In today’s tech-savvy world, opening a business has become effortless. You have to raise some capital, create a stellar online presence, and start selling. However, when it comes to running a business, you need expertise, experience, and a keen understanding of the business world. From recruiting employees, handling marketing practices, and managing finances, an entrepreneur must simultaneously wear many hats.
Usually, businesses operate without human resource specialists, but things can get tricky if you don’t have an accountant on board. While you might keep track of finances, accountants can do a lot more for your business. In addition to crunching numbers, they can perform internal audits, prepare financial statements, and ensure compliance with regulatory bodies. After all, these finance experts help businesses manage their accounts and build an unshakable financial standing.
Besides this, accountants provide investors and management quantifiable financial information, helping them make apt business decisions. Believe it or not, every organization can benefit from proficient accounting skills and manage money-related matters smartly. So, if you want to keep your company afloat during the crisis and volatile market conditions, familiarize yourself with the accounting world. Here we are highlighting the importance of accounting in the business and how it streamlines operations.
1. BusinessPrepares Financial Statements
Nowadays, calculating business revenues and profit is not enough to evaluate the company’s financial performance. Entrepreneurs should know if the company is at threat of liquidity crisis or has sufficient cash to pay for day-to-day expenses. Here, the role of accounting comes into play. Accountants prepare financial statements, giving rich insights into the organization’s economic performance. If hiring an accountant seems like an additional expense, learn the ropes yourself.
You can pursue an online masters in accounting no GMAT program to equip yourself with modern-day accountant skills. The GMAT wavier will let you complete the program in 20 months, and since it is online, you can continue running the business. Thus, you can record all expenses, revenue, and profits in one place. Similarly, you can outline assets, liabilities, and capital to apprehend your company’s financial strength.
2. Helps with Budgeting & Future Projections
Every company drafts a vision and mission statement about the goals they want to achieve. Similarly, you have to set some financial goals and measure the company’s performance against them. For instance, you can create an objective to reduce business expenses by 10% and increase sales by 20%. But any idea how to achieve these goals? Accountants take the responsibility of preparing budgets and future projections for the company.
They identify business trends and historical data to plan for the upcoming fiscal year. If the sales increase by 12% every year, you can project a 14% increase for the coming year. Hence, the company will have a new goal to increase sales by 14%. As a result, you can launch captivating marketing campaigns or motivate the sales team to achieve the goal. In addition to improving business efficiency, such initiatives can also increase profitability.
3. Ensures Statutory Compliance2
Honestly, there is nothing better than running a business single-handedly. You can play by your rules, work on your schedule, and delegate tasks amongst employees. Despite this autonomy, entrepreneurs are accountable to the law and state. You have to ensure compliance with legal regulations and international financial reporting standards (IFRS). Surprisingly, an accounting degree will familiarize you with all accounting standards.
You can maintain records and prepare financials as per regulatory standards, saving the company from legal troubles. Besides this, it would also keep you up to date with changing regulations. Previously, finance and operational lease were two different things. According to IFR S16, companies have to treat all leases as a finance lease. Hence, having a keen understanding of these regulations will let you prepare accurate financial records.
4. Fosters Decision-Making
Unsurprisingly, wrong decisions regarding inventory or asset purchases can lead to financial distress in the company. Business owners often wish they could calculate the potential consequences of taking a loan or making a substantial office purchase. Fortunately, having accounting know-how can help your make informed business decisions. You would know how to conduct a cost-benefit analysis before investing money in any tangible or intangible assets.
Moreover, you can also calculate the overall cost of investment and the returns it would bring. And if the price seems higher than returns, you can save the company from loss-making investments. Likewise, you can also make accurate decisions about acquiring loans. Accountants can calculate interest coverage ratio and apprehend whether their company can pay interest and repayments timely.
5. Assists with Tax Calculations
During the busy tax season, every business owner is hustling between work and tax calculations. In addition to being stressful, it impacts the overall productivity levels. Well, savvy accounting skills can save you from this hassle. Accountants are familiar with all tax regulations, helping companies maximize deductions. They categorize them throughout the year and advise owners on making strategic decisions.
Sometimes, owners forget about depreciation and out-of-pocket expenses, leaving a lot of money on the table. Similarly, they also end up making incorrect calculations without realizing that not all costs are deductible. As a result, companies have to go through an IRS audit. Accountants fully understand how deductibles work, closing doors for dreadful audits.
6. Keeps Tabs on Income and Expenses
In most businesses, the amount of money going out of the company – outflows always exceed the money coming in – inflows. Alongside resulting in short of cash, it can also pose a threat of liquidity problems. With proficient accounting skills, you can manage cash flow accurately. Firstly, you can limit credit sales to ensure there is enough cash coming into the business. Likewise, introduce smart payment terms for the debtors and encourage them to make timely payments.
Most importantly, an accountant has an eye for lucrative investments which means, you can expand the income sources. At the same time, you can cut back on expenses to reduce outflows. Find ways to save energy and lower utility bills. Likewise, keep a check-in balance on employees to ensure there are no additional lunch or travel expenses.
Entrepreneurs’ life is quite challenging, especially when they have to dig into piles of receipts and invoices to maintain records. In today’s dynamic business world, having financial know-how has become crucial to make the business thrive. An accounting degree equips individuals with proficient skills, helping them improve operations. From tax calculations, financial statements to preparing budgets – accounting plays a crucial role in the business world.