Accounting Department StructureThis presentation is sample from the “Financial Training for Business Owners and Non-financial Managers” developed by me. Big part of this material was collected from different open online resources, links and references can be provided at request. If you are interested in the full content of this training or just want to say “hi”, please contact me. Aslan.umarov@gmail.com.

Key Definitions:• Accounting is measurement, processing and communication of

financial information about economic entities. Accounting, which has been called the "language of business", measures the results of an organization's economic activities and conveys this information to a variety of users, including investors, creditors, management, and regulators. Practitioners of accounting are known as accountants. The terms 'accounting' and 'financial reporting' are often used as synonyms.

• Finance is a field that deals with the study of investments. It includes the dynamics of assets and liabilities over time under conditions of different degrees of uncertainty and risk. Finance can also be defined as the science of money management. Finance aims to price assets based on their risk level and their expected rate of return. Finance can be broken into three different sub-categories: public finance, corporate finance and personal finance.

Who is in charge of Accounting and Finance?Depending on Company size• For large and mid size

companies it is CFO (Chief Finance Officer)• For small companies even

Vice president for finance or a controller

For small and mid-size businesses accounting and finance functions are usually combined. Same goes for accounting and finance roles…what stays the same is the function itself…

• Record transactions• Prepare reports• Maintain the accounting software• Process all the paperwork• Record transactions in general ledger

Typical Roles of Accounting people:

• Insurance • Risk management,• Contract administration • Pricing, • Internal auditing, • Investor relations,• Cash management• Bank relations

Typical Roles of Finance people:

Role of accounting:

• Develop accounting policies and procedures • Establish and maintaining record keeping processes • Daily record transactions in business systems

Classifies and records activities (transactions) in monetary terms:

• Measure business performance over a period of time• Show in numbers how business is doing at given date

Interprets and presents these records to:

• Projects, in monetary terms, future activities depending on course of action considered by organization

Projects future financial performance

Collect databookkeeping

Prepare reports

PlanBudgeting

and forecasting

Make decisions

Execute

Requirement to accounting information

Key to success is repetition. Most common repetitive process in accounting in monthly closing cycle. Closure helps to see how the company is doing in terms of its objectives, including profitability.

• Depends on user needsAccurate • All info needed for decision is includedComplete • Cost of info provision is less than benefitCost effective• So non-accountant is able to understandUnderstandable • Only important information is providedRelevant • Available when neededAvailable • Provided at appropriate time Timely • Provides summary and diagrams Easy to use

Requirements for Information Provided by Accounting and Finance

Company Working Cycle from Accounting Perspective

Different users need different type of accounting

Management Accounting Financial Accounting

Users of information and purpose:

Internal decision makers: managers, to plan, control, make decisions

External decision makers: shareholders, banks, government, to make investment decisions etc.

Format of information Any form useful for business managers Regulated by law, US GAAP, IFRS etc.

Content Historical information and future predictions Only historical information

Level of detail Depending on management needs Prescribed by legislation

Frequency of reporting Annually, Quarterly, monthly, weekly, Annually, quarterly

What else about Accounting?

• Besides the fact that accounting is boring, in this particular presentation you will learn:• Purpose of accounting department • Key roles in accounting department• Key processes assigned for each role• Key performance indicators

Chief Finance Officer

Accountable for the administrative, financial, and risk management operations of the company, to include the development of a financial and operational strategy, metrics tied to that strategy, and the ongoing development and monitoring of control systems designed to preserve company assets and report accurate financial results.

• Strategy formulation and execution• Established commercial credentials• Analytical experience (not only financials)

Strategic Leadership

• Operational finance, including FP&A (financial planning and analysis)• Treasury, balance and financing skills• Control, accounting and cost cutting skills

Core Finance Areas

• financial and non-financial risks (e.g. cyber risk)Risk Managing Skills

• Technical finance experience in structuring deals• Change and project management• Funding, capital market experience• Investor relations

Merger and Acquisition

• Transformation and change management Management Skills

• Able to manage legislative and increasing tax requirements • Technology and automation • Cross-cultural, cross-market business and finance experience

Other

CFO Skills and Experience

CFO should have strong background in business and art, to turn accounting actions client-centric and accounting information useful for decision making

• Financial Performance • Financial Control• Risk Management • Financial Operations

Holds the Vision for:

• Delivers business expectations to the team

Represents the Interests of the Business

• Understands & delivers the ultimate support role for the business units • Delivers the expectations of the BU managers

Represents the Customers

• Sets right priorities for the team based on relevant metrics, Boards and Management team expectations

Owns the Priorities:

• Renovate, reissue and maintain the accepted practices and standards best fitting current and ever changing business environment

Creates Acceptance Criteria:

CFO Leadership Role

CFO takes part in strategic decisions, sets financial goals and priorities for the company and provides leadership role model for the support services and company staff in general

• Assist in formulating the company's future direction and supporting tactical initiatives• Monitor and direct the implementation of strategic business plans• Develop financial and tax strategies• Manage the capital request and budgeting processes• Develop performance measures that support the company's strategic direction

Planning

• Participate in key decisions as a member of the executive management team• Maintain in-depth relations with all members of the management team• Manage the accounting, human resources, investor relations, legal, tax, and treasury

departments• Oversee the financial operations of subsidiary companies and foreign operations• Manage any third parties to which functions have been outsourced• Oversee the company's transaction processing systems• Implement operational best practices• Oversee employee benefit plans, with particular emphasis on maximizing a cost-effective

benefits package• Supervise acquisition due diligence and negotiate acquisitions

Operations

• Oversee the issuance of financial information• Personally review and approve all regulatory filings and reports with the Securities, Taxes

and Exchange Commission• Report financial results to the board of directors

Financial Information

ToolsDaily/Weekly Cash ReportFlash ReportProjectionsFluctuation AnalysisRatio AnalysisBusiness, strategic, and contingency plansHuman resource toolsCash managementCost reduction strategiesRatio analysis and benchmarkingLean management techniquesRisk analysisMergers and acquisitionsKey performance indicatorsOpen source softwareProject management softwareWorkflow ToolsDynamic Benchmarking Tools

CFO KEY DUTIES

CFO has number of duties that require high level of professional knowledge such as core finance and management accounting

• Understand and mitigate key elements of the company's risk profile• Monitor all open legal issues involving the company, and legal issues affecting the

industry• Construct and monitor reliable control systems• Maintain appropriate insurance coverage• Ensure that the company complies with all legal and regulatory requirements• Ensure that record keeping meets the requirements of auditors and government

agencies• Report risk issues to the audit committee of the board of directors• Maintain relations with external auditors and investigate their findings and

recommendations

Risk Management

• Monitor cash balances and cash forecasts• Arrange for debt and equity financing• Invest funds• Invest pension funds

Funding

• Participate in conference calls with the investment community• Maintain banking relationships• Represent the company with investment bankers and investors

Third Parties

Ratios Industry Goals

Owner's Equity Ratio (Equity To Asset)Net Operating Return on AssetsNet Operating Return on SalesAsset TurnsTotal Expenses to Total Net SalesPre-tax Return on EquityGross Margin Percent - TotalTotal Direct Expenses to Total Net SalesTotal Indirect Expenses to Total Net SalesSales per EmployeeEquity to SalesGearingInterest LeverageDebt Service RatioQuick RatioCurrent RatioAverage Collection PeriodReceivables TurnoverAccounts Payable days takenWorking CapitalWorking Capital TurnoverBreakeven SalesTotal Inventory TurnsDays' Sales in InventorySales to Inventory

CFO KEY DUTIES, Continued

• On business KPI’s. KPI’s must be client-centricFocus

• Partnership with business operationsStrengthen

• Improve processes aligned with focusAchieve

• Provide stakeholders with timely and accurate financial information and forecasts

Access

• Cost effectiveness and improved business efficiencies Increase

CFO Role in General

• Have net margins and key financial ratios improved?

• Are overhead costs in line with industry peers?

• Has days sales outstanding (DSO) been reduced?

• Is needed financing in place at attractive rates and terms?

• Is the cash flow cycle running smoothly?

• Are effective tax reduction strategies being utilized?

• Does the finance department have input into the company’s strategic direction?

• Is finance making value-added contributions to the company’s bottom line?

• Is the CFO an active and visible part of the executive management team?

• Is the information generated by the finance department accurate, timely and actionable?

• Is the company’s supply chain operating smoothly and efficiently?

CFO should be able to answer following basic questions:

Chief AccountantGuides the team to ever-higher levels of cohesiveness, self-organization, and performance. Apart of usual job routine, Chief accountant deliverable is a high-performing, self-organizing accounting team.

Key Duties• Verify, allocate, post and reconcile transactions• Produce error-free accounting reports and present results• Analyze financial information and summarize financial status• Provide technical support and advice on management• Review and recommend modifications to accounting systems and procedures• Participate in financial standards setting and in forecast process• Provide input into department’s goal setting process• Prepare financial statements and produce budget according to schedule• Direct internal and external audits to ensure compliance• Plan, assign and review staff’s work• Support month-end and year-end close process• Develop and document business processes and accounting policies to maintain and strengthen

internal controls

Leadership Role

• Expert in Accountancy and advisor• Coach • Impediment bulldozer • Facilitator

Key Competencies• BA/BS in Accounting • Supervisory Experience • PC proficient • ERP experience • Strong communication skills• Cost accounting • Tax, transfer pricing

Chief Accountant Summary ToolsChart of Accounts General Ledger ERPPlans:Strategic plan Business plan Budgets Cash-flow forecast Organizing:Accounting and financial manualsJob descriptions Controlling: Internal control policyAuthority delegation policy Internal and external audit Fixed asset register Vehicle policyInsurance policy Monitoring:Evaluation report BvAAudit reports Financial statements Management reports

The best chief accountants rise up through the ranks and earn a spot at the management table. The person in this role needs to develop effective communication skills that translate beyond his/her immediate financial staff to relay company objectives to the entire staff as well as being able to translate complicated financial terms to senior managers or board members.

Timeliness KPI’s# Days to close the books and sign off the month

# Days to close the books and sign off the year

# Time to process invoices

# Time to process transaction /payment

# Time spent for input data per week

# Payroll processing time

% Financial reports submitted on time

% Travel expense accounts processed in three days

# Days in accounts receivable

Quality KPIs% Input errors detected

% Invoices accuracy

% Accuracy of transactions /payments

# Factual errors identified in reports

# Errors reported by outside auditors

% Audit recommendations implemented

% Transaction items requiring reconciliation

% Collection rate of outstanding amounts

Generic KPIs# Internal complaints received

# Internal customer satisfaction index with accounting services

% Tasks finalized on time

% Internal procedures updated

% Processes optimized

# Accounting employees to FTEs ratio

# Accounting employees engagement index

KPI’s Related to Department Management

Accounts Payable Clerk

The payables clerk is accountable for verifying proper payment approval, processing payments in a timely manner, and ensuring that discounts are taken.

Key Skills

2+ years of Accounts Payable experience

Detail oriented, professional attitude, reliable

Must be able to follow standard filing procedures

Key Performance Indicators

# Days to close the books and sign off the month

% Input errors detected

% Accuracy of transactions /payments

Key tasks

• Match supplier invoices to authorizing purchase orders and proofs of receipt

• Take all economical supplier discounts

• Obtain payment approvals for non-cost of goods sold invoices

• Enter all supplier invoices into the payables software

• Issue notices to suppliers regarding rejected invoice line items

• Process expense reports

• Process procurement card payments

• Notify managers when budgeted expenditure levels have been exceeded

• Pay supplier invoices when due

• Update the supplier master file

• Reconcile accounts payable to the general ledger

Tools • Budget

• Payment approval policy

• Vendor Discount

• Travel Expense policy

• Docs Requirements for disbursement

• Payment processing guidelines

• ERP AP Journal

• Month end closure guidelines

• Year end closure guidelines

• Account Reconciliation procedures

• Reports, KPI’s, Dashboards

• Other policies, procedures & reports

Accounts Payable Clerk Summary

Purchase order Invoice

Match Invoice to

P.O.

Copy and distribute CodeFile

RecordData entry

and allocation

Queued for

processing

ApprovePayArchive

Send Invoice

Accounts Payable Daily WorkflowRelevant Metrics and KPI’s

Admin Metrics:

• Number of Invoices Processed Per Day Per Operator

• Average Cost to Process an Invoice (By Invoice Time)

• Exception Invoices as a Percentage of Total Invoices

• Average Time to Approve an Invoice from Receipt to Payment

• Discounts Captured as a Percentage of Discounts Offered

• Erroneous Payments as a Percentage of Total Payments

• Electronic Invoices as a Percentage of Total Invoices

• Duplicate payments

Financial Metrics:

• Accounts Payable Turnover Ratio

• Accounts payable days

AP Metrics and Work-Cycle examples

Task Deadline

Verify all invoices have been entered and updated for the month being closed

Verify that all invoices received have been updated Verify any necessary invoice adjustments have been updated for the month being closed

Verify all standard entries have been updated for the month being closed

Verify the Accounts Payable total is in balance Transfer the General Ledger data to the General Ledger for period being closed

Verify the General Ledger transactions have successfully transferred to the General Ledger

Accounts Payable Aged Trial Balance in Detail Vendor Status Report Other Reports

Accounts Payable Month-End Check-list

Accounts Receivable Clerk

Accountable for collecting the maximum amount of overdue funds from customers, which may include a variety of customer location techniques, collection methods, legal claims, and the selective use of outside collection services.

Accounts Receivable Clerk SummaryKey Skills

Information management

Verbal and written communication skills

Problem analysis and problem solving skills

Key Performance Indicators

Debt coverage metrics

Budget vs. Actual billing & Balance

Aging Summary vs. Age overdue target

Key tasks

• maintain up-to-date billing system

• generate and send out invoices

• follow up on, collect and allocate payments

• carry out billing, collection and reporting activities according to specific deadlines

• monitor customer account details for non-payments, delayed payments and other irregularities

• generate age analysis

• review AR aging to ensure compliance

• maintain accounts receivable customer files and records

• investigate and resolve customer queries

• develop a recovery system and initiate collection efforts

• communicate with customers via phone, email, mail or personally

Tools • AR Journal

• Credit Policy

• Collection guidelines

• Budget

• Audit management letter

• AR Month/Year End Check-list

• Internal Control policy

• Customer information

• Billing policy

• Customer Sales reports

• Aging Report

• Other reports

Receivables are second big part in Balance Sheet freezing the Cash that can be used for other important items, all ratios should reviewed carefully

Customer makes purchase

Create Customer Invoice

Print and send customer invoice

Did customer pay in time?

Apply early discount if applicable

Receive and apply payment

Record Deposit

Print A/R Report

Assess financial charge if applicable

Print and send financial charge invoice

Print statements

Did customer pay?

Print AR aging schedule report

Is this invoice uncollectable?

Write off sale as uncollectable

YES

NO

YES

NO

YESNO

AR Relevant Metrics and KPI’sCredit and Collection Measures• Collection Effectiveness Index (CEI)• Days Sales Outstanding• Days Average Collection Rate• Prior Month's Past Due Collected• Percent Over 61 Days -- or Percent of Any Age Category• Bad Debt to SalesDepartment Performance Metrics • Active Customer Accounts per Credit and Collection Employee• Operating Cost per Employee• Cost per Sales• Cost of Collections• Transaction Turnover per Accounts Receivable Employee• Operating Cost per Transaction

AR Relevant KPI’s and Work-Cycle Example

Accounts Receivable Month End Check ListCheck Task Deadline

Verify that all Sales have been posted for the month

Verify that all cash receipts have been posted for the month

Verify all adjustments to customer accounts have been posted

Verify all inventory receiving have been posted

Apply unapplied credits to customer accounts

Process finance charges and print invoices

Print an Accounts Receivable trial balance in detail

Review the trial balance for accuracy

Make all necessary corrections to accounts before running statements

Print statements

Print Monthly Sales Analysis Reports

Transfer the General Ledger Distribution to the General Ledger

Reconcile the General Ledger Accounts Receivable balance to the Accounts Receivable month end balance

Payroll Clerk

The payroll clerk position is accountable for collecting timekeeping information, incorporating a variety of deductions into a periodic payroll, and issuing pay and pay-related information to employees.

Key Skills

• Experience of payroll processing

• Working knowledge of relevant software

• Understanding of basic accounting principles

Key Performance Indicators• # of mistakes in payroll calculation• Time be-weekly payroll processing • Overtime vs. regular salary per

employee• Overtime vs. regular salary per

department • Total cost of work force• Management Span Control• High performer turnover rate• Career path ratio• New hire high performer rate• Percent of high performers

Key tasks

• Collect, compile and enter payroll data• Review and verify source documents• Calculate and post payroll deductions• Process payroll by established deadlines• Issue statements of earnings and deductions• Reconcile employee deductions• Investigate and correct payroll discrepancies and errors• Update payroll records by recording changes including insurance coverage, salary increases• Process new employees, terminations, transfers and promotions• Prepare and print payroll reports of earnings, hours worked, taxes, insurance, leave• Address employee's pay-related concerns and provide accurate payroll information• Complete requests for pay-related documents including statements and verifications• Produce federal, state and local tax payments• Develop, manage and maintain comprehensive payroll records• Ensure compliance with federal and state regulations and guidelines

Tools

• ERP Payroll module

• HR policies and procedures

• Payroll dashboards

Payroll Clerk SummaryPayrolls and taxes should be paid in time. This is very important to make sure that deadlines are met. No excuses!

Payroll ClerkWork-Cycle

example

Payroll Clerk Month End Check List

Check Task Deadline

Verify that all paychecks and payroll tax batches have been posted

Print monthly total reports

Verify the totals and make any adjustments necessary.

Reconcile paychecks

Accrue vacation hours

Clear month to date totals

Transfer the G/L distribution to the General Ledger

Fixed Asset Accountant

The fixed asset accountant position is accountable for recording the cost of newly-acquired fixed assets (both tangible and intangible), tracking existing fixed assets, recording depreciation, and accounting for the disposition of fixed assets.

Key Skills

• Fixed asset accounting experience

• BA in accounting

• Detail oriented

Key Performance Indicators• Sales to fixed assets• Fixed assets (net) to net worth

ratio • Percentage of IT expenditures to

related fixed asset costs• Frequency and amount of

unreconciled items• Amount of fixed asset losses from

employee theft• Depreciation to Fixed Assets ratio

Key tasks

• Create and monitor a system of controls, procedures, and forms for the recordation of fixed assets.• Record fixed asset acquisitions and dispositions in the system.• Track the compilation of project costs into fixed asset accounts, and close out those accounts once

the related projects have been completed.• Reconcile the balance in the fixed asset subsidiary ledger to the summary-level account in the

general ledger.• Calculate depreciation for all fixed assets.• Review and update the detailed schedule of fixed assets and accumulated depreciation.• Investigate the potential obsolescence of fixed assets.• Conduct periodic physical inventory counts of fixed assets.• Recommend to management whether fixed assets should be disposed of.• Conduct analyses related to fixed assets as requested by management.• Prepare audit schedules relating to fixed assets, and assist the auditors in their inquiries.• Track company expenditures for fixed assets in comparison to the capital budget and management

authorizations.

Tools • Fixed Assets Journal

• Capital Budget

• FA accounting policy and procedures

• Verification guidelines

Fixed Assets Accountant SummaryMake sure that all assets are present and properly used for business purposes. Periodic verifications help. FA accountant should be always involved in CAPEX decisions

Fixed Assets Accountant Work-Cycle Example

Business modeling

Capital budgeting Procurement

Installation Capitalization Operation

Maintenance Capital improvement

Decommissioning

Disposal

Inventory accountant

accountable for the ongoing analysis of process constraints, target costing projects, margin analysis, and tracing costs back to underlying activities. The cost accountant must also construct and monitor those cost-effective data accumulation systems needed to provide an appropriate level of costing information to management

Key Skills

• Excellent analysis skills

• Communication skills

• Familiar with production operations

Key Performance Indicators• Distribution Cost per Unit Shipped• Distribution Costs as a Percent of

Sales• Inventory Quality Ratio • Inventory Turns • Gross Margin • Return on Investment• Turn-Earn Index• Inventory days• Slow moving inventory level• Fill Rate

Key tasks

Inventory• Coordinate physical inventory counts and cycle counts• Investigate cycle counting variances and resolve issues• Update standard costs in the bill of materials• Review standard and actual costs for inaccuracies• Validate the cost of goods sold as part of the month-end close• Accumulate and apply overhead costs as required by generally accepted accounting principles• Work with the materials review board to locate and dispose of obsolete inventoryAnalysis• Report on breakeven points by products, work centers, and factories• Report on margins by product and division• Report on periodic variances and their causes, focusing in particular on spending variances• Analyze capital budgeting requests• Perform cost accumulation tasks as a member of the target costing group

Tools

• Inventory Turnover

• Inventory Accuracy

• Units per Transaction

• Slow moving inventory level

Inventory Accountant Summary Inventory holds most of the cash. It is very important that comprehensive and systematic process is in place to make sure that cash is not buried in slow moving inventory and customer demand is fully met

Some Inventory metrics:• Backorder Percentage• Inventory Service Level• Carrying Cost of Inventory • Inventory to Sales Ratio• Inventory Accuracy• Inventory Turnover• Units Per Transaction• Back Order Rate• Order Tracking• Rate of Return• Perfect Order Rate• Order Status• Stock outs • Stock Cover • Receiving efficiency• Lead Time• Put-away• Order picking/packing• Inventory Turns or Inventory Days on Hand

Inventory Accountant Month End ChecklistCheck Task Deadline

Verify all inventory receiving have been posted

Verify all inventory adjustments have been posted

Verify all inventory transfers and vendor returns have been posted

Print an Inventory trial balance in detail.

Review the trial balance for accuracy.

Make all necessary corrections to accounts before running statements

Print Monthly Inventory Sales Analysis Reports

Print Inventory Valuation Report

Reconcile the General Ledger Inventory balance to the Inventory Journal month end balance

Reconcile sales, cost of goods sold, inventory, and other General Ledger account totals

Tax AccountantThe tax accountant position is accountable for the collection of tax-related information, reporting to taxation authorities at the federal, state and local levels in a timely manner, and advising management on the tax impact of various corporate strategies.

• Devise tax strategies to defer or eliminate tax payments• Create tax data collection systems• Complete required tax reporting in a timely manner• Prepare and update tax provision schedules• Update the company sales tax database as tax rates change• Coordinate audits by various taxation authorities• Research and correct process errors that caused incorrect tax filings• Negotiate with tax authorities over tax payment issues• Research the basis for tax positions to be taken• Advise management regarding the tax impact of corporate strategies• Advise management on the impact of new laws on tax liabilities• Coordinate outsourced tax preparation work• Identify tax savings in prospective acquisition scenarios

ERP Specialist

Reduce Error Reduce Expenses

Auto Report Generation

Accuracy Automation Reliability

Easy document

production

Quick processing

timeUser Friendly

Security of Data

Instant Access to Data

Helpful for staff

Clarity Realtime transactions

One time entry

Key tasks

• Perform an application support for ERP systems users• Work with ERP systems users and management to determine

appropriate system configuration and setup. • Assist ERP systems users with data conversion. • Assist with testing new releases of ERP systems prior to use in a

production environment. • Create documentation and procedures guidelines for ERP systems

users. • Assign appropriate system access to users at different levels • Design, develop and maintain automated workflow processes. • Work as a Systems Analyst with knowledgeable persons to help define

user needs and develop data processing solutions. • Analyze and troubleshoot ERP system issues reported by end users. • Design, develop and maintain reports used by technical staff and ERP

systems users.

Key Skills

• Understand ERP data schema

• Understand business practices and procedures

• Communication skills

ERP Specialist SummaryKPI’s• % of severity • % of incidents resolved

• Call abandon rate• Customer satisfaction

All business units are customers for accounting department. All accountants are customers for ERP specialist.