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Monday, March 12, 2012

Contrast Between Accounting and Finance

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To better understand what basic finance is about in relation to accounting, we can summarize some important differences:  

Accounting  :
- Historical - Looks Back Predictive 
- Oversight and "Cop Like"
- Narrow Focus 
- Financial Only 
- Short Term Focus 
- Advocates Profits 
- Control Cost by Accounts Control 
- Rules and Compliance

- Looks Ahead  
- Service Oriented 
- Broader Focus 
- Financial and Non-Financial 
- Long Term Focus 
- Advocates Value 
- Cost by Process 
- Free From Rules

In order to have a solid level of finance in place, you may need to consider: 

1. Financial Performance Evaluation: A set of standard procedures to monitor the financial performance of your organization, including economic based measurements. 
2. Capital Budgeting: A process for evaluating how to invest in long-term assets or projects. 
3. Cash Flow Management: Forecasting procedures to better manage your cash inflows and outflows. 
4. Working Capital Management: A set of guidelines to direct the financing of your assets. 
5. Risk Management: Identifying risks, measuring the financial impact on your business, and implementing procedures to reduce significant risks.

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