Finance & Accounting
Companies cannot operate or survive without money. Whether your company intends to make a profit or it is organized as a non-profit, money will be involved in some capacity. The purpose of finance and accounting is to provide owners and managers of a business with an understanding of the movement, uses, and impact of money within the business.
Every organization needs to have positive cash flow. Simply put, it needs more money coming in than going out. Understanding finance and accounting can be further enhanced by understanding three basic, yet related steps: (1) money in (receipts) and money out (payments); (2) recording; and (3) reporting.
Step one is identifying the money coming in and going out. Entities can accumulate income from many sources, but usually it comes from the sale of their goods or services. Likewise, entities spend money to purchase goods or services. These transactions of income and expense are at the core of finance and reflect the operations of your organization.
Once it has identified its transactions, an organization must create a system to formally record the transactions. This system may be as simple as a handwritten ledger or spreadsheet; or as complex as a packaged solution (e.g., QuickBooks) or customized financial accounting package. Regardless of the system, the goal is to ensure that all transactions are compiled together.
The final step is to generate output from the system. Stakeholders want to know the financial status of the organization; the organization itself wants to analyze how it is doing or how it can improve; and government agencies or other legal bodies (e.g., IRS) demand accurate financial reporting of your business.
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