Treasury and Accounting: What is the Difference?

Treasury and accounting are two closely related sectors within an organization. If they are not well understood, they can easily be confused and misinterpreted. While there are some similarities between these two functions, there are distinct differences as well. In this article, we’ll take a closer look at the differences between Treasury and Accounting and the roles they play within an organization.

Defining Treasury and Accounting

What is Treasury?

Before we delve into the differences between these two functions, we need to define what they are. Treasury is a department within an organization that links the company to the financial markets. It is often part of the finance department. The major difference between treasury and accounting is that treasury focuses more on the business’s financial strategy and long-term plans. In contrast, the Treasury team focuses on the short-term management of financial assets. Its responsibilities include evaluating new ventures and determining their impact on the business. It also analyzes the performance of products and services in the market, forecasting cash payments, and anticipating challenges of low cash flow.

Typical Projects carried out in Treasury

1. Developing models and tools to accurately predict cash flows that helps an organization plan for liquidity needs and optimize cash management strategies.
2. Implementing techniques to efficiently manage working capital components such as accounts receivable, accounts payable, and inventory, aiming to minimize costs and maximize liquidity.
3. Analyzing debt structures, negotiating terms with lenders, and refinancing existing debt to ensure optimal capital structure and minimize financing costs.
4. Designing hedging strategies to mitigate the impact of currency fluctuations on the organization’s financial performance and reduce foreign exchange exposure.
5. Managing surplus cash by evaluating investment opportunities, assessing risks, and optimizing investment portfolios to generate returns while preserving capital and ensuring compliance with regulatory requirements.

What is Accounting?

On the other hand, accounting handles the process of summarizing financial transactions into useful reports to maintain control over transactions. Accounting is about past performance and how it impacts the organization in the present and future. It involves auditing financial records, maintaining transactions in proper order, compiling annual reports that evaluate financial performance, managing accounting systems and processes, and analyzing tax implications.

Typical Projects carried out in Accounting

1. Compiling accurate and timely financial statements, including the balance sheet, income statement, and cash flow statement, in accordance with relevant accounting standards (e.g., GAAP or IFRS).
2. Assisting external auditors by providing necessary documentation, explanations, and analyses to facilitate the audit process and ensure compliance with regulatory requirements.
3. Developing tax planning strategies to optimize tax liabilities and comply with tax regulations, including preparing and filing tax returns, managing tax audits, and evaluating the tax implications of business decisions.
4. Implementing cost accounting systems to track and analyze costs associated with products, services, and activities will enable better decision-making and performance evaluation.
5. Conducting financial analysis to assess the organization’s performance, identify trends, and make recommendations for improving efficiency, profitability, and financial health. This may involve variance analysis, ratio analysis, and trend analysis to interpret financial data and communicate insights to stakeholders.

What is the Relationship Between Treasury and Accounting?

Even though accounting and treasury are different, they both help manage and decide on financial matters. A treasurer can help a company make decisions that may improve its financial well-being, and an accounting department prepares financial reports to enhance management’s operations. However, treasury and accounting have different objectives and goals relative to an organization’s financial reports. A treasurer’s focus can be ensuring the company’s financial reports are positive and meet the goals of an organization. Employees in the accounting field focus on keeping track of an organization’s performance and auditing financial reports to see if the company has met various targets.

Key Differences between Accounting and Treasury

Definitions

The primary difference lies in their definition. While accounting focuses on summarizing financial transactions in useful reports to maintain control over transactions, treasury management focuses more on the business’s financial strategy and long-term plans.

Roles

Different roles exist in each career path. A career in treasury may involve roles such as treasury manager, treasury analyst, finance manager, chief financial officer, or finance manager. People in accounting may have other positions such as senior accountant, inventory accountant, junior accountant, cost accountant, or forensic accountant. The exact role you hold may depend on the company you work for.

Focus

Treasury and accounting have different objectives and goals relative to an organization’s financial reports. A treasurer’s focus can be to ensure a company’s financial reports are positive and meet the goals of the organization. Employees in the accounting field focus on keeping track of an organization’s performance and auditing financial reports to see if the company has met various targets.

Positions in Accounting vs Treasury

There are different roles in each field, with different responsibilities and average base salaries. A career as a Treasury Assistant is an entry-level treasurer role. As a treasury analyst, you may track a company’s financial actions, such as credit income, liquid assets, and cash flow. A financial controller’s position can help oversee a company’s investment and budget and reduce its financial risk. A director of finance oversees many of the financial operations of a company.

On the other hand, an accounts payable clerk is responsible for recording, verifying, and maintaining transactions. An accounting officer can forecast future financial performance, track expenses, examine and prepare financial reports, and assess financial operations. The accountant prepares and maintains financial reports, prepares tax returns, evaluates financial operations, recommends best accounting and financial practices, audits and analyzes financial performance, and compiles and presents financial and budget reports.

Also Read

• Corporate Treasury: What is it all about, and what do you need to know?
• What Is the Role of a Corporate Treasurer?

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