Question

Why does a company need both accounting and finance personnel? What types of problems might occur if accounting and finance personnel do not cooperate and work effectively together?

Answer 1

Accounting department simply takes care of the accounts of a firm, i.e maintaining proper books of accounts, taking care of the accounting standards while reporting financial statements. Keeping a track of all the accounts present in balance sheet and income statements. Filling of the tax returns and other taxes related documentation etc. All this comes under the accounting personnel.

While finance personnel have entirely different job. Their task is to fetch financing for the company. To have contact with banks or other lenders and get cheap financing as possible. Perform capital budgeting analysis for various new projects to be undertaken by the firm in near future and perform an extensive analysis for this to find the profitable projects and project cash flows out of them. Also take care of equity present out there for listed companies to keep a track of value of shares, when there should be a buy back decision to be undertaken. Thus we can simply say all the financing and investing decisions might be attributed to finance personnel.

Company requires both of them because tasks are quite different in nature. But cooperative working from both is essential because proper track of accounts would provide proper details to the finance personnel about the company's current financial status. Based on which they would make their decisions for whether company needs debt or equity financing. Is company in a condition to reinvest in projects and go for expansion or not. What kind of impact would the liquidity of company have on the shareholders perception. What should be the direction in which the finances should be taken where shareholders wealth could be maximized. Also if there are more of the expansion projects coming in then there has to be a change in depreciation methods for tax purposes from the accounting departments.

All such type of decisions requires co-operation from both the department personnel to ensure better financial status for company.