Listen to the Audio Part 1

I covered what accounting is and what I do in my last blog.  Today I wanted to explain and define “finance” and clarify the fact it is only a branch of accounting.  I know many of the jobs today placed in the “finance department” over the accounting department.  However, finance is a part of accounting.  When speaking of financing people go to them to get money such as investments normally, loans, credit lines, or even donations as in fund-raisers, or assets management.  Many people rent or loan out the use of their property and charge fees for rental or leasing.  Some will allow payment plans to purchase the equipment or property also called leasing or financing. The person or company will charge the price plus interest.  Income from this process is called financing income.  

The money gained from this type of income stream is called financing or financing activities and it can be a primary function of the business or secondary income.  Often the small business owner will fund our business.  We invest our personal money earned from other means into the business however this is only meant to be temporary.  I have seen many unprofitable business owners get stuck in this process of self-financing or even see debt as their best solution to fund the business.  I have also met people that have no intention of increasing sales but want to spend and write off those expenses.  We and the IRS call spending and creating without sales a hobby.

What is finance?  We need to start with what is meant by managing finances.  Because the meaning of the word is being used incorrectly.  The practice of using “financing” for everything is keeping people in debt.  A word is used to create an image.  If you change the image of the word finance people will accept debt as a primary stream of income instead of seeking work and earning from our gifting, training, and skills as our primary stream of income.  Money earned is supposed to support a business before investments or lending.  If a business operates primarily off loans and investments you essentially lose control.  Yes, you can have controlling interest, but many companies have lost their ownership by takeovers.  Because the owner did not manage their resources the company’s “finance” executive essentially sold or stole the business from the sleeping owner or owners.  Strangely they blame that piece on accounting.

Listen to Audio Part 2

Know the status of your business(s).  Accounting is what measures cash flow, creates processes, and plans, and helps to create sustainable and profitable actions.  The accounting department is the heart of the business, not the finance department.  The finance department is only a branch of accounting.

What comes first?  Work or investment or debt (financing).  Did you know financing is not meant to be your primary stream of income?  What is financing or finance?

Yes, one can say finance means to pay for but why would a lending department also manage your money?  

Only one piece here has to do with the finance department.  Determining if a client is eligible for the credit in the finance department position.  So, a sale would not go through unless the client would qualify for a loan or line of credit offered by the business.  

Listen to Audio Part 3

A line of credit is the approval of payments for a purchase.  Instead of making one large payment the accounts receivable department also has a collections department to follow up with customers for payments.  The collection is a part of accounts receivable.  Account receivable creates invoices and applies payments received (a bookkeeping function of accounting.)   Also, the IT department would not go to finance to make a purchase.  

"Workflow of a purchase request is not under finance. Unless people call their accounting department the finance department. Yet another mislabel." - Yaschica Michelle Coard

The author of the article states that the IT or any department would go to the Accounting department normally the controller (comptroller) to receive approval from the annual budget to make a purchase. The comptroller may purchase on account through their vendor and they would contact the vendor's accounts receivable department on their vendor side. The comptroller would then send the bill and agreement to the internal accounts payable department that handles billing. The IT department would then make the purchase online and give the accounts payable department purchase order. And I could continue with the workflow here but either way, the "finance" department is normally not involved in this process unless the vendor wants to call accounts receiveable the finance department.

We will look at a couple of articles and search findings of finance and accounting.

 

Do you notice finance means “end?”  Finance is debt or as you saw above finance is creating funding through fund-raising, investments, loans, or credit debt.  However, it is the end of your cash flow when you have too much financing going on.  Yet, I am seeing an alarming trend of people that do not know how to sell or want to do the work of selling.  Many business owners are taking the lazy way to business.  Lazy called “easy button” is what business owners want today and this includes managing their money.  Finance has taken over in the marketplace because it is easier to have someone give you money or borrow money than it is to do the work, plan and provide a quality service or product and manage your spending internally all with accounting processes.

Listen to Audio Part 4

Bookkeeping is only a portion of accounting.  Although we can not provide our accounting services without bookkeeping.  Bookkeeping is essential for accounting.  Bookkeeping is required for tax preparation.  Accounting is designed to be proactive and not reactive.  Bookkeeping does not come first but bookkeeping is the reactive action to the initiation of income and spending practices created by planning and strategizing from accounting knowledge enacted through business management processes.  

Accounting is a repeat process (cycles) in many forms that will also eliminate wasteful habits, fraud, and loss to create more productive internal habits that result in an increase in profits.  Benefiting from accounting is to treat your accountant as a resource for planning not just taking down notes or bookkeeping.  

Listen to Audio Part 5

What came first the accountant or the finance person?  When I checked the scripts, the accountant came first.  Finance is not looked upon as a righteous way of income because interest is referred to as usury.  You are being used for your work or your money.  People pimp out other people all the time for their gifts and our country was built on pimping of the slaves.  Since this continues in the American culture today people see the benefit from work from others as noble.  I wonder when the lazy person was respected over the labor.  Since the lazy person is not rewarded in the scriptures, I know we can say it is the flipped process.  People are calling good evil and evil good.  Look at the parable of the talents. The parable of the talents is an excellent parable for how to we operate in service.  Mattithyahu (Matthew) 25.  Particularly Mattithyahu 25:24-27 KJV shows us that investment is last.

You know I get money where I do not work you could have invested what I gave you.  I think it interesting that the master is wicked but so is the servant that was lazy.  The lesson still worked and the other workers used what he gave them to earn more.  They worked so this parable is not for investment.  The investment comes later.  We work to earn, give (according to the scriptures – we give to the righteous), and then invest.  An accountant is not only a tax collector either, so we need to remove that term.  Why is the world so hell-bent on turning accountants into the least respected?