So, whats the difference?

The words finance and Accounting are often used interchangeably so the general view is that they mean the same thing. In reality, they both have their own very signed meanings and understanding them can help you to better value their purpose and make more use of the people and systems available to you.

Accounting is responsible for talking the story about what’s happened in the past. They assemble the financial data of your business to report on what has happened. This information is helpful in reviewing performance against what you wanted (budget) and satisfying government filing requirements.

Finance take that information and everything else available to them, to predict the future. They work closely with the senior team in a company to compile information on signed and expected sales, committed spend and agreed on terms for settling the payment. They also help to make sense of the historical data, explaining what has driven the results so far.

Finance without Accounting is almost impossible. It’s like driving a car without knowing how much fuel is left and whether all the parts are working.

What’s the purpose of these roles? 

Trying to get the same person to fulfill the roles of finance and accounting is never ideal. The purpose of both is very different and so are the skills and personalities required. Practically, the accountant does their job on looking after what’s happened, before handing over to finance to plan ahead.

If you split these roles and use them the way they are intended you will get much better results. Your accounting and finance people will be happier as they get to master their area of expertise. The accountant gets to focus on the important tasks required to keep everything above board and deliver reports in a timely manner for you to be able to make use of them. The finance person won’t get bogged down with managing legal requirements and reporting on historical information so they are free to advise on how you make the business more profitable and predictable.

As your business scales, getting the right accounting and finance professionals around you takes away a lot of the headaches of steering a business and makes it much easier for you to reach your goals. You’ll focus on high margin sales and profit opportunities that you might otherwise overlook.

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