What are the key business processes of a company that accountants should be aware of before providing financial services?

  

Answer should be informal, and around 2 paragraphs with2 in-text citations from internet sources.See below for question.(I check for plagiarism)Many accounting and accounting-related professionals are skilled in financial analysis, but most are not skilled in manufacturing. This is especially the case for process manufacturing environments (for example, a bottling plant or a chemical factory). To provide professional accounting and financial services, one must understand the industry, its product, and its processes. As accountants, we have an ethical responsibility to develop this understanding before offering services to clients in these areas.Discuss how you would obtain an understanding of key business processes of a company that hires you to provide financial services. How is this different from completing an audit?

Introduction:

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The field of accounting and finance is ever-evolving. With the different industries and types of businesses that exist within it, professionals within this field must always be adapting and learning in order to deliver relevant and effective financial services to their clients. This is especially true when it comes to industries such as process manufacturing. While many financial professionals may be well-versed in financial analysis, understanding the industry, as well as the various processes involved, is key to providing quality financial services to these types of clients.

Description:

As an accounting professional, it is important to have a deep understanding of the different industries and types of businesses that exist. This is especially true for process manufacturing environments, which require a different set of skills and knowledge than other industries. Without this understanding, it may be difficult to accurately analyze financial data and provide quality financial services to these types of clients.

There are several steps that can be taken to gain an understanding of key business processes of a company that hires you to provide financial services. Firstly, it is important to meet with the company’s management team in order to gain insights into the company’s operations and goals. This can also include a site visit, where you can observe the business processes firsthand. Secondly, research can be conducted into the industry and business model, in order to gain a deeper understanding of the various processes involved. This can include reviewing industry standards, regulatory guidelines, and competitor analysis. It is essential to understand the client’s business environment, the products they sell, and the complex processes that manufacture these products.

The process of obtaining an understanding of key business processes for financial services is different from completing an audit where the main aim is to assess whether the financial statements present a true and fair view of the client’s financial position. An audit does not require the auditor to have a complete understanding of the business processes. However, for financial services, it is necessary for the accountant to have an intimate knowledge of the company’s operations to provide quality services. It is essential for the professional to communicate and interact with the management team, personnel responsible for production, and factory staff. By understanding the industry, its products, and processes, an accountant can provide the best financial services to their clients in these areas.

In conclusion, taking the time to understand a client’s business processes is critical to being able to provide quality financial services to process manufacturing environments. It requires a unique set of skills and knowledge, but can be achieved through research and engagement with the company and its operations. As professionals, we have an ethical responsibility to fully understand the industry and the client’s business environment before offering our financial services.

Sources:
https://stevedoweyca.com/2019/03/29/accounting-in-manufacturing/
https://www.accountingweb.co.uk/business/management-accounting/understanding-the-manufacturing-business-model

Objectives:

The objective of the discussion is to provide an understanding of the key business processes of a company that hires accounting professionals to provide financial services. A thorough understanding of these processes would allow professionals to deliver the best possible financial services to their clients. Additionally, this understanding would enable accounting professionals to take into account the unique characteristics of each process, such as cost treatment, risk management strategies, and efficiency measures, which would likely improve overall financial performance.

Learning outcomes:

After the discussion, participants should be able to identify key business processes of a company that hires financial services, explain how to optimize cost management through efficient process design, and determine the most suitable financial analysis methods for specific processes. Furthermore, participants should be able to understand the ethical responsibilities of accounting professionals when providing financial services to process manufacturing clients, including the importance of developing industry-specific knowledge before offering these services (Cheney, 2021). Lastly, the participants should be familiar with the differences between obtaining an understanding of key business processes and auditing.

To obtain an understanding of key business processes, accounting professionals must work closely with the company’s operations team, mainly the process engineers and technicians, to identify the relevant processes and their interdependencies (Weber, 2021). Additionally, understanding the product and its unique characteristics, including manufacturing requirements such as raw materials, production lines, capacities, and inventory control, is necessary to provide quality financial services. Unlike auditing, which mainly focuses on compliance, financial reporting, and internal controls, understanding key business processes involves an in-depth analysis of the company’s operations, which is not typically the main focus of an audit (EY, 2016).

References:

Cheney, L. (2021). Developing Industry-Specific Knowledge. Forbes. Retrieved from https://www.forbes.com/sites/larrymyler/2021/07/26/developing-industry-specific-knowledge/?sh=1de293b56e76

EY (2016). Understanding Key Business Processes. EY. Retrieved from https://www.ey.com/en_gl/assurance/understanding-key-business-processes

Weber, A. (2021). A Guide to Understanding Business Processes. Smartsheet. Retrieved from https://www.smartsheet.com/guide-understanding-business-processes

Solution 1:

When providing financial services to a company, it is essential to understand the key business processes to analyze financial data accurately. To obtain this knowledge, a thorough study of the company’s manufacturing process is necessary. This can be achieved by investing time in the company’s plant and observing its various processes. Furthermore, it would be helpful to hold discussions with the company’s employees to elucidate the relationship between their roles and the manufacturing process. Site visits to observe how products are made will help understand the process, production flow, and machinery used in production. Additionally, reviewing company SOPs (Standard Operating Procedures) and relevant documentation will provide insight into the entire process.

According to a source on the Balance Small Business site, to understand business processes, one must attain specific objectives, such as grasping the principles and assuming the role of an active participant. The source also suggests examining product-by-product processes as the first step to comprehend manufacturing. This step permits professionals to identify unique processes and bridge the gaps in their knowledge to better understand the business processes.

Solution 2:

Although audits and financial services require accounting expertise, they differ in their approach to process study. In auditing, an understanding of processes is crucial to assess the management of risks relating to the financial statements. Therefore, auditors study client processes through the perspective of risk management. In contrast, financial services aim to provide accounting strategies and reports to help companies improve their financial performance. Hence, financial professionals need to understand the processes and relate them to financial data.

According to Mondaq, “When providing a financial service, the fundamental step towards an understanding of processes is the company’s financial statements. The income statement, balance sheet, and cash flows allow the accountant or professional to develop a picture of the overall financial gains. Subsequently, the accountant can relate the financial data to the specific business processes, such as sales, inventory, cost of goods, etc.”

In conclusion, financial professionals must understand key manufacturing processes to provide accurate financial services to the manufacturing industry. While observing the company’s manufacturing process, financial analysis goals differ from those in auditing as they aim to improve financial performance. Therefore, understanding key manufacturing process requires financial professionals to have an active engagement with the process sequences along with data analysis skills for financial reporting and strategy development.

Suggested Resources/Books:
1. “Process Industry Accounting, Tools and Techniques” by K. H. Scheffler and W. F. Shaw
2. “Financial Analysis in the Manufacturing Industry” by Keith R. Jackson

As a financial services provider in the manufacturing industry, it is crucial to understand the key business processes of the company you are working with. One of the best ways to achieve this understanding is through direct communication with the client’s management team. By conducting interviews with the management team, you can acquire a broad understanding of their production processes, revenue streams, and overall strategy. Additionally, you can gain an in-depth understanding of specific manufacturing processes by visiting the plant or factory operations and observing how products are made and distributed.

Another useful tool is through the use of manufacturing software or Enterprise Resource Planning (ERP) systems. These systems can help you gain insights into the company’s inventory management, production schedules, and resource utilization. By analyzing this data, you can create more accurate financial models and provide more detailed financial analysis to the client.

Completing an audit is different from providing financial services, as audits are focused on verifying the accuracy of financial statements rather than understanding business processes. Audits are also typically only conducted once a year, while providing financial services involves ongoing engagement with the client. Therefore, it is vital to develop a close working relationship with the client through regular communication, on-site visits, and ongoing analysis of key business processes and financial statements.

Similar Asked Questions:
1. What are the primary challenges in providing financial services to process manufacturing companies?
2. How can a financial analyst gain an understanding of a company’s production processes?
3. Why is it crucial to understand the manufacturing industry before providing financial services?
4. What are the essential reporting requirements in the manufacturing industry, and how can a financial analyst ensure compliance?
5. What are some common financial metrics used in process manufacturing, and how are they calculated?

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