Understanding the meanings and differences
So, what exactly is the difference between Accounting and Finance? In this article, this is what we are going to find out. Before we identify the differences between the two, we need to make sure we can define the two first.
If you’re interested, we compared the differences of IT and Accounting in our previous article.
Finance is defined as the management of money and investment for individuals as well as businesses and governments. Professionals in finance usually take up careers in financial services, such as; financial planning & analysis, wealth management, investment banking, trading on the stock market and so forth.
Professionals in finance, whether they work for individuals or businesses, are responsible for making sure that there is always enough funding for the needs of their clients and are in charge of allocating these funds where it is most optimal to do so. Professionals in finance are meant to create value by managing capital in ways that earn higher than expected risk-adjusted returns.
Accounting is defined as the maintenance, reporting and recording of financial records for companies and individual clients. Professionals in accounting usually work for corporations in-house but there are specific accounting firms that work on the behalf of many other businesses. Professional accountants are responsible for making sure that all financial transactions are recorded correctly and that all account balances are correct as well as ensuring that financial statements are accurate.
Accountancy is comprised of many different responsibilities which monitor how a business, or an individual client, is performing in the present and how it has been doing in the past. The process of accountancy monitors the day-to-day flow of money coming in and out of all accounts that are concerned with the business/client.
Finance is more about asset management and liabilities management. The process usually involves targeting future growth and expansion of a business/client. This is the main difference as accountancy focuses on what’s going on right now and what has been happening in the past whereas finance focuses on what is going to happen in the future.
This, however, does not mean that accountancy and finance don’t conjoin roles every now and then. For example, an accountant may sometimes point out where improvements can be made for the future of the organisation/client they work for. This is the same for professionals in finance as they may be required to work with reports and statements provided by accountants to prepare the business/client for continuous growth and planning for the future.
While there is definitely a difference between these two professions, there will always be slight, or in some cases major, overlaps as they are in some ways dependent on each other. Accountancy is more about accuracy and attention to detail whereas finance is more about strategic planning with a little bit of creativity mixed in to keep everything flowing.
Both professionals in finance and accounting can have clients that are individuals, businesses, governments and other non-profit organisations (such as charities). When it comes to employment there can be significant differences.
The most common types of employers for financial professional companies are:
The most common types of employers for professionals companies in accounting are:
- Public accounting firms
- Operating companies
- Personal tax filing firms
There are many differences in how financial and accounting professionals work with financial statements for their clients. Accountants are mainly responsible for creating financial statements whereas financial professionals are mainly responsible for analysing them and ensuring things will go smoothly in the future.
People who are good at collecting and organising large amounts of data such as receipts, financial records, invoices etc. may want to consider pursuing a career in accountancy. People who are better at analysing and interpreting data may prefer a career in finance as they may have the skills necessary to see how well a company/client is performing and be able to point out where improvements can be made.
There are many different job roles that both professionals in accounting and finance may be given when they start working for a company/client. Below are the most common job roles for both professions:
- Financial Manager
- Financial Planner
- Financial Analyst
- Insurance Administrator
- Risk Management Coordinator
- Credit Analysis
- Data Analysis
- Cost Accounting
- Data Collection
- Tax Preparation
- Payroll Accounting
- Compiling Reports
- Budget Analysis
No matter which profession suits you best, there is no shortage of job opportunities for both of these professions as there are many companies and clients out there who are in constant need of people with the right skills to manage their expenses and financial problems. There are even some courses out there that are a combination of the two which may help you to better determine which you would prefer to do and leaves you with the option to choose.
On another note, it is quite common for professionals who work in accounting to switch to more financial positions and the same goes for financial professionals who may switch to accountancy. Because there is a large amount of overlap between the two professions, it is quite easy to adapt from one to the other as it is similar work but with different goals in mind.
Some firms and clients may not even require a formal degree to take you on an accountancy/finance positions. As long as you have the skills necessary to work in both at an advanced level and have the experience needed you may be able to start your career in either without the need to study a course for years.
Even if you decide that you don’t want to pursue a career in either it is good to gain the skills that are required for both as you could use them to start up your own company and save on the cost of having to hire other people to do the accounting/finance for you.
It is very much worth getting a degree in either though as the rules and regulations are getting ever stricter in the financial sector so the demand for highly skilled and sought out professionals in accountancy and finance is on the rise. There has never been a better time to be studying finance/accountancy and if you play your cards right you could end up starting a very prosperous career with a well-known company/client.