The Relationship of Finance and Accounting to the Other Departments

The Finance Department in every company has in theory two primary areas of responsibility:

·         To safeguard the assets of the company by properly accounting for them, instituting internal controls to pre-vent their misuse or loss, and generally monitoring their proper use. In this role, Finance becomes something of a policing activity, making sure others don’t damage the company through their actions.

·         To organize all the data that it collects from company transactions and to present that data in a form that every-one in the company can use to more effectively manage their own functions and the company as a whole. In this sense, Finance provides information to help other departments—its customers—do their jobs.

While these functions should generally carry equal importance to the management of a company, they are not always carried out with equal enthusiasm by financial departments. In some companies, financial departments are more recognized for assertive policing than for serving the users of financial information. Policy constraints and procedural labyrinths seem to be the predominant preoccupation of these accountants, to the frustration of many outside the Finance Department. Yet, in other companies, the strong direction of operationally driven management can result in a financial department that is totally occupied with servicing a continuous flow of requirements for ad hoc information, at the expense of the protection function. In these companies, folks outside of Finance get their needs met, but auditors and others outside the company may be concerned about the safety of the company’s assets and the efficient use o fits resources.

In a perfect world, then, these functions would be balanced in a way that serves the best interests of the company’s owners. A financial department that implements adequate internal controls and then enforces them with appropriate levels of enthusiasm would have time and resources to serve the reasonable information needs of the enterprise as well. However, in reality, finding this balance is one of the most challenging management jobs in the company.