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, measuring the financial impact of operational activities and sharing this with company management. The primary activities of operational accounting are directing, controlling and planning.

Businesses focus on their primary operation to generate revenues. Service companies focus on the activities performed for the benefit of customers, such as plumbing repairs or stock trading. Manufacturing companies focus on producing finished products for customers, such as picture frames or blouses. Merchandising companies focus on obtaining and selling products their customers want, such as name brand appliances or bestselling novels. All of these companies need to understand the financial performance of their primary operation in order to make future decisions.

Directing involves overseeing employee activities and using them to achieve company goals. The operational accountant provides data regarding customer order quantities, current production levels or hours worked to managers who direct employee activities. This gives them the financial data they need to make operational decisions, such as assigning overtime to employees, adjusting production quantities or purchasing additional materials.

Planning consists of reviewing the past performance of the operation and anticipating its future performance. The operational accountant provides the manager with detailed information regarding actual operational revenues and expenses for past periods. For example, this information might include specific cost breakdowns for requested expenses or individual customer orders.

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 actual financial results and planned financial activities, showing the difference between actual and planned revenues and expenses. The operational accountant highlights those expenses and revenues with large differences and provides further details for the manager.