WHY IS ACCOUNTING CRUCIAL FOR YOUR BUSINESS?

Accounting has become a part of our everyday lives. We need to record, access, and communicate financial transactions to understand businesses' financial health.  Since tiny, parents teach their children how to spend and save money, and they also tell children to show what items or products they have spent and how to calculate the transactions such as profit and losses.

Thus, parents teach us the basics of accounting to understand financial health. However, accounting becomes a bit complex when we encounter organizations or businesses.  One needs to keep track of expenses, profits and losses, summarizing the company's operations, cash flow, and the company's financial position.  

Based on accounting, one can evaluate the financial performance of the company or organization, and hence it is a very crucial part of the financial business. If you plan to start a new business or start-up, you should pay immense attention to the accounting part, as it plays a significant role in shaping your business.  Now, let us learn why accounting is very crucial for your business.

As we all know, the primary role of accounting is to maintain a systematic, accurate, and complete record of all the financial transactions in a business. These records help the owners, managers, investors, audits, and other stake holders know and evaluate a business's economic performance. Thus, these records can act as a backbone for the company's financial health.  The main objectives of accounting are as follows:

a)       Accounting helps you record the transactions made in a company or organization.

b)      Accounting helps business owners to plan their budget based on the resources and transactions. If there is any limited amount of resources or when the company faces any crisis, the owners have to plan how to anticipate the needs and resources, to coordinate with different segments in the organization.

c)       Accounting helps you to know company financial position by reflecting the company financial condition at that time. It includes how much funds your business used, how much capital has been invested. Accounting acts like a dashboard to show where your business stands among millions of companies.

d)      As accounting acts as a dashboard to track company financial position, it helps you  to improve and boost your decision-making skills. Accounting come up with various strategies to improve your business performance financially.

e)      Accounting controls the organization financially by placing checks to avoid losses caused by theft, fraud, errors, damages, mismanagement. Thus, it helps to safeguard business assets and avoid long-term losses.

f)       Accounting plays a vital role in legal requirements by maintaining accurate records of transactions done in a company and sharing them with tax authorities, shareholders and regulators. These records are also required for direct and indirect tax return filing purposes.

By this, you can learn why accounting is crucial for your business and how it helps you to improve your business.