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Financial Accounting Services: Find the Right Accountant for Your Needs in Miami, FL
Whether you run a boutique in Coconut Grove, own a bar in Wynwood or manage a showroom in Miami's Design District, the right financial accounting services can help ensure the financial health of your enterprise.
Chances are good you have questions about what a financial accountant does and what role they play in supporting companies, nonprofit organizations, and government agencies. You may also be wondering if you really need financial accounting services and what the difference is between financial vs. managerial accounting.
Here's everything you need to know about the principles of financial accounting, what to expect from financial accounting services, and most importantly, how hiring the right financial accountant could be one of the best investments you can make for your Miami business.
What is Financial Accounting?
Financial accounting is one of four major types of accounting, the others being managerial accounting, tax accounting, and auditing.
All types of accounting deal with numbers, or more specifically, financial numbers. Accountants, often dubbed bean counters, are notorious for being laser-focused on details that those outside the profession might find boring, tedious, or even trivial. The fact is that accountants play a critical role in the success of everything from small owner-operated businesses to multinational corporations.
Financial accounting is the practice of collecting financial data and compiling that data into a report, spreadsheet, or statement. These statements can be created on-demand as needed, or on a daily, weekly, monthly, quarterly, or yearly basis. In general, financial accountants work with companies and organizations rather than individuals. If you've ever read an annual shareholder's report from a big corporation, a yearly update from a charity, a balance sheet, or a cash flow statement, chances are good they were prepared by either a staff or freelance financial accountant.
What's usually excluded from financial accounting services?
When answering the question, "what is financial accounting?," it can also be helpful to look at what financial accounting is not.
Financial accounting services don't provide financial forecasts — these services strictly compile historical data without offering any insights or projections regarding the future performance of their clients. That said, the information provided by financial accountants is widely used to help generate business valuations, secure investors and even determine the creditworthiness of a company. Investors and business owners alike rely heavily on the services of financial accountants when planning everything from corporate growth to capital investments, acquisitions, and mergers.
Financial accounting also tends to exclude work on taxes, as tax accounting is a specialized type of accounting that deals specifically with work that complies with IRS laws and requirements related to tax return preparation, tax planning, and audit representation. That's not to say that financial accountants aren't familiar with the rules and procedures around taxation, but it's not their area of expertise.
Principles of Financial Accounting
One of the hallmarks of financial accounting is that this branch of accounting uses double-entry bookkeeping, a fundamental accounting principle that has surprisingly deep historical roots.
Double-entry bookkeeping is based on the premise that every financial transaction has equal and opposite effects in at least two different accounts. This system includes built-in checks and balances to ensure that the numbers match up by recording all transactions as either debits or credits. A debit in one account reduces the credits in another account, and all the debits must add up to the total of all the credits and vice versa.
Because double-entry bookkeeping is highly accurate by design, this method produces financial statements that are exceptionally reliable and error-free. If there's an error in any financial statement, such as a missed credit or a debit that wasn't recorded, it's easy to spot and correct using the double-entry system. It's this accuracy that makes financial accounting incredibly trustworthy among business owners, creditors, and other stakeholders who count on the reports prepared by financial accountants to make important financial decisions.
Double-entry bookkeeping invented by Fransician friar
One of the most interesting aspects of financial accounting is that double-entry bookkeeping has been around for centuries. Not only is this type of accounting incredibly accurate, but it's passed the test of time.
Luca Pacioli, a Franciscan friar and mathematician who worked with the renowned artist and inventor Leonardo da Vinci, is widely regarded as the father of double-entry bookkeeping. He described this method in his 1494 textbook, and while the tools of the trade have changed dramatically, those same methods continue to be used throughout the world to this day.
Financial vs. Managerial Accounting
Despite the fact that all types of accounting use similar principles, there are some significant differences between the four largest branches of the discipline. Understanding these differences will help you find an accountant who's best able to meet the needs of your Miami business.
While most people understand that tax accounting focuses on preparing financial statements that comply with the Internal Revenue Code, also commonly referred to as the IRS code, there's often confusion when it comes to financial vs. managerial accounting.
Regulated financial reporting vs. unregulated reporting
Financial accounting services focus on collecting and compiling data in order to develop comprehensive, factual financial statements and reports on the business performance and financial health of the client, which is often a business, government agency, or nonprofit organization.
The reports and statements prepared by a financial accountant are usually geared toward an external audience, such as investors, industry regulators, and lenders. Financial accounting reports are standardized and regulated, given that the information these reports contain are subject to rules established and enforced by the Financial Accounting Standards Board (FASB), an independent, nonprofit regulating body established in 1973. The FASB's reporting standards are based on what's known as generally accepted accounting principles, GAAP, which dictate how businesses, charitable organizations, and governments should compile their financial statements.
By comparison, managerial accounting aims to generate financial reports and statements that are largely used internally. Although there's often an overlap between the data collected by financial accountants and managerial accountants, since managerial accounting reports are strictly in-house documents, there's no standardized rules or guidelines regulating those reports. As a result, there's a great deal of discretion involved with managerial accounting, as each company is free to use whichever accounting system and set of rules they prefer. While this might sound convenient, it can lead to costly inconsistencies around accounting methods.
Another notable difference between financial and managerial accounting is that managerial accounting focuses on historical data in order to generate financial forecasts, while financial accounting is completely historical. Managerial accountants work to project financial trends to help guide business decisions, while financial accountants stick to the known facts.
Cash method, accrual method or both
It's also important to know that financial accounting can be done using either the cash method of accounting, the accrual method, or a combination of both. Cash accounting only records transactions that have been finalized with the exchange of cash (or the equivalent) for products or services. Under cash accounting principles, revenues are only recorded once the payment is received and expenses are recorded once the debt is paid.
What does a financial accountant do that's different from a bookkeeper?
One notable distinction between accountants and bookkeepers is their professional designations. For the most part, bookkeeping is largely unregulated — anyone can call themselves a bookkeeper, advertise their services, and take on bookkeeping clients. This is perfectly legal, but it falls short of what many companies, creditors, and investors need in terms of financial accounting.
How a Financial Accountant Can Help You
As a business owner, manager, or partner in Miami, you might be wondering if you need to hire a financial accountant. After all, there are plenty of options when it comes to online, do-it-yourself bookkeeping services, and many of those services, programs and apps can be valuable tools for day-to-day tracking of your corporate expenditures and revenue.
Although there are many bookkeeping tasks you can likely tackle yourself, the fact is that any time you spend dealing with your own accounting is time you take away from actually running your business. After all, if you wanted to spend your days crunching numbers, reviewing financial statements and creating reports for creditors and investors, you likely would have pursued a career as an accountant.
What professional financial accounting can do for your Miami business
You might be surprised at the scope of practice of financial accountants and the ways that financial accounting services can add real value to your Miami business. Here are just a few examples of what a financial accounting services expert can provide to you and your company:
Organize Your Finances
Bringing a financial accounting service onboard is a great way to ensure your company books are in order. These professionals know how to make sense of complex loan statements, identify irregularities in your cash flow, and even help you track down delinquent accounts and overdue payments. A financial accountant will give you a clear, unbiased snapshot of how your business has performed financially, and that can help guide your future business plans.
Add Credibility to Loan Applications
Retaining the services of a financial accounting professional is a must if you're in the market for business financing from a credit union, bank, investment firm, or government program. The right accountant instantly adds credibility to your loan application by ensuring all the reports and documentation are presented to potential lenders in a way that meets, or even exceeds, industry standards and expectations.
Even if the lender doesn't expect you to provide a complete double-entry accounting of your financial status, submitting professional, accurate, and verified financial statements with your loan application can go a long way toward building trust with potential lenders and investors. Accountants can work with you to craft a compelling financing proposal that lets creditors know you're a professional who they can trust with their money.
Assist With Succession Planning
Thinking of passing on the family business to the next generation? Getting ready to sell your company?
If a change in business ownership is in the foreseeable future, the right accounting service can compile the information you need to accurately value your enterprise. Not only is this important from a taxation standpoint but it can give you a clear, unbiased picture of how your company has performed — a critical factor when pricing your business for sale.
Act As a Virtual CFO
Need a Chief Financial Officer, but can't quite justify the costs of expanding your lineup of c-suite executives? Consider contracting with a financial accounting service instead of recruiting a full-time, in-house financial executive.
Outsourcing financial accounting duties makes sense for most companies. This approach allows businesses to access the financial services they need from a top-tier industry expert, without incurring the extra costs associated with traditional hires.
While it's not the first thing that comes to mind for many managers when they ask, "what does a financial accountant do," there's a growing trend towards lean business practices that focus on purchasing services on an as-needed basis. Virtual CFOs can be contracted to prepare specific documentation, such as quarterly reports and stockholder updates on an as-needed basis, and these services can be quickly scaled up or down as required.