The Misunderstood Finance Department

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When we hear about the finance department, we only imagine them simply counting money for the business. This is when I started to doubt that it's all they do, so I researched further into it and found out that there's much more to the finance department than just counting money.  

Firstly, the finance department, as we all know, deals with bookkeeping. Chron defines bookkeeping as a 'process by which all subsidiary ledges and journals of the organization are summed up for a given time'. Essentially, it means it takes note and condenses all relevant purchases and revenue of the company in the span of different time periods, usually quarterly and annually.  

These are then converted into reports such as profit and loss accounts, and balance sheets. A profit and loss account, as the name suggests, accounts the profits and the expenses the business has made which includes the revenue, cost of producing goods, expenses, tax and interest. On the other hand, the balance sheets summarizes all the assets and liabilities the company has in that time period. 

AccountingTools states that the assets are further divided into fixed and current assets. Fixed assets are the assets that cannot be easily converted into cash like properties, computer equipment, machinery, computer software, etc. On the other hand, current assets are assets that can easily be converted into cash. 

For liabilities, Investopedia states that it is divided into current and long-term. Current liabilities are the company's debts and obligations that are needed to be paid in a short amount of time, usually one year. As for long-term liabilities, they are simply the debts and obligations that are needed to be paid nowhere in the near future (e.g. long-term bank loans, mortgage loans, etc.) 

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These reports are then further used to make budget planning and forecasting, for example cash flow forecasts and creating departmental budget plans. These tools are used to create and/or modify business plans as they will tell what the company is capable of with its existing resources within the near future. 

In conclusion, there is much more to the finance department than money as they also deal with the company's assets and liabilities. Also, they make help the business make future business plans with analyses of its own financial resources. This made me realize that people working in finance related jobs are very analytical and careful as they are required to bookkeep every single transactions and business activities with minimal errors. As for the analyses, they must consider all minute conditions of the business and improve it with the existing financial resources. As a potential business owner, this is a skill that I need to learn to keep the business surviving so I will give particular attention to the university class that are heavily related to this department. 

-William Tjen