Why are businesses in business? They’re in business to make money. Every last one of them. Nothing happens without money. Money comes in. Money goes out. Some of it hangs around as assets and profits. Somebody’s got to keep an eye on all that money. The Finance and Accounting departments play that role. Some of their functions and tools follow:
Money Coming In (also known as Accounts Receivable)
The revenue generated by sales of goods and services. These are payments received from customers.
Money Going Out (aka Accounts Payable, Payroll, and Tax)
Businesses maintain accounts from which they disburse payments. Generally, they use a conventional business checking account. Regularly, the bank account has to be resolved to ensure that it is full, accurate, and complete. Someone has to keep an eye on where the money is going. The authority to use it must be controlled and the account audited on a regular basis.
Of course, the Accounts Receivable department has to make deposits so there’s enough in there from which to pay the bills. Here are some examples of the kind of bills incurred:
| Electricity | Supplier Payments | Payroll checks |
| Gas | Water and Sewer | Rentals (e.g. Computers, Buildings, Vehicles) |
| Taxes | Internet | Phone |
Money as Assets (aka Asset Management and Inventory)
What does the company own? This includes every piece of equipment, every tool, every desk, and frankly every stapler. Production parts waiting to be used and sold are inventory assets. Part of the worth of the company comes from the assets owned.
Money as Liabilities
This is on the Balance Sheet. Bills might not have been paid, but we know that money is owed to someone. The balance sheet resolves assets and liabilities.
Money as Profit
An Income Statement, otherwise known as a Profit and Loss Statement. In general, this is Revenue minus the Expenses (money owed). Looking at the current situation and projecting the upcoming situation, the health and value of the business can be determined.
The General Ledger is the central collection of every transaction around and within the business. Every input, output, or action should be indicated there.
Balance Sheets and Income Statements are commonly use by creditors to evaluate the business and make decisions on whether or not to extend credit. Lines of credit are important to smooth peaks and valleys in cash flow. They are also critical to building the business.
ABOUT THE AUTHORS:
Shaniece Bennett, MBA, CPA – Bennett is the founder of Accutrak Consulting & Accounting Services, a Michigan-based accounting and tax services firm. She combines her 15 years of professional expertise with charisma while helping others achieve business, financial, and personal goals. She is noted for her personal approach by going beyond the numbers to add additional value. Her areas of expertise include individual and small business taxation, accounting, payroll, full-cycle cost control, budgeting and forecasting, and administration. She is an Expert-in-Residence at the Macomb-Oakland University Incubator.
Stephen Czerniak – Czerniak retired after a successful career that culminated in fifteen years of experience as an internal consultant and “change agent.” He is currently an Expert-in-Residence at the Macomb-Oakland University Incubator and a volunteer with the Troy Historic Village and Historical Society.
