A functional organizational structure is a structure that consists of activities such as coordination, supervision and task allocation. The organizational structure determines how the organization performs or operates. The term organizational structure refers to how the people in an organization are grouped and to whom they report.
A functional organizational structure is a structure that consists of activities such as coordination, supervision and task allocation. The organizational structure determines how the organization performs or operates. The term organizational structure refers to how the people in an organization are grouped and to whom they report. One traditional way of organizing people is by function. Some common functions within an organization include production, marketing, human resources, and accounting. This organizing of specialization leads to operational efficiency, where employees become specialists within their own realm of expertise. Business functions are the external directed activity systems of an organization. They are often referred to as business processes or throughput functions. These business functions are concerned with the provision of goods and services to the external customers of the organization. They express the main purpose of the organization, why the business exists.
Example: A motorcar manufacturer could have parallel process lines for different types of cars (e.g. passenger cars, heavy duty vehicles, microbuses, sports cars, etc.). Other examples are the different degree courses and research programs at a university, the different types of projects in an engineering company, different shops in a region, different types of services of a consultant etc.
The grouping of activities according to the type of function performed is the most commonly used structure. This is the most traditional way of organizing people. You would find this not only being widely used in business organization but also in non-commercial organization such as hospitals, universities etc. Some common functions within an organization include production, marketing, human resources, information technology and finance. This organizing of specialization leads to operational efficiencies where employees become specialists within their own realm of expertise. This structure enhances the experience of each function.
Depending on the nature of the organization and its scope of activities, the functions it has to perform may differ vastly from those of another organization. For instance, one company which undertakes both manufacturing and marketing may have departments engaged in purchase, production, marketing and finance. If it is selling a product such as TV or refrigerator it may also have an after-sale-service department.
On the other hand, a company which is an ancillary to a parent company may have only departments for purchase, manufacturing and finance. Since it is selling its entire production to the mother company there is no need for a marketing department.
The provision of a good or service involves processing, namely the transformation of inputs into outputs. This occurs in phases. For example, the business of producing cars involves procurement of parts, the assembly of different parts into a car, other processing (e.g. painting), as well as marketing, selling and delivery. Likewise, a university course involves different disciplines and subjects. Each phase is a sub-activity system or sub-function with its own expertise or functional specialization. These are provided by the business support systems.
Inward-directed activity systems of an organization are known as business support functions. They are concerned with providing resources (e.g. human, material, technological, knowledge and energy) for the different specializations required by the business functions.
All functions have their own internal governance, as well as being governed by coordinating organizational governance. Coordinating governance is self-referring activity systems and includes planning, performance management and various regulatory activities. They coordinate all functions within the organization, the business, business support and organization support functions.
Self-directed activity systems of an organization are known as organization support functions. They are concerned with establishing and maintaining the organization as an entity. Each organization support function provides support to all functions, business, business support and other organization support functions.
For example, corporate finance provides budgets and accounting services to all functions (even to itself). Likewise, the IT function coordinates the flow of data within and between all functions (including its own data flow). Other organization support functions are administration, knowledge management, human resource development, organizational development, legal services and auditing, amongst others.
Another extension to this model could be creation of center of excellence (COE) centers within the organization. COE refers to a team, a shared facility or an entity that provides leadership, evangelization, best practices, research, support and/or training for a focus area. The focus area in this case might be a technology, a business concept, a skill (e.g. negotiation) or a broad area of study. A center of excellence may also be aimed at revitalizing stalled initiatives. It may also be known as a competency center or a capability center. Such a center may bring together faculty members from different disciplines and provide shared facilities.
Example - Given below is the functional structure for a Services Organization:
Service Organizations are outsourcing providers of functions that have traditionally been performed and audited within the client (user) organization. Their functional organizational structure is usually divided into :
In most companies, HR is split into Recruitment, Training & Talent management. If the scales of operation are very wide Recruitment, Training and Talent management function like different Departments and the job profiles do not overlap at all.
Operations is the most important part of the actual functioning of the company . It is the main earner of the business because it can ‘billed’ for. All other expenses go as ‘costs’ to the company. This category includes employees who actually execute the processes for the customers.
Administration is again a wide function which looks after the day to day functioning of the company starting from transport ,office maintenance, security and running the cafeteria. Some of these are often called transaction processing.
Finance is a back office function that includes a number of services including billing, account payables, general accounting etc.
Business development includes marketing and other strategic planning. Important decisions with respect to Mergers and Acquisitions (M&A’s) are taken by this department in close coordination with the Finance department. Scanning the market and drawing a map for the company’s future growth depends largely on the efficiency of this Department.
The Technical Department is also a support function .Unlike in an IT Company, this Department ensures systems are in place. As there is extensive use of technology, the Technical Department has the responsible job of ensuring that all software is running smoothly.
Each of these can function as a separate company in terms of the structure. The C-level Executives have the tough job of coordination between different Departments for a smooth and effective functioning. Roles for each Department are quite clearly defined generally.
In most of the automated financial systems, you can define more than 12 accounting periods in a financial year. This article will explain the concept of the adjustment period and the benefits of having adjustment periods. Adjustment periods have their inherent challenges for the users of financial statements and there is a workaround for those who don’t want to use adjustment periods.
GL - Different Accounting Methods
The accounting method refers to the rules a company follows in reporting revenues and expenses. Understand the two common systems of bookkeeping, single, and double-entry accounting systems. Learners will also understand the two most common accounting methods; cash and accrual methods of accounting and the advantages and disadvantages of using them.
Although technically a general ledger appears to be fairly simple compared to other processes, in large organizations, the general ledger has to provide many functionalities and it becomes considerably large and complex. Modern business organizations are complex, run multiple products and service lines, leveraging a large number of registered legal entities, and have varied reporting needs.
Business Metrics for Management Reporting
Business metric is a quantifiable measure of an organization's behavior, activities, and performance used to access the status of the targeted business process. Traditionally many metrics were finance based, inwardly focusing on the performance of the organization. Businesses can use various metrics available to monitor, evaluate, and improve their performance across any of the focus areas like sales, sourcing, IT or operations.
Understand what we mean by GAAP to STAT adjustments. This article discusses the different standards that are used for multiple representations of the financial results for global organizations. Understand the meaning of US GAAP, Local GAAP, STAT, IFRS, and STAT. Finally, understand why accounting differences arise and how they are adjusted for different financial representations.
In this article, we will describe how to determine if an account needs adjustment entries due to the application of the matching concept. Learners will get a thorough understanding of the adjustment process and the nature of the adjustment entries. We will discuss the four types of adjustments resulting from unearned revenue, prepaid expenses, accrued expenses, and accrued revenue.
This article explains the process of entering and importing general ledger journals in automated accounting systems. Learn about the basic validations that must happen before the accounting data can be imported from any internal or external sub-system to the general ledger. Finally, understand what we mean by importing in detail or in summary.
The sole trader organization (also called proprietorship) is the oldest form of organization and the most common form of organization for small businesses even today. In a proprietorship the enterprise is owned and controlled only by one person. This form is one of the most popular forms because of the advantages it offers. It is the simplest and easiest to form.
Period End Accruals, Receipt Accruals, Paid Time-Off Accruals, AP Accruals, Revenue Based Cost Accruals, Perpetual Accruals, Inventory Accruals, Accruals Write Off, PO Receipt Accrual, Cost Accrual, etc. are some of the most complex and generally misconstrued terms in the context of general ledger accounting. In this article, we will explore what is the concept of accrual and how it impacts general ledger accounting.
GL - Review & Approve Journals
Review and Approval mechanisms ensure that the accounting transaction is reasonable, necessary, and comply with applicable policies. Understand why we need review and approval processes, what are they, and how they are performed in automated general ledger systems. Learn the benefits of having journal approval mechanisms in place.
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