Have you ever wondered why an organisation requires fund accounting? What’s the purpose? It is a streamlined process of managing an organisation’s portfolio assets to allocate funds strategically. As a fund accountant, you have definite roles and responsibilities that help you manage various funds, including equity, debt, and hybrid funds. Organisations can follow a disciplined investment system by following the right fund management process. Did you want to explore how fund accounting helps assess cash flow management and long-term capital investments? Stay with us in the blog ahead to take on information.
What is Fund Accounting?
Fund accounting is a systematic process for tracking the money allocated to manage different operations in an organisation. It is a useful method of accounting followed by non-profit organisations, government entities, and associations. In daily operations, various restricted and unrestricted funds need to be managed to allocate funds with the help of accounting systems. Fund accounting records all financial transactions for the assessment of risk and investment. One of the key highlight features of fund accounting is the use of accrual accounting, in which all the financial transactions will be recorded as per their occurrence.
Core Responsibilities of Fund Accountant
Accounting is a complex task that requires management based on accounting principles and accuracy skills. Fund accountants must manage multiple roles and responsibilities to improve an organisation’s financial health from managing financial statements and handling portfolio transactions to assessing (Net Asset Value) NAV for multiple investments. Here is an overview of what are the key roles and responsibilities of a fund accountant:
Funds & Asset Valuation
The core fundamentals of fund accounting are to assess the valuation of funds and assets by determining (Net Asset Value NAV). It helps find the right value of funds and assets with definite accounting practices and methods. Fund Accountant helps to record financial transactions and present valuable data that comes into use in preparing annual financial statements.
Financial Reporting
Further, the fund accountant is responsible for preparing financial reports with annual and semi-annual statements. Investors use this information for auditing by capturing all financial transactions regarding investments, distributors, and other fees. It helps them generate financial reports with correct valuation and cost estimation.
Reconciliations
Fund accountants record financial transactions and perform daily, weekly, or monthly reconciliations to keep track of fund positions. This provides the assurance that record-keeping adheres to standard accounting practices and that any discrepancies will be resolved without delay.
Portfolio Analysis
Another role for a fund accountant is managing a diverse portfolio of clients to achieve maximum return with less risk. In financial terms, generating reports with ratios and calculations like Internal Rates of Return (IRR) is too important. You will get valuable insights into performance and the fund’s investment return with definite portfolio analysis.
Reasons Why Do Organisations Require Fund Accounting?
Fund accounting is one of the best practices that helps businesses fulfil complex regulatory requirements and streamline cash flow management. Here are the top reasons why fund accounting helps any organisation improve its fund management.
More Financial Transparency
Fund accounting helps generate more transparent financial reporting and builds trust and credibility among investors. It also helps in tracking and creating reports to maintain trust among stakeholders and investors.
Regulatory Compliances
Fund accounting helps an organisation maintain regulatory compliance and reporting standards. The correct accounting practice also helps organisations conduct detailed analyses to understand their financial position clearly.
Better Financial Management
It helps assess financial statements with resource allocation and financial planning with standard fund accounting. It also helps determine the overall financial position to make informed decisions.
Fund Accounting: A Tool for Fund Management!
Fund accounting helps an organisation effectively manage all fund allocations. Therefore, it is crucial to follow all required measures of fund accounting to increase transparency, regulatory compliance, and financial decision-making.
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