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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.
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 many transactions requiring basic accounting knowledge and understanding. They also must be thorough, have great attention to detail, and know fundamental accounting principles.
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.
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 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!).
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.
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.
This post was reviewed by our team of accounting and financial experts. TGG’s mission is to make business owners’ lives better through excellent financial management. We strive to provide the most up-to-date and objective information on accounting-related topics so our readers can make informed decisions based on factual content. All posts undergo a review process with at least one member of our Leadership Team to ensure accuracy.
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