Internal Financial System Of Enterprises
An internal financial system of enterprises is meant to provide an efficient and secure mechanism of recording, controlling and monitoring all financial activities that take place within the business. This system will enable the business to produce more accurate financial statements, better manage risk and make timely and reliable decisions.
The purpose of establishing an internal financial system of an enterprise is to guarantee the protection of assets and fund, monitor cash flows and enable the business to better forecast and analyze its financial performance. This system usually includes the creation of a financial budget, setting up proper bookkeeping systems and employing procedures to prevent fraud. A company can opt for different approaches for setting up its internal financial system.
One approach is to structure the system in such a way that it consists of the following divisions: Accounting and Reporting, Financial Planning and Analysis, Cash Management, Revenue and Expense Accounting, and Tax Accounting. The Accounting and Reporting division is responsible for preparing and submitting accurate financial reports, setting up internal accounting controls, preparing and reconciling balance sheets, income statements and other financial documents, and maintaining the financial records of the enterprise. The Financial Planning and Analysis division is responsible for creating financial models and providing analysis and forecasts of future revenues and expenses. They also create and manage the company’s budget and make financial decisions accordingly. The Cash Management division is responsible for managing the company’s incoming and outgoing funds, creating invoices and monitoring cash flow. The Revenue and Expense Accounting division is responsible for creating and maintaining records related to sales, purchases, payments and receivables. The Tax Accounting division is responsible for calculating and submitting the appropriate taxes to the various tax agencies.
The other approach to setting up an internal financial system of an enterprise is to structure it in such a way that it consists of the following divisions: Accounting, Financial Planning, Accounts Payable and Receivable, Payroll, Inventory, Cash Management, and Customer Service. The Accounting division is responsible for setting up and maintaining proper bookkeeping and accounting systems and ensuring compliance with applicable accounting principles. The Financial Planning division is responsible for creating and maintaining financial models and providing analysis and forecasts of future revenues and expenses. The Accounts Payable and Receivable division is responsible for maintaining records and managing payments related to receivables, payables and other financial transactions. The Payroll division is responsible for managing employee payroll and creating invoices. The Inventory division is responsible for managing and tracking inventory levels. The Cash Management division is responsible for overseeing incoming and outgoing funds, creating invoices and monitoring cash flow. The Customer Service division is responsible for resolving customer inquiries.
Whichever approach to setting up an internal financial system of an enterprise is chosen, the end goal is always the same – to provide the business with accurate financial statements, better manage risk and make reliable financial decisions in a timely manner. It is essential that the business understand the purpose of the system and its components in order to create an effective and efficient internal financial system of an enterprise.
