What Is Internal Accounting? Concept, Duties, Management Methods, and Accounting Support Software

Vũ Khôi

Author at Wotech Electronics Blog

Internal accounting plays a vital role in a business, with the task of recording, consolidating, and analyzing information related to financial transactions. To excel in this position, you first need to understand what internal accounting is, what internal accountants do, and how they carry out those duties. Let this article answer those questions.

What is internal accounting?

Internal accounting, also known as managerial accounting, is the consolidation of actual occurrences — including transactions without vouchers — which helps assess the business's profit situation or losses. In practice, many people confuse internal accounting with general accounting. Both positions share the common task of consolidating and providing figures to evaluate how the company is operating.

However, internal accounting primarily supplies information to leaders inside the business, while general accounting also works with external agencies such as the tax office and insurance authorities.

In addition, internal accounting reflects all of the business's actual transactions, whereas general accounting only records transactions with supporting vouchers.

Depending on their scale and organizational structure, businesses have different numbers of internal accountants. Small and medium-sized enterprises typically need only 1 to 2 internal accountants, while large corporations have several, each covering a specific area such as accounts payable/receivable, warehouse accounting, payroll accounting, or sales accounting.

The work of internal accounting

What does an internal accountant do?

An internal accountant works extensively with vouchers, invoices, and internal ledgers. Below are the main duties an internal accountant is responsible for.

• Consolidating and verifying the validity of internal accounting vouchers

• Booking accounting vouchers

• Storing vouchers carefully and systematically

• Coordinating work with other departments and other internal accountants

• Preparing monthly, quarterly, and annual reports, or ad-hoc reports depending on the specific case

• Consolidating and analyzing data to provide an overview of the business's situation, thereby helping company leadership formulate appropriate development policies

What ledgers does internal accounting need?

The ledgers in internal accounting are divided into two main parts: the purchases journal and the sales journal. The purchases journal includes the payables detail ledger, daily purchase reports, warehouse receipt notes, and payment vouchers. The sales journal, on the other hand, includes the receivables detail ledger, daily sales reports, warehouse release notes, delivery notes, and cash receipt vouchers. In addition, internal accounting also requires profit-and-loss reports, debt reports, and inventory (in-out-stock) reports. Accounting ledgers must be presented systematically and comply with accounting regulations.

Internal accounting software

From the description above, most readers will probably have a general picture of an internal accountant's work. To make the job fast and easy, accountants should use internal accounting software to record, consolidate, and analyze data. The most popular free internal accounting software is Excel.

Basically, Excel is a fairly common tool because it's easy to use and not vendor-dependent. However, using Excel for accounting still has a few shortcomings:

• Hard to retain data over many years, since you'll have to create many separate Excel files

• Difficulty integrating accounting ledgers

• Difficulty handing over work and exchanging information between departments

• Limits on how many people can use it at the same time

Therefore, for smooth, fast accounting operations and savings on staffing, SimERP accounting software — built on Odoo ERP — is one of the accounting solutions favored by many businesses at home and abroad, for the following reasons:

• Internal accounting operations are controlled on a single unified system

• The software offers financial management features such as tracking revenue, expenses, and contracts against the corresponding payments and cash in-flows and out-flows, reducing errors in the booking process

• The software provides the business with a complete set of accounting ledgers compliant with both Vietnamese (VAS) and international (IFRS) accounting standards

• Information is stored fully and securely thanks to SimERP's strict permission system

How to manage internal accounting

Accounting reports that are produced without checking and review can easily contain errors, waste resources, and adversely affect the business leadership's decision-making. That's why every company needs to establish an internal accounting management process to ensure accuracy and transparency in its accounting books. That said, management must be carried out methodically; overdoing it can backfire from a management standpoint.

Typically, businesses manage internal accounting in three ways: surprise checks, regular checks, and periodic checks. The type of check varies with the nature of the work. Surprise checks are usually used for quick verifications aimed at preventing loss of money, such as cash fund checks or materials checks.

Besides that, regular checks are mainly performed between departments, such as reconciling figures and verifying completed workloads. Finally, the periodic check is the most comprehensive, ensuring that the figures recorded in reports match those in the ledgers. For this round of checks, businesses usually set up an independent unit to guarantee transparency.

The potential of the internal accounting field

Internal accounting is becoming more and more popular because of how important this work is to a company's development. Internal accountants' salaries are considered stable and relatively high on the market. Typically, at small companies the salary ranges from around 6 to 8 million VND for fresh graduates.

At large companies, because the work is more complex, salaries are somewhat more competitive, ranging from 10 to 12 million VND. The salary increases with years of experience. After about 3 years on the job, an accountant's salary can reach roughly 15 to 30 million VND. In addition, internal accounting offers plenty of opportunities for development and advancement.

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