Everyone who sets up a business works with a certified public accountant so that accounting processes run systematically. But does every business owner work with a finance professional to grow correctly and keep their business sustainable?
In Türkiye, finance and accounting are the business departments most often confused — even assumed to be the same. Understanding the differences between these two closely intertwined departments, between which a great deal of information flows, is in fact vital for growth and sustainability. So what are the differences? Let's take a closer look.
Accounting is the unit where a business's commercial information is recorded, classified and reported completely and accurately. The commercial information that goes through these processes forms the business's year-end or quarterly returns and data. Finance takes over where accounting's work ends: using the data prepared by accounting, it helps determine the business's future strategies by focusing on the time value of money — managing money and running the business's funds. If we define accounting as data, finance is the department that turns it into insight.
When setting strategies, finance determines which path to take for the future benefit of the business by analysing and examining the statements made up of the commercial information prepared by accounting and the business's assets. Well-kept accounts lead to better strategy. Strategies are like a compass showing how you will manage your money in the future and how you will strengthen your weak points. To explain strategies and the role of finance further, imagine a manufacturing company without a finance function that wants to increase capacity and buy a machine for this. In such a case, the manager is likely to make the decision by looking only at the company's cash position. If the money isn't there, they will borrow — and what is common in Türkiye is to rely on bankers for advice on this. But do you think the bank employee looks after your advantage or that of the institution they work for? In such tasks, the department that looks after your interests and decides for the good of the business is your finance department. If we look at the same scenario in a business that has a finance department, when such a request comes up, the finance department evaluates the budget prepared for that year, the commercial information and assets of past years and the cash flows, and supports with data whether it is the right time to grow. And if borrowing is the way forward, because you take advice from your own team rather than from bankers, you will build banking relationships in which borrowing is as cheap and beneficial as possible.
One of the biggest mistakes is the belief that companies must increase sales to increase profitability. Sales are very important for a business, but there is another element that is just as important: cost. Costs that rise unchecked and cannot be controlled will reduce your profitability, however high your sales are. One of finance's tasks is to identify costs that go unnoticed but have a significant impact on profitability, and to determine the decisions that will improve the situation. Accounting's role is only to report these costs; once the reports reach finance, your finance department identifies the problem and takes the actions that increase profitability. Research shows that with an effective finance department and the right strategies, businesses' profitability increases by between 5% and 19% while sales stay the same.
