The business area (organizational unit) is all the internal dealings of a business, which include the financial aspects. It directly relates to a particular business segment or area of operation in a business. Financial accounting concepts normally assigned to business areas are transferred to business areas. For instance, a business area may be comprised of three departments: Finance, Marketing, and Operations. Movement value assigned in Financial accounting is normally associated with business areas.
- The business area (organizational unit) definition is optional in accounting systems. It is basically a logical structure that describes how the financial accounting data will be interpreted within the organization. This may be the only way by which managers would interpret business activity within an organization. A business area can have one of the following structures:
- These are business areas in which there are normally two to ten levels of management. The most common business areas in an organization are Management, Marketing, and Service. These business areas are typically established in one country. Examples of these business areas are International Business, Management, Finance, Supply Chain, Back Office, Process Industries, and Logistics.
- The other major business areas are Marketing, Research and Development, Engineering, Information Technology and Process Industries. These business areas are established in different countries. Examples of these business areas are: Automotive, Banking, General Ledger, Real Estate and Wholesale. A company’s financial statements usually contain information on the above business areas, as well as information about their product lines and services offered.
The above structures are used to group the product lines and services offered under one business area. This makes it easier for a company to determine where they fit within the structure. It is also helpful when trying to determine where to focus their attention within the structure. For example, a particular product line may be better served under the Marketing or Services structure, as opposed to being placed in a Business Corner or Marketing Zone. When planning your organization, consider these business areas when determining where you want to see your products positioned. This will help you to better plan your marketing strategies and ensure that your products and services are placed in the best positions to increase profits and create positive financial statements for your business.
If you do not know what these three business area types are or how to use them to design your organization, you should contact a Certified Accounting Specialist to help you understand how to define the business area and how to set up your organizational units. A CPA can also help you with strategic planning, reviewing your accounting documents for accurate information, and calculating your savings with the appropriate adjustments. With a little help, you will be able to define your business area and ensure that you maximize your profits.