Business Accounting Vs Financial Management- What’s The Difference

by Aanya Alberto A geeky girl and Vape Enthusiast

Accounting and financial management are separate functions where accounting requires reporting past financial transactions and financial management requires planning about future transactions.

However, if you are into the new business world and want to know how business accounting services differ from financial management, this article will help you.

Accounting Overview:

Accounting is measuring, processing and recording financial transactions of a business. The process is about summarizing, analyzing and recording information that needs to be reported to management, creditors, shareholders, etc.

Now, accounting can be divided into different fields such as financial accounting, management accounting as well as tax accounting. The two types are:

• Financial Accounting- this is about reporting financial information to external users, suppliers, creditors and more.
  
  
• Management Accounting- reporting financial information to internal users like employees or management is known as management accounting.

Financial Management Overview

Financial management is different from business accounting services in many aspects. It helps manage the finances and economic resources of the organization. It is more about managing the economic activities of the company to achieve financial objectives.

The main objective of financial management is creating wealth for the business and investors to generate cash and earn a good return by using organizational resources at its best.

Key Elements Of Financial Management

• Financial planning involves funding; the management of the company needs to ensure that sufficient funds are available at the time of need for running the business. Good financial planning ensures medium, short and long-term requirements of funds might be fulfilled.
  
  
• Financial control is an important element of management since it ensures the proper utilization of the company’s assets.
  
  
• Financial decision-making deals with financing options, investment and dividends part of the business so they can generate a good return on investment and distribute the wealth among shareholders. 

Main Differences Between Business Accounting Services And Financial Management Services:

Here are the main differences in accounting services and financial management services:

• Accounting is more about reporting, whereas financial management involves the assets and resources of the company and their proper utilization.
  
  
• The main objective of accounting is providing financial information using proper procedures and rules whereas the objective of financial management is creating wealth, generating cash by using the company’s assets.
  
  
• Accounting reports the financial information to investors, creditors whereas financial management is used by the management of the company.
  
  
• Accounting services are of two types- financial accounting and management accounting. Financial management is a process with three elements such as financial planning, financial control, and financial decision making.
  
  
• Accounting is all about reporting past transactions whereas financial management involves planning about future financial transactions.
  
  
• Accounting gives the financial position of the organization whereas financial management gives a holistic view of the business activities and provide proper insight into the future generation of wealth.

Finally, business accounting services are different from financial management in many aspects. While one concentrates on the past another looks at the current financial condition of a business.

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Created on May 28th 2019 05:08. Viewed 533 times.

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