What Is Operational Accounting?
The accounting field encompasses a variety of specialties. These include tax accounting, fixed asset accounting and operational accounting. Operational accounting focuses on the financial aspects of running the business. Accountants who specialize in operational accounting focus on the primary operation of the business. These accountants measure the financial impact of operational activities and share this with company management. Operational accounting focuses on three primary activities. These include directing, controlling and planning.
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Business Operation
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Each business focuses on its primary operation to generate revenues. The primary operation varies by company and focuses on one of three types. Service companies focus their operation on the activities performed for the benefit of customers, such as plumbing repairs or stock trading. Manufacturing companies focus their operation on producing finished products for customers, such as picture frames or blouses. Merchandising companies focus their operation on obtaining and selling products their customers want, such as name brand appliances or bestselling novels. These companies need to understand the financial performance of their primary operation in order to make future decisions.
Directing
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Directing involves overseeing employee activities and using those employees to achieve company goals. Managers who direct each employee's operational activities need financial data to make operational decisions. The operational accountant provides data regarding customer order quantities, current production levels or hours worked. The manager uses this information to make decisions such as assigning overtime to employees, adjusting production quantities or purchasing additional materials.
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Planning
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Planning consists of reviewing the past performance of the operation and anticipating the operation's future performance. The operational accountant provides the manager with information regarding actual operational revenues and expenses for past periods. The operational accountant provides detailed information as needed for the manager. Detailed information includes specific cost breakdowns for requested expenses or individual customer orders.
Controlling
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Controlling refers to the process of reviewing actual activities and comparing those activities to the planned activities. The operational accountant provides the manager with financial reports that detail the actual financial results and the planned financial activities. These reports calculate the difference between the actual and planned revenues and expenses. The operational accountant highlights those expenses and revenues with large differences and provides further details for the manager.
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