Operating accounting is your company’s internal way of accounting. This is usually similar to the financial way of accounting.
Accounting is the process of keeping detailed records of all the financial transactions in your business. It’s also called bookkeeping.
Operating accounting is used about the—sometimes bespoke—financial systems businesses use for their internal bookkeeping and strategic planning.
This tailored form of accounting is solely for the company’s internal use and is not applied to external reporting or public documents.
The goal is to be able to plan better, steer the company in the right direction and keep control of the company’s operating costs.
Operating accounting versus financial accounting
While operating accounting is the internal accounting, financial accounting is the type of accounting used to generate financial statements for the annual report, and for other types of reporting and filing that businesses have to do.
This means that financial accounting is the legal standard in the country you are operating in, and the one all businesses have to adhere to when it comes to submitting financial documents, filing taxes, and so on.
Why use an internal system?
Operating accounting doesn’t have to adhere to statutory or corporate accounting principles. Some businesses tailor their internal systems in order to gain the best and most accurate insights into operational performance, and to use as a basis for sound business decisions.
However, creating complete tailor-made internal accounting systems is not common since it takes a lot of time and resources. It also creates extra work when it comes to reporting and filing, since the internal accounts have to be adapted according to the financial accounting principles.
That’s why many companies base their internal accounting on standardised accounting principles to streamline bookkeeping and ensure that they are consistent across all levels of financial reporting.