Financial operations involve a number of different functions at varying levels. At the most basic level, it encompasses basic accounting practices such as journal entries and the maintenance of general ledgers and sub-ledgers.
Businesses have many functioning operations that process and manage the various financial activities that are recorded in these documents. Management of these operations will typically be divided according to their functionality. For example, a business may have a team that is responsible for managing accounts receivable. This refers to all transactions between the business and its customers, for which full payment has yet to be received, and can also involve collection of unpaid accounts.
Another team may be responsible for credit management, which is the development of policies for evaluating the creditworthiness of customers and following through with them to ensure timely payments.
Payroll is the process of administering compensation to employees for the work that they perform for the business. A dedicated team of accounting professionals will be responsible for managing this function, too. Payroll involves more than just issuing paychecks. It consists of tracking hours worked, benefits accrued, time off, vacation, overtime hours, sick time, tax, social security and retirement withholdings, and many other facets of compensation.
Financial operations management is responsible for many other accounting functions, such as accounts payable, account reconciliation, cash management, intercompany accounting, lending, and equities management. All of these functions involve the administration and accounting for various subsidiary elements of the business’s overall financial activity.
Financial operations management will also be responsible for the administration of accounting automation, which is the use of software applications to perform the essential functions involved in the process of maintaining a business’s financial records. Also known as computerized accounting, the technology is becoming more popular and widely used, as businesses and organizations see the advantages of migrating their accounting systems from a manual, spread-sheet dependent or paper-based system to one that is completely digital and automated.
Financial operations management is also responsible for the production and analysis of various financial statements produced from the general ledger, such as income statements, the balance sheet, and cash flow statements. Management will aide in the analysis of the information contained in these statements for the purposes of making evaluations about the business performance.
Lastly, one of the most important functions is integration. All of the disparate functionalities concerning the business’s financial activities are related, and ultimately must be integrated. They cannot perform entirely independently of one another, and in many cases, one functionality feeds into or supports another.
Financial operations is an umbrella term that refers to all of these related activities, and financial operations management is responsible for making sure that they are properly integrated to support the overall health and performance of the business.
