Operational accounting is best defined as handling accounting matters that most directly relate to the financial side of running a company and have an impact on its success. The goal is to use operational accounting to find inefficiencies and also future-looking strategies that can help you with optimizing business operations.
After this blog, you’ll have a clear understanding of what an operations accountant does and, more importantly, what kind of benefits you can reap from seeking this type of expertise.
Duties Involved In Operational Accounting
Ultimately this practice encompasses 3 key areas of accounting work which are planning, directing, and controlling activities. Below we’ll detail each.
This involves using past data and historical trends in your accounting planning to do forecasting and projections of the future for operational planning purposes. To accomplish this, an accountant will gather revenue and expense reports for a specific period and work to break information down into specific buckets.
That could include breaking apart the data by:
- Cost type
Doing so allows your business to do a better job predicting what you’ll need for successfully managing day-to-day business operations.
Another key aspect of operational accounting duties is leveraging accounting to support and actually accomplish your company’s financial goals. The data collected in the planning phase can be used to execute in the distribution of resources, ranging from employees to technology or actual materials.
Plus, in directing activities, your accountant can ensure that the work being performed daily is happening within a realistic operating budget. This process of smartly guiding the company based on the assessments made in the planning phase can help your company achieve longevity.
While having and executing a plan is great, realistically you may find discrepancies between planning and directing activities. That’s why a good operational accountant will consider where a company is at and how it’s measuring compared to those original planning activities, to find discrepancies that need resolving.
Often the financial aspects of a business can become quite complex, by using controlling activities, an operational accountant can put reports together that show important KPIs in real-time compared to previous projections. This all goes a long way in facilitating important conversations about the business.
This part of operational accounting helps show which areas need investigating so that in turn you can adjust your forecasting to be more accurate or put better steps in place to support your company in meeting previous projections. This piece is focused on reviewing and advising those internal controls to ultimately work on optimizing your business operations.
Technical & Industry-Specific Support
While operational accounting duties encompass those three key activities, another factor to consider is the technical support you need to meet your own industry’s requirements. No two companies are alike, and different industries will need different operating systems and KPIs to measure success.
That’s why it’s important to vet your operations and work with an accountant that has real-world experience in different industries. They’ll be able to help you craft realistic accounting processes that best serve your business. Plus, they’ll know the latest regulations that affect your type of business, so you can have confidence you’re running it in a manner that’s compliant.
Operational Accounting vs. Financial Accounting vs. Managerial Accounting: How Are They Different?
While this question is somewhat complex, from a high-level perspective:
- Operational is heavily focused on the operating activities of a business, seeking to accurately record, measure, and refine them.
- Financial is outward-looking — it’s about prepping and sharing financial information and documentation with external stakeholders, tax agencies, and securities regulators, to name a few.
- Managerial is a holistic approach that touches many different aspects and is more focused on gathering and presenting financial information to be used in key business decisions. It’s also about refining and streamlining the accounting structure and processes to ensure its serving management.
How Does Operational Accounting Benefit You?
As a leader, you’re always looking for ways to make your business effective, efficient, and profitable. And operational accounting is a way to accomplish that.
It allows you to examine and refine what’s happening within the company and ensure your strategic goals and day-to-day activities are in alignment. Some of the ways it does that include helping you:
- Create plans for future growth that are stretching but realistic for your company.
- Distribute proper resources throughout the business to provide what’s needed to grow.
- Reflect on progress, identify problematic areas, and implement effective changes.
What to Look For With An Outside Partner
Having the right technical knowledge is certainly important, but it’s also crucial that expertise is married with experience. If you’re bringing on a partner to tackle your operational accounting, vet them to make sure they understand your industry and have a proven record of working with similar companies.
Also, if flexibility is important to you, make sure you have a partner who can meet your needs both through in-person or virtual solutions based on what you prefer. Also, think about what the future holds and ask if your partner is able to advise your business beyond just operational accounting. Make sure you’re able to work with a team whose ability to advise your business can grow alongside you.
Looking to create a strong accounting framework and align operations with your strategic goals? Contact our experts to learn how Centri can support you with accounting and advisory services tailored to your needs.