Different types of accountants and what they do

The universal language of the world is numbers, allowing people to break down complex logistics into bitesize symbols. Without them, businesses would be impossible to form, as numbers denote status and tell a story of the health of a company. Accountants are the ones in charge of monitoring, recording and manipulating these numbers. But what exactly is an accountant, why are there several different types, and what are the specifics of their roles that set them apart?

What are accounting jobs?

Accounting jobs are roles that put a person in charge of overviewing, reporting, or using the financial logistics of a company to further the company’s ends. If this sounds vague and generalised, it’s because a lot of accounting jobs have wide overlap, with specific roles specialising to achieve specific goals.

In this article, APH will break down the indispensable roles of accountants and the specifics of their specialised roles. Read on to find out more.

What is financial accounting?

Financial accountants report historical financial data to external parties, such as HMRC, clients, etc. They are responsible for writing up financial records, analysing financial reports, overseeing/checking financial transactions and, as strange as it may sound, compiling and illustrating an overview of the company’s financial journey. This is done to inform external parties, including close external parties such as shareholders, and allow them to make decisions based on the comprehensive outline of the company.

Here’s a more in-depth look at their specific duties:

• Recording financial transactions – A financial accountant tracks the financial health of a business by recording financial transactions as they occur, utilising dedicated accounting systems (Xero, for example,) to build trails of financial activities and paint a picture of the active abilities of the company. Financial accountants tend to use double-entry bookkeeping to ensure that every transaction affects at least two accounts, maintaining the accounting equation (assets = liabilities + equity). Overall, this duty allows for external parties to make informed decision-making when dealing with the company, as well as ensuring compliance with tax laws and regulations.
• Preparing financial statements – Following the Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), which are frameworks established to guide accountants into creating universally consistent and valid statements, accountants write up financial statements to illustrate the performance of the company. Typically, it’s based on a monthly, quarterly, and/or annual basis. The statements are used internally and submitted to regulatory agencies, and consist of:
  • Income statements – Summaries of a company’s revenue, conveying whether they made a loss or profit during that time.
  • Balance sheet – A balance sheet provides a comprehensive shot of a company’s financial position during a specific period.
  • Cash flow statement – This statement explains how money is generated and used by a company during a period, breaking the cash flow up into operating, investing and financing activities.
  • Statement of Retained Earnings – This explains a company owner’s equity, detailing its changes over time through records of net income, paid dividends and additional capital contributions via owners.
• Analysing financial data – Financial accounting involves analysis as much as record keeping, and breaking down financial documents into equations. They use vertical analysis, which is the comparison of items within a single statement, and horizontal analysis, a comparison of statements over differing periods. The results are presented in financial reports to extract meaningful insights, usually for risk management and opportunity creation purposes. The types of analysis are as follows:
  • Ratio analysis – Ratio analysis involves taking insights from financial documents to illustrate profitability ratios, liquidity ratios and solvency ratios.
  • Trend analysis – The assessment of a company’s financial performance via graphs.
  • Variance analysis – This identifies areas where performance deviated from expectations, analysing why and how to take corrective action to prevent it in the future.
  • Cash flow forecasting – Using financial data, accountants forecast future cash inflows and outflows to determine whether or not there will be enough cash on hand to meet short-term obligations and inform future decisions.
• Ensuring compliance – Financial accounting requires an understanding of regulations and standards set out by government agencies, such as the IFRS, as well as the intricate tax laws that mandate accurate filings. Financial accountants will set up internal and external audits to test the effectiveness of financial controls set within the business and ensure all records necessary for HMRC and other relevant entities.
• Assist with audits – Financial accounting involves working with external auditors to provide the necessary documentation and ensure a smooth audit process via preparing financial statements and documentation and addressing any concerns raised by auditors.

Management Accounting

A management accountant has a similar role in the company to financial accountants, with the biggest difference being that they are more internal. Whereas financial accounting and management accounting both compile and analyse data, management accountants inform the company what their internal strategies should be.

These duties are:

• Planning/Budgets – Management accountants develop strategic plans, operational plans and detailed, periodic budgets for departments across a business to ensure that the organisation has a clear roadmap for the future. Budgeting is important in the process of planning, as well as the ability to create financial forecasts through market research and analysis to make use of budgets accountants anticipate opening. They do this through collaboration with stakeholders, focused market analysis, and monitoring results. A lack of planning and budget can lead to bottlenecks and missed opportunities.
• Cost accounting – Profits don’t just come from income, they come from lowering expenditure by getting more value out of what you do spend. Management accountants, as well as the more dedicated role of cost accountants, track spending, finance allocation, and analysis across products, services and projects. They do this to look for areas of cost reduction and efficiency improvement, through measures such as optimising business processes. Failure to keep track of spending, as well as looking for better alternatives to spending, means you risk inefficient spending and lowering your agency in the market.
• Decision support – Management accounting practices include keeping specific documentation aside to use as argumentation as to why decisions should be made and assessing potential impacts of different strategies, investments and operational decisions. This allows management to make informed decisions at all levels with assurance that growth and profitability will rise as a result. Management accountants do this by building financial models, applying them to what-if scenarios and drawing up risk management plans. Decisions made financially without proofing in this manner can result in inadequate returns, as well as missed opportunities and costly setbacks.
• Performance management – The development of key performance indicators (KPIs) may or may not be the responsibility of the accounting manager, but they will be involved in the overviewing of the KPIs, as well as illustrating their performance in a report. These reports are often used in comparison to industry benchmarks.

Tax accountants

Tax accountants help business executives and individuals navigate the endlessly complicated labyrinth of tax laws and regulations that all income-having organisations are subject to. Their expertise is essential, as not only does it allow people to comply easily with the aforementioned rules, but also use them to their advantage, optimising financial outcomes for each tax year.

The following are some of how tax accountants operate:

• Tax returns – These accountants compile various types of tax returns for people, businesses, companies etc, such as income tax, corporate tax, partnership tax, sales tax, and payroll tax returns. They do this by gathering financial data from bank statements, invoices, w-2s etc. and then utilising dedicated software to calculate the correct tax liability. Failure to do so could lead to issues with HMRC.
• Tax updating – Tax accounting involves ensuring that the accountant and their clients are up to date on tax laws.
• Representation – Those who specialise in tax accounting also specialise in presentation, meaning they’re a good choice to represent their clients when communicating with tax authorities, whether this be routine, or engaging in disputes.
• Tax strategy – Through analysis of financial information, tax accountants can find ways to save heavily on taxes by taking advantage of several factors, finding ways to impose allowable deductions to expenditure, identifying tax credits the client is eligible for, recommending tax-advantaged accounts and developing investment strategies.

Government accountants

Government accountants work for government agencies as the stewards of public funds, taking taxpayer money and applying it responsibly and efficiently. They follow the governmental accounting standards board for guidelines, ensuring their duties are done in a way that maintains public trust with government programs being delivered effectively.

• Budgeting – Government accounting involves developing and managing the budget that government agencies, departments and programs have, forecasting revenue, allocating funds and monitoring spending to ensure it aligns with legislative mandates. Public funds must be used by priorities, as it’s how domestic security is secured.
• Financial reporting – Preparation of comprehensive financial reports to provide a transparent view of government finances, such as revenues, expenditures, assets etc. to ensure the public, as well as overseeing bodies and or public accounting firms via audits, have access to how the taxpayer’s money is being used.
• Auditing government programs – Conducting audits of government programs allows government accountants to ensure that money is being spent in the right manner, and in compliance with laws and regulations, as well as ensuring that they are working to acceptable efficacy. It’s an effective way to detect not only the abuse of funds but also misuse through lack of efficiency.

Forensic Accounting

A forensic accountant uses investigative and accounting skills to uncover financial crimes, such as through suspected fraud, embezzlement etc. Whilst they use a lot of skills that many in the accounting field use, forensic accountants do not work with their own company’s financial data to make a profit. Rather, they work in public accounting firms, law firms, government agencies and the like.

The duties of a forensic accountant are:

• Investigation – Forensic accountants scrutinise financial records and other data to uncover evidence of fraud, embezzlement, money laundering – and acts of financial malfeasance. They do so by checking for inconsistencies and conducting interviews with related parties to gather information to corroborate evidence. The flow of funds is of particular interest, with programs following the paper trail as far as they can. Evidence is the main goal of this forensic accounting duty.
• Witness – Forensic accountants may be called up to the court to testify as an expert witness, explaining evidence and also providing their own professional opinion, which counts for a lot in court. Findings are presented clearly and concisely in a way that the judge and jury can understand.
• Fraud prevention/detection – Forensic accounting involves creating internal controls to prevent fraudulent activity, and analysing the business to identify vulnerabilities. They also train employees on preventing and/or detecting fraudulent activity.
• Litigation support and dispute resolution – Forensic accountants can provide valuable assistance when resolving financial disputes, assessing damages, calculating lost profits and providing their expert opinion on the financial implications of the dispute. The goal of this is, of course, to reach a fair and equitable resolution, avoiding higher costs or more time being spent on litigation.

Conclusion

These are not the full extent of financial operations amongst different types of accountants, as there are many dedicated roles within the accounting field, but these are the most numerous roles by far. All in all, accountants understand and use logistics as a weapon to create long-term plans. The bigger a business becomes, the more accountants tend to be required to handle the logistics of the company. Their work with data proves the term “the pen is mightier than the sword”, as the industry is built with careful planning.