Importance of Accounting in Your Businesses
Table of Contents
If you own a business, you should have an accounting department or segment in your management structure. Therefore, this post is for you. This is because you need to know so much about importance of accounting information and accounting system for your business. This will then help you keep in place your business financial accounting and management accounting framework. As a matter of fact, your knowledge of Importance of Accounting in Your Businesses is very key to your business success.
In the light of the above, we present this post to help you reflect on the following:
- The Role of Accounting in Business
- Key Concepts of Financial Management
- What Happens With Poor Bookkeeping
- Importance of Ethics in Accounting & Financial Decision Making
- Why Accounting Information is Relevant to Business Decisions
- Advantages of Financial Planning.
Importance of Accounting in Your Businesses
Furthermore, as Consultants in accounting, auditing, taxation and management, Complete Full Marks Consultants Limited presents this post to enable you appreciate why you need and accountant in your business. It’s a way of telling you that if you can’t employ a full time accounting staff, we can run your financial data right from our office, generating every financial information you need and making your statutory annual returns for you.
Importance of Accounting in Your Businesses – The Roles of Accounting:
Data & Reports – Every financially associated information in your business must be captured by your accounting system. In fact, you have to know that book-keeping or accounting is a historical record of your business financial or economic transactions. Your turnover, purchases, cost of administrations, cost of projects etc. are captured by the accounting system. Therefore, if you don’t have a good accounting system, you may be running the risk of not knowing the correct directions to go in your business.
Reporting Profits – You are in business to make profit. This is why every business, small or large maintain accounting system so as to ascertain what they are making (profit or loss) on their business transactions. Again, this also enables interested third parties to make decisions on the progress of the business productivity.
Managing and Monitoring Cash Flow – Proper accounting system will take care of working capital and any other short and long term cash requirements within the business organization. That is why the cash flow variable “cash and cash equivalent” is an indicator of the buoyancy of the business. Ability to meet up with the short term business liabilities/commitments is a good indication of the liquidity of the business. The accountant generates this.
Importance of Accounting in Your Businesses – Management Decisions:
The accounting system supplies information to the management team and other key officers. With these, the management generates executive information about your company performance. Your accountant tells you if you’re running short on cash. So, it provides details about your finances so you know when you have money to spend or to stay action on the spending.
Commitments to Government:
Accounting helps you keep your commitment to the government. Every business entity owes government one form of tax or the other. It’s the accounting system that generates the information required for the computations of these commitment cash-wise. Therefore, your business income necessary for computation of your tax liability, in form of Company Income Tax (CIT), Social Security on employee emolument, sales tax/VAT, and other several tax bills, are generated by your business accounting system. Now think of what happens when there is no accounting paper work going on in your business. So, you see, a good accounting paper work tells you how much to pay and what forms you need to fill out to meet your obligations.
In addition, if you also have to provide financial information to government regulatory agencies like, C.A.C, BPP, etc., your accountant provides you with that data. Without good accounting system you may not be able to produce financial statements that are true and fair.
Importance of Accounting in Your Businesses – Business Control:
Furthermore, you may not be able to keep track with your business growth without a good accounting system in place. This exposes you to danger of losing money and monetary assets to fraudulent staff. But a good accountant builds in good internal control procedures and policies that can spot out warning signs that something’s gone wrong.
The basic investment information that attracts investors, loans or grants, are put together by the accountant working with the accounting or financial information generated in your business. Therefore, your accountant generates an income statement, cash flow statement, and a balance sheet to enable outsiders assess your business financial standing at a glance.
In addition, budgeting is a core factor in every business. Planning budget is a business strategy for business growth. It’s a way to save money and noticing any expenditure exceeding the budgeted amount. Therefore, to make a budget you need financial/historical records. These documents are maintained and made available through accounting since they are the basis of planning and making budgets.
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Importance of Accounting in Your Businesses – In Conclusion:
You are now more aware of the importance of accounting in your business. This process of financial paper work that goes on in offices/businesses help save a lot of regrets. For instance, it helps to avoid business failure. If you are running your business without proper accounting information, you are like one walking in the darkness who could fall into a ditch any moment. Again, it helps you avoid conflicts, such as, defending tax penalties unnecessarily. Now think of other statutory obligations you would be breaching and their consequences.
Complete Full Marks Consultants Limited is out to assist. For your Accounting, Auditing, Taxation and Management services, contact us on +234 8034347851 or email us via firstname.lastname@example.org.
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Founder/Managing Partner of Complete Full Marks Consultants Ltd. An Economist turned Chattered Accountant and Tax Practitioner with over 37 years of industrial experience.