In my previous piece on the functions of accounting and finance department, I made some point about accounting and finance department being more than just a cost centre and have received over twelve emails asking me to do a brief write up on it.
This article is written to elaborate on ‘accounting and finance department are no longer cost centres’. In a nutshell, accounting and finance department stopped being costs centres ever since accountants and other finance professionals assumed driving seats in the board room.
It will be ideal for me to briefly in one sentence explain what a cost centre is. In common parlance, a cost centre is an activity centre that only cause cash outflow (causing the company to bleed financially). The implication of this our working definition is that a cost centre destroys value by way of constant outflow of cash.
How on earth will someone say that accounting and finance department is a cost centre if the above working definition for the purpose of this article is true? I personally don’t think that whoever is of this kind of opinion is right. Accounting department in my opinion is more of an investment center for reasons discussed in this post.
Generation next accountants are far from being part of a cost centre (going by our adopted definition of a cost centre) as they are equipped with soft skill sets of modern accountants. The importance of accounting in business as a whole is hugely undermined by those saying that accounting and finance departments are just ordinary cost centres.
Reasons why accounting and finance department are not just cost centres
Cost Savings: there are many ways that accountants save money for a company but for the purpose of this illustration, I will only comment on the pre-auditing function of a modern day accounting department. Through pre auditing, accountants working as internal auditors identify potential rogue and wasteful request for expenditure.
Risk Management and Analysis: ‘it will only take one risk to crumble a business’ was the words of a wise man who was once my mentor. Risk if not properly handled can tear down any business empire. This is where qualified accountants come in. Accountants are risk managers that understand special language of business. The unique blend of training acquired by accountants positions them in a special spot as far as risk analysis in concerned
Forecasting, projections and budgeting: the functions of budgeting, forecasting and projections in businesses have for long been tagged as an invaluable activity of accounting and finance department. It is a known fact that accounting staff of a company are the pillar of these activities.
Cyber Security Assurance: it is no longer an option for a company to have a cybersecurity savvy workforce as any that does not equip its staff with cybersecurity knowledge is doing so at their own peril. Accountants in their capacity as assurance officer play key role in cybersecurity assurance.
Compliance: being compliant is a serious business especially now that the new EU data protection rule has just kicked in. The nature of the trainings given to accountants makes it less cumbersome for accountants to guide companies accordingly. Accountants add value in this regard by not only saving costs but also by ensuring that the negative press that always come with non compliance is reasonably reduced.
Fraud Prevention: statistics has shown that companies loose more by way of fraudulent activities of stakeholders than they lose through economic downturn and the action of competitors put together. Accountants as fraud fighters work in tandem with other business process owners to ensure that frauds are nipped at its tip before it becomes a serious issue.
The aim of this article was to make a point that accounting and finance department are no longer cost centres as many think. This is because too many value adding activities are now taking place in accounting department.
For the points discussed in this article to be true, accounting staff have to continually update their skill sets in order to rightfully take their place in the department of accounting and finance.