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Branch Accounting


September 02, 2022

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Branch Accounting

 

The ever-growing global market has enabled various organizations to have different working divisions which are geographically separated from the main office. When the business plans for expansion to multiple branches, it is essential to keep track of accounting for each branch along with the head office. This is where branch accounting comes in aid. Let’s look into branch accounting and some significant factors connected to it in detail.

 

What is branch accounting?

Branch accounting is defined as a bookkeeping system or an accounting system that is maintained in each branch of an organization. These accounts are designated for a particular period and thereby, it is temporary. Also, the bookkeeping system of each branch is sent to the head office to integrate with other units. With branch accounting, the performance of each branch can be tracked very closely as the firms are transparent about all transactions, and cashflows, and financially accountable. Moreover, this bookkeeping system provides different methods to maintain records properly and prepare financials for business. Accoxi is reliable cloud-based accounting software that comes with branch accounting and all its essential features can aid in managing different branches of the organization effectively.

 

 History of branch accounting

The history of branch accounting goes way back to Venetian banks which were formed as early as the 14th century. During the period around1410, the ledgers of a firm of Venetian merchants also made use of accounts for home and overseas accounts. The first accounting textbook named Summa de Arithmetica by Luca Pacioli (1494) already consists of a chapter which is devoted to it. German counting-houses and other businesses made use of branch accounting widely by the 17th century. During mid-1700, Moravian settlements also used it throughout the thirteen original colonies.

 

 Need for branch accounting

Branch accounting can be helpful in making better decisions on each branch of an organization. It helps evaluate a branch's profitability and examine the possibility of expanding the business. With branch accounting, a company can understand whether to shut down the business in a particular brand or scale up the business for success. Also, separate accountability gives us the operating cost of the branch in the particular region which enables us to make optimal strategies for enhancing business performances.

 

Benefits of branch accounting

 

  • Accountability is the primary advantage of branch accounting. It helps to closely track the efficiency and profitability of various locations.
  • With branch accounting, it is possible to maintain different accounts books, and financials for each branch separately.
  • As the profitability of each branch is known, branch accounting helps to find out different branch requirements clearly.
  • The progress reports of each branch can be determined with the help of branch accounting.
  • Branch accounting aids the head office to find the optimal method for attaining required business profitability.

The key features in Accoxi branch accounting make the creation, managing, and switching of branches much easier. Also, it is helpful in multiple branch handling along with separation of both branch and head office reports effectively which ensures streamlining workflows in organizations.

 

Disadvantages of branch accounting

  • An additional workforce is required as each branch has separate accounts.
  • More infrastructure in each branch adds up to the costs.
  • Rise in company expenses due to the need for different setups in each location.
  • For handling branch accounting in each branch, it is required to appoint branch accountants.
  • Decentralized decision-making as there will be multiple authorities.

 

Objectives of branch accounting

Some of the objectives of branch accounting are as follows:

  • The cash flow and cash position of each branch can be known with the aid of branch accounting.
  • Branch accounting helps to know the profit and loss generated by different branches.
  • The financial position of each branch can be determined with branch accounting.
  • Evaluating the performances of each branch can be done with branch accounting.
  • Branch accounting also helps in the comparison of different branches by which it is possible to strategize methods for enhancements.

 

With Accoxi branch management, it is possible to stay current with information on financials, allocate users and customers to branches, manage stock transfers, and have centralized control on inventory management.

 

The bottom line

When businesses have multiple branches, it is inevitable to have bookkeeping systems and branch accounting facilities. As branch accounting ascertains the income, expenses, assets, and liabilities of each branch, this bookkeeping system is essential to know whether profitability is achieved in each branch or not. This is crucial to determine the performance of branches and scale up the business growth effectively.

Looking to experience a hassle-free branch management system? Register yourself for a free trial of Accoxi now.

 

 

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