Types of Accounting in e-commerce business

There're three positions in the company that, at first glance, have the same financial duties but they actually do have apparent differences. Every entrepreneur should know how to work with each of them and with the documents they prepare to use time more responsibly.

It's excellent if your company has all three specialists so they could prepare all kinds of financial documents that business needs. We’re talking now about:

  1. Accounting

  2. Financial accounting

  3. Managerial accounting

What's an accounting and what's the difference between financial and managerial accounting?

An accountant formes an accounting. We won't list all the responsibilities of an accountant in this article. There are specific cases and duties for an accountant in each business, but mainly they work with calculations, ensure prompt and accurate payments, and conducts the transaction. Also, they organize and maintain accounting documentation and collects data for the financier. It's information that is observed by an accountant and also by a financier.

The entrepreneur may think that accounting is something confusing and complicated. Usually, he doesn't want to ask questions about something too obvious not to look ridiculous. Accounting is a huge pile of reports and an entrepreneur should not be involved in all the information declared there.

That is why the business needs a financier. There aren't so many accountants who, in addition to their work, still realistically understand the financial accounting and can explain it to the entrepreneur. The financier's task is not only to observe and form the financial accounting professionally on the basis of accounting documentation but also to prepare a clear interpretation of the essential information. That is to say, he converts data in financially understandable reports for the entrepreneur so that he can quickly make confident decisions

Financial management isn't just "those papers" that appear on the entrepreneur's desk from time to time. If the entrepreneur is still afraid to dig deeper into finances, and financier doesn't bother to explain simple stuff than the business continues to exist in a paradigm of the world where entrepreneurs and accountants don't completely understand one another.

Let's compare the possible types of financial statement.

The accounting should deal with information relating to the accounting of cash flows, cash operations, debt accounting, assets, inventories, and information on cashless settlements. Accountings reports are provided quarterly or annually. Financial accounting works with the economic and property state of business, with the size and distribution of investments, the cost of financing, and the number of debts. Financial accounting reports must be prepared monthly and quarterly.

However, none of these reports yet complete all financial picture and give all info about the whole financial status of the business. Only managerial accounting contains analyzing financial information, measurements, and predictions concerning business profits and expenses, results of identified problems and predictions loss. Managerial accounting assist entrepreneur to make quick and effective decisions concerning financial management without the need to accept and process a vast pile of information.

If still the entrepreneur doesn't understand a particular index in the accounting or even in the financial accounting, it is not a tragedy. Anyway, he has far more business concerns than any employee, and he can't cover every level physically. His thoughts should be focused on the main thing and only scratched the surface to make management decisions. He does not need to understand all the indexes he doesn't "feel" and which will not help in making the decisions right here right now.

For example, such documents like income and expense analysis, sales and budget analysis, cost of goods, forecast problems, etc. He may just be confused and overwhelmed with these complicated terms and will not be able to make effective decisions based on it.

The basis of any strong business is the proper distribution of responsibilities and competent delegation of tasks. If the team is formed of professionals who are in their area of ​​responsibility, then the entrepreneur has the opportunity to lead the team, working mostly with managerial accounting.

It's not worth to afraid of financial management and not to know everything in the business. It is enough to be responsible for your decisions and to form a team of real professionals.

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