The 3 Things You Must Learn in Accounting | From a Controller

hey guys welcome to another video with the financial controller in today's video i want to be focusing on the three areas of accounting that you want to focus on and get good experience and good exposure to if your goal is to become a controller or even an assistant controller so this video is for someone who maybe works in accounting today and has maybe two or three or a few years of experience in accounting or even maybe finance and your goal in the future is to become in the controller ship route so you can you know aim for an assistant controller or then a controller position after that so these are the three areas that i really believe that if you master and get some good experience and good exposure to uh so that means that you need to spend maybe i don't know a year or two working in each of these areas and getting good rounded experience these are the areas of accounting that are gonna set you up to become an effective controller in the future and if you're new to the channel welcome my name is bill hanna i'm the financial controller i'm a licensed cpa in the great state of new york and i started off my career a decade and a half ago working at pricewaterhousecoopers as an auditor and then transitioned out and i worked in private accounting as a financial analyst and then senior accountant accounting manager assistant controller and then a controller which is what i do today i'm a controller at a software company in new york city and the purpose of this channel is to give you the tips and the juice of an advice from my decade and a half working in accounting so that you can apply it to your own life and career and supercharge your own career trajectory all right so jumping right in the three areas of accounting that i want you to get good exposure to and experience and if you want to fulfill your dream and becoming a controller are going to be procure to pay or p2p order to cash or ought to and record the report or r2r and these are the three areas and we're going to talk about each one of these here in a minute and describe them but these are the areas and the processes that then create the financial statements which is the goal of a controller is to create timely and accurate financial statements right so the goal of this video is we will describe each of these processes in a minute but the goal is if you work in one of these areas today so let's say you work in procure to pay or an accounts payable and your goal is to become a controller down the line so you want to fill in the gap on the bucket so you're missing um o2c order to cash and record to report these are the two areas that you want to begin filling in the bucket by getting the experience and the exposure by asking your manager that you want to work in these areas or if that's not possible then what you need to do is maybe find another job that will give you these experiences so that you can get more rounded and understand the full picture all right so let's begin by describing each of these processes or areas at a high level before we dive in and talk about each of these areas individually so the first one is procure to pay and as the name imply this is uh the process by which the company spends money right so procure is the process by which the company goes out and procure services and goods from vendors and then up to the minute where they pay that vendor so this is the process of getting the service and paying the vendor the second process is order to cash and this is as the name implies the process by which you get orders from customers and then you fulfill these orders you issue an invoice or a customer and then you collect the cash so this is order to cash and then the third process is r2r or record to report and as the name also implies this is the process of gathering all of the data and transactions that you we just talked about in procurement and in invoicing and gathering all of that together recorded in the ledger so that you can generate a set of financial statements therefore as you see this is the complete cycle in accounting right so this is purchasing and invoicing and making money on the other hand and then tying it all together and gathering the data and recording it in ledger and then generating financial statements which is the end goal of a controller is to generate accurate and timely financial statements okay so let's talk about each of these processes here separately so that um i want to give you a detail of each process so that you can identify and understand if you're working today in accounts payable you want to know which other processes in accounts payable or or in p2p that you need to get really good at before you can progress and learn the other areas in accounting and if you're currently applying or interviewing for an accounting position i highly recommend you check out my best selling online course the night before the accounting interview where i share with you 49 questions and tips from my experience as an accounting hiring manager over the last decade and a half check it out i'm going to leave a link down below all right now let's jump into each of these processes and areas of accounting so i can give you some more context and some more color into what you need to learn because the object of this video at the end is that what you need to learn in each of these processes so you can master it and move on to the next and then you can get more rounded and uh work your way up to a controller position so when we talk about procure to pay so when you work in a procure-to-pay department often referred to as the accounts payable department uh your role here is that you're collecting the vendor bills and invoices and recording them timely and accurately on the books and records right so usually when you code these things into the books an erp system or quickbooks whatever the case is you're coding the expense to either an expense general ledger account and choosing a department the relevant department say the marketing team requested a spend and this invoice is from the vendor and now we're recording it to the marketing expense general ledger account and to the department that relates to the marketing team right so the recording uh timely and accurately is important uh and then also uh you need to process these vendor invoices and pay them on time right so usually the vendor gives you sometime between 10 and 90 days to pay them so you need to make sure that you are recording this invoice and processing the payment and getting the right approvals in order for you to make this payment to the vendor and the other aspect to this too is matching so when we say matching here you're gonna be matching three things you're matching the purchase order so usually when someone within your company wants to go out and buy a service or a good uh they need to request their spend through a purchase order right so they create a purchase order you then match that purchase order with the invoice that comes from the vendor and the item receipt so three-way match between a purchase order an item receipt item receipt usually it's just evidence that the item or the service has been received right and then the vendor invoice you need to match the quantity and the amount between these three things and in some companies if it's a service company there is no item or receipt there is no physical good it's just a service uh so then you're matching uh the actual uh vendor invoice to the purchase order and that's the matching that we're talking about here so this is the best practice is to create a matching process by which you match the purchase order to the vendor invoice and if we're talking about a physical good then we're talking about a third three-way match which is purchase order invoice and an item received and this is the process of procure to pay in a nutshell and it's usually managed within an erp software so um a software like netsuite or sap can handle a process by which if you are requesting a certain purchase within the company you log in you create a purchase order once it gets approved by the right person then you take the purchase order number you send it to the vendor and the vendor will include that purchase order on the invoice when they send it back to accounts payable in your company then they can do a match between what's being requested and what's being built by the vendor and this is a way of controlling the spend this is a way of managing the company's budget and the spend so this is an overall of what is procured to pay if you are now working in this area then you want to focus on in the other two areas that we're going to be talking about next all right the next process or area in accounting we're talking about is order to cash or o2c and this is the process by which the company makes money right so this is the process of receiving orders from customers fulfilling these orders and then issuing invoices and then collecting the cash from the customers after that right so typically the process begins by receiving a purchase order from the customer so you get the po that says i'd like to buy 10 items from whatever you're selling right you take the purchase order and you record it in the system you create a sales order out of it right the purpose of the sales order in the system is that it sets aside 10 items from whatever it is that you're selling right it sets aside that that's going to be shipped to that customer right and then when the time comes and you ship that item to the customer with 10 items then you create an invoice right and then from that invoice that's what you communicate back to the customer and you say you owe me this much money and then you collect the cash against it in the future so this is in a nutshell what goes on in order to cash this is the billing function of a company um and it's a really important one because revenue gets recorded out of billing uh function and so this is a really important function in the company so we talked about procure to pay order to cash and now we're going to talk about record to report now when we talk about records to report or r2r this is the process that puts it all together so when we talked about procure to pay we talked about getting vendor bills this is all the expenses for the company or inventory if you're dealing with physical goods and in order to cash is the process of revenue generation right so we have here revenue and expenses record the report is a process of tying it all together and gathering all this data collecting it and recording it and the general ledger from which you can create trial balance and from a trial balance you can create a set of financial statements okay so when we talk about recorder report this is a team that will be making sure that transactions are recorded timely and accurately on the books and records so they look at p2p they look at autoc and they make sure that the vendor invoices are recorded timely if a vendor invoice is not being recorded on time then they have to record an accrual for it right so there's a team of accountants that work at a company typically and looks at each process and makes sure that the right adjustments or accruals are being made to the books and records so for the vendor example if you haven't gotten the vendor invoice and it's not recorded yet you record an accrual right and similarly with order to cash there are some adjustments that are going to be made to revenue based on the timing for example if you haven't shipped or the terms of the customer only transfer the titles at a certain point in time then sometimes some adjustments need to be made to revenue and in many cases you also receive some revenue in advance which is a deferred revenue and then you need to make some adjustments on your books or record as you ship out these items to the customer and as you fulfill the service you record the revenue piece by piece from that deferred revenue so uh this is the team that looks at the transactions that are coming from all of the areas which is procure to pay in order to cash and payroll and some other areas as well and then the make sure these transactions belong to the period and are accurate and timely and then they make any adjustments that is needed whether it's an accrual or an amortization of a prepaid so let's say with a vendor invoice you get a vendor from an invoice that covers 12 months in the future uh so then you record that as a prepaid and you amortize it over 12 months so this is the team that's going to be doing this kind of things right and then the second thing they'll be doing is the month end close process right and if you haven't seen my video a month in close process i'll leave a link to it up here which is coming up with a set of procedures and a checklist for all the things that need to happen at the end of the month for you to be able to close your books and records and these mainly are going to be steps and procedures that are going to be done to make sure that all the activity that's coming in from vendor bills from invoicing from payroll are correct and accurate so they usually involve reviewing for example all the billing that's been done in the months and doing some analytical procedures to make sure that billing is correct and accurate for vendor invoices it's going to be also a process of checking making sure that we have the right information and accruing for things that are not on the books and records right so this is the month in close process so once all the steps in the month and close process is completed then what this team will do is consolidation and consolidation may refer to two things either gathering the information or the data that is similar in one ledger so that you can report on it or consolidation may also refer to if you have multiple entities so you have four subsidiaries that you need to consolidate this means combine the data and make sure you have a complete set of consolidated financial statements once you have that then the final step is going to be reporting now reporting means that you are now generating a set of financial statements and usually that means that you generate the financial statements balance sheet income statement and statement of cash flow and do some comparative analysis period over period and maybe actual versus budget to make sure that you have the right information before you can then distribute this information to the management or stakeholders that are interested to see the financial statements of the company so i highly recommend that you go out and actively seek the knowledge and the experience working in these areas typically the knowledge for these areas comes from practical experience actual work uh experience and not from an academic way of like taking an online course this requires hands-on work experience in order for you to really get it and really grasp it right so if you uh your company right now there is an opportunity for you to work in an area outside of what you do today this is the way to go if not unfortunately sometimes you have to make a job move in order for you to get the right experience and become a more rounded professional if your end goal is to become a controller if you have any questions leave it in the comment section below if you like the video then why not give it a big fat thumbs up and i'll see you in the next video [Music] you

Channel: The Financial Controller

Views: 60,282

Keywords: accounting career, how to become a controller, things to learn in accounting

Id: _-cSmDUxS3Q

Length: 14min 6sec (846 seconds)

Published: Sun Oct 17 2021