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Accounting and Finance: Why Is It Important to Your Business?

4/23/2021

9 Comments

 
The key to your business lies within the accounting, finance and understanding of the numbers of your company.
Accounting and finance refer to the recording and analyzing of business activities. Understanding where your incoming and outcoming cashflow will help you make better decisions moving forward to avoid failure.
1.) KEEP FINANCIAL RECORDS
Accounting is essentially a record of a company's financial activities.

A company's ledger is where accountants and small business owners can track the income and expenses of a business' daily operations. An accurate record of a company's finances can help a business manage their financial future and understand the cash flow.
2.) AVOID LEGAL PROBLEMS
Keeping an accurate financial record helps follow important business laws. Overlooking a minor detail could have major implications on your tax management.

Financial managers need to understand what expenses to deduct, how much taxes to pay and when to pay those taxes. Poor financial recording could lead to your company being audited and could land you in unnecessary legal trouble.

Additionally, an oversight in finances improvements to your facility could mean that you're not following the regulation of safety laws.
3.) MAKE A BUDGET
Using your financial records and understanding your cash flow can help you create a budget and budget is what keeps your business on track. A budget gives you a current view of your financial standing and helps you navigate your business towards future growth and development.

When creating a budget net income, expenses, goals and anticipating unexpected adjustments must be considered. Staying on top of these numbers is essential to managing your business, so it is important to continually keep checking in on your initial plan and adjust as you go.

Good accounting sets up a blueprint for the management of your business and offers a solid foundation for stability and success.
4.) ANALYZING PERFORMANCE
​Successful business owners are always checking in to see how their business is doing.
A company can assess their financial position by looking at their historical and current records of liabilities and assets and other financial records. A business owner can use this information to gauge how the company is doing.
These records are an opportunity to learn from past mistakes and make more informed decisions about planning for a more lucrative future. Knowing your current financial standing can also help you identify new areas of growth that help you achieve your bottom line.
5.) EXTERNAL COMMUNICATION
The communication of financial information is important when dealing with external parties.
Clear accounting and finance management can be useful when getting a loan from a bank or attracting potential investors.
Good financial management makes it easier for you to provide financial statements to external stakeholders. External users will assess these reports to decide how to proceed with their involvement with your business.
6.) INTERNAL COMMUNICATION
Financial reporting can also help business owners communicate information to internal stakeholders.
This information might be relevant to employees who are interested in profit-sharing and stock-based compensation. This records also allow owners to communicate the strengths and weakness of their business with their teams.
Allowing your team to know your financial standing can tie with a bonus structure that can be used as a productivity incentive.
7.) DEVELOPING STRATEGY
Good accounting and finance management inevitably leads to a good strategy. Once you’ve developed a budget and thoroughly analyzed your data, it should be easier to have a better understanding to develop a strategy to achieve your bottom line.
After reviewing your financial records, you will be more empowered to make informed financial decisions on everything from staffing to supply management. Your budget is your map to your strategy and strategy is your key to profitability.
9 Comments
Hailey Miller link
2/1/2022 02:06:46 pm

I did not know that having financial records can allow owners to know how their company is doing. I would imagine that any business owner would want to focus on growing their company to maximize profits. I think they should look for reliable bookkeeping services to ensure timely and accurate recording of their financials.

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Victoria Addington link
2/8/2022 06:34:33 am

I am most captivated when you mentioned that budget can be created by utilizing your financial records and analyzing your cash flow. This made me think that all of these tasks rely on accounting. With that said, it's very significant to have a small business CPA to ensure that these processes are achieved.

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Edward Clarkson link
2/10/2022 04:30:35 am

Thanks for sharing this useful information! Hope that you will continue with the kind of stuff you are doing.

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MckinneyVia link
2/24/2022 09:50:44 pm

Very much appreciated. Thank you for this excellent article. Keep posting!

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Sabina link
3/28/2022 01:53:27 am

Thanks for sharing this useful information! Hope that you will continue with the kind of stuff you are doing.

Reply
Lhynzie link
9/12/2022 11:44:43 pm

Awesome content. Thank you for sharing this wealth of information. It was very interesting and very useful content. I’m definitely pinning it to share!

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sutherland accountant near me link
10/7/2022 05:44:37 pm

When you work for yourself, you must carefully consider your retirement strategy. The establishment of an employer-sponsored retirement plan is one option to begin financing your retirement while receiving tax benefits. Even as a single proprietor, you are running a business, and having an employer-sponsored retirement plan will allow you to put money into your retirement account before taxes are deducted; in addition, since your company is sponsoring a retirement plan, your federal tax burden could be reduced.

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Mary Moore link
10/19/2022 06:24:32 am

One of the most important bits of information, in my opinion, is this. I enjoyed reading your essay, too. I liked how you explained.

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Sam link
11/7/2022 06:59:48 am

That's good to know, and I thank you for giving this really helpful information.

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