounting tasks, outsourcing can be a great solution.
Scaling Your Accounting Department as Your Business Grows
As your business grows, your accounting needs will change. When you’re just starting out, a small team or even one accountant might be enough to handle the books. But according to accounting department structure best practices, as your company expands, you’ll need more people and possibly more specialized roles to keep up with the added financial complexity.
At first, you might only need a bookkeeper or a staff accountant to handle daily tasks like data entry and paying bills. However, as the business grows, you may need to bring in an accounting manager to supervise the team and ensure everything runs smoothly. Later, when your company is even bigger, hiring a controller can help provide more in-depth analysis of your financials and help with strategic planning.
Scaling your accounting department doesn’t just mean hiring more people. It also means using better tools and technology to handle the larger volume of transactions and reports. Accounting software can help automate tasks and give you real-time financial data to make important decisions faster.
As your business grows, make sure your accounting department grows with it. The right accounting department structure and the right people can help ensure that your finances stay organized, accurate, and ready to support further expansion.
The Importance of Setting Up an Efficient Accounting Department
An efficient accounting department is crucial to maintaining any business. Accounting department structure best practices, in order to be successful, should record all financial transactions accurately to provide timely and accurate financial information to management, investors, and stakeholders.
This information is essential for making informed decisions about the company’s future, including financial investments, expansions, and cost-cutting measures.
An efficient accounting department structure ensures compliance with standards and regulations, reducing the risk of legal and financial penalties. This helps build trust and credibility for a company.
Establishing an efficient accounting department structure can streamline processes, reduce errors, and improve an organization’s overall performance. By identifying areas for improvement and implementing best practices, the accounting department can optimize an organization’s financial operations.
Accounting Department Structure: Summary
The four expectations you should have out of your accounting department include accuracy, timeliness, useful reporting, and high-level strategy and support. First and foremost, the information needs to get into the system correctly. This builds the foundation for producing insightful monthly reporting for management. Timeliness also plays a key role in your ability to make good decisions. This begins with following processes and procedures that drive an efficient accounting department to produce financials in a timely manner. Monthly reporting should go beyond the financials and include metrics, KPIs, and trend analysis shown visually through easy to understand charts and graphs. Lastly, you should expect high-level strategy and support when you need it. When looking at your accounting department, you should recognize the distinct roles and responsibilities for each member and realize the importance that each one plays in helping you run your business by the numbers.
FAQs About Accounting Department Structure
How many people should be in my accounting department?
The size of your accounting department depends on the size of your business and the complexity of your financial needs. Small businesses may only need one or two staff members, such as a bookkeeper and an accounting manager. As your company grows, you may need to break away from this simple accounting department organizational structure and add more roles, like a controller or CFO, to handle increasing financial tasks, reporting, and strategy.
What qualifications should I look for when hiring accounting staff?
When hiring accounting staff, look for candidates with relevant accounting degrees, certifications (like CPA or CMA), and experience in your industry. For entry-level positions, a basic understanding of accounting principles is important. For higher-level positions, such as a controller or CFO, candidates should have extensive experience and knowledge of financial strategy, budgeting, and reporting.
How often should my accounting department generate financial reports?
It’s important to produce financial reports regularly to keep track of your company’s financial health. Most businesses generate monthly financial reports, including income statements, balance sheets, and cash flow statements. Additionally, quarterly and annual reports are essential for broader financial analysis and tax purposes.
Can my accounting department handle taxes, or should I hire a separate tax professional?
While your accounting department can handle basic tax-related tasks, such as payroll taxes and sales tax filings, it’s often a good idea to consult with or hire a tax professional, especially for more complex tax situations. Adding a tax professional to your accounting department structure ensures compliance with changing tax laws and can help maximize deductions and credits.
How can I ensure my accounting department is protected from fraud?
Preventing fraud starts with setting up strong internal controls, such as separating duties among different staff members, requiring multiple approvals for large transactions, and regularly reviewing financial statements. A good accounting department structure should have checks and balances, like having an accounting manager or controller review the work of the staff accountant. You should also consider regular audits, either internally or externally, to catch potential fraud early.
What is the difference between accounting and finance departments?
While closely related, the accounting and finance departments serve different purposes. The accounting department focuses on day-to-day record-keeping, managing transactions, and ensuring compliance with accounting rules and regulations. The finance department, on the other hand, focuses on the long-term financial planning, analysis, and strategy of the business, including budgeting, forecasting, and investment decisions. In many companies, the CFO oversees both departments.
How do I know if my accounting department is running efficiently?
An efficient accounting department consistently produces accurate, timely financial reports and meets deadlines for tax filings and audits. You can gauge efficiency by tracking how quickly financial information is processed, the accuracy of financial statements, and how smoothly the department operates. Implementing accounting software, automating repetitive tasks, and regularly reviewing internal processes can help improve efficiency.
What is the role of accounting software in a modern accounting department?
Accounting software is essential for modern accounting departments, helping streamline tasks such as invoicing, payroll, and financial reporting. Tools like QuickBooks, Xero, or NetSuite automate data entry, track transactions, and generate reports, reducing errors and saving time. A good accounting system also makes it easier to scale the department as your business grows.
Matt Garrett is the Founder and Chief Executive Officer of TGG. He is a regular speaker across the country on behalf of Vistage educating business owners on the need for sound financial practices, and is Vice President of the Board of Directors of FINACA. Under Matt’s leadership, TGG has received the following recognition: INC. 5000 top companies in the U.S. five years in a row; one of “San Diego’s Fastest Growing Companies” the past four years; and is among San Diego’s “Best Places to Work.”
