You’re probably already aware that you need to have some form of accounting for your business. Accounting can help your business analyze and report transactions to tax collection agencies but can also be handy in letting you know the general health of your business.
Every business needs some form of accounting. Whether you choose to use accounting software or hire an accountant, planning and controlling business processes will be much easier with accounting. The following are just some of the other reasons why accounting is important to your business;
Having a budget is essential to your business in many ways. With a budget, you are better able to strategize, save money and even detect expenditure that exceeds the budgeted amount. To make a comprehensive budget for your business, you need access to your previous records. If the records were well maintained using an accounting system, they will be easier to access and hence budgeting will be easy to do.
- Access to Funding for the Business
At some point every business requires additional funding to grow. To get this funding from a bank or any other lender, you must be able to present the financial status of the business. With a good accounting system, finding documents that point towards the status of your business such as assets and liabilities, taxes paid and even profits recorded should be very easy. Financial institutions require these documents to approve funding for your business.
- Decision Making
Any business decision whether it is to acquire another business or take the business public, will depend on the financial health of the business. The financial health is indicated by the business financial statement which can only be prepared using a proper accounting system. The financial statement is made using other business documents like profit and loss statements and expenditures. Without it, business decisions would be difficult to make which could lead to stagnation. In our opinion one of the best accountants London is Numerion. Not only for their exceptional business advice, but also impeccable track record in client retention (check them out!)
- Keeping Investors Informed
Financial statements provide investors and other stakeholders with information regarding the health of your business. With the right accounts, your investors, debtors, creditors, customers and even the government will be aware of the status of your business. Most investors will shy away from investing in an organization that lacks proper financial accounting. If you plan to take the company public in the future, meticulous financial accounting may just mean the difference between a successful public offer or not.
- Keeping a Business Profitable
When you have a great accounting system it can be very easy to detect when the profits are dipping a little and why it is happening. Your financial statements will point right to the problem which means you can begin implementing solutions right away to become profitable again.
With great financial statements, you will be able to notice where you are spending more money than is necessary and redirect those funds to more important aspects of the business. If you are expenses are too high, you can begin to formulate a plan to reduce such expenses and increase your profit margins.