Importance of Accounting
Have you ever heard the expression “If you can’t count it, you can’t manage it.” It means that companies operate on money, and if you don’t control that money, you don’t control your business. By accurately accounting for your company’s income and expenses, you can manage the flow of money and thereby direct the course of your business.
The Role of Accounting
- Obeying the Law: There is a practical advantage to having efficient accounting practices. Having protocols and sticking with them, keeps your company in compliance with the law. Without a proper accounting structure you could be violating any number of laws. An example is not paying the right amount of taxes.
- Creating Budgets: By understanding how money flows through your business by having efficient accounting practices, you can begin budgeting. When you budget, you anticipate revenues and use that knowledge to make decisions about how to maintain and grow your business.
- Analyzing Performance: It’s hard to improve upon a business if you are unable to establish a pattern of what works and what doesn’t. By organizing and analyzing your company’s financial records, you can see not only where the money went but how much value your company’s various expenses contribute to the overall operation.
- Developing Strategy: Lets face it, if you are a business owner, your goal like the rest of us is to make a profit. If your customers are buying more of one thing and fewer of another, that’s something your records can tell you. And if your records tell you you’re not getting good enough returns from a certain marketing strategy you can make the decision to to changing, possibly a decision that could reshape your business. Remember: Good strategy requires good information!
Why are Accountants Important?
When asked what accountants do, responses often mention roles such as tax agents and independent auditors. The functions performed by the vast number of professional accountants who work in businesses are often forgotten and not well understood. But here is the the reality – A competent accountant is an invaluable asset to the company. Their training in accounting enables them to adopt a pragmatic and objective approach to solving issues. This is a valuable asset to management, particularly in small and medium companies. What do they do?
- Help Businesses Reduce Costs
- Mitigate Risks
- Responsible for Collections
- Financial Data Collection, Entry and Report Generation
- Act as a Financial Interpreter
- Deal With Third Parties, such as Vendors, Customers and Financial Institutions