Why Is Accounting Important for Your Business?
What is Accounting?
Accounting is an essential part of running a successful business. It provides data, reports, records, analysis, and accurate information about assets, profits, debts, and liabilities. As a small business owner, professional accounting will help you keep track of your receivables and payables, clearly understand your financial status, and prepare well for tax season. In this article, you will learn what accounting is, why small business accounting is key to business success and why you should seek the services of an accounting firm in Loganville, GA.
Accounting analyzes, records, and reports a company's financial transactions, financial health, and cash flows. It interprets a company's financial information and reports the results clearly and understandably. Business entities can use the data provided by accounting to keep track of their income and expenditure, control costs, prevent the misuse of assets, increase production and profit, assure statutory compliance, and make smart and informed business decisions.
What are the 3 Basic Financial Statements?
The financial data provided by a comprehensive financial services firm is relayed to stakeholders, lenders, and management teams in financial statements. There are three basic financial statements, including:
- Income statement: This statement gives information about the net income generated and net loss incurred by a company during a particular period.
- Balance sheet statement: A balance sheet statement tells you the financial status of your business on a particular date.
- Cash flow statement: This statement shows you the cash generated and what was spent during a specific time.
Why Accounting Is Important for Small Businesses in Loganville, GA
You're probably wondering, what's the importance of accounting in Loganville, GA? Accounting provides management, investors, and government with transparent, reliable, and quantitative financial information that they can use to evaluate a company's financial performance. The main objectives are:
Reveals the financial performance of your business.
Accounting records provide detailed information about the financial standing of your business or corporation. They measure, quantify, and report your business's financial ups and downs. Without proper accounting, you may not fully understand the financial health of your business.
With these reports, business owners can ascertain the exact amount of profit or loss their business has made over a certain period.
They can also compare their current data with the last accounting records.
Ensures statutory compliance.
Accounting is crucial for business owners, especially during the tax season. Accounting is responsible for reporting a company's financial status and ensuring they conform to all local and national laws and guidelines. Businesses must provide accurate financial information to several government agencies to run in compliance with regulations authorized by the Government and pay taxes on corporate sales, income, and social security. Unless you want IRS audits and penalties, you need to keep your financial records straight.
Public-owned companies must provide annual financial reports to the Securities and Exchange Commission. Private-owned companies must also provide financial information to national taxing agencies like the International Revenue Service, popularly known as the IRS. Proper accounting helps organizations provide accurate reporting of financial assets and liabilities. It also ensures that a company's financial statements are legally and accurately reported on time.
Creates budget projections.
Most small business organizations work with limited resources to fund their day-to-day operations. It takes careful planning and budgeting to allocate these resources throughout the business to ensure it runs efficiently. Budgeting helps keep costs in check and uses historical data to prepare future budgets. Managers can prepare a budget for overhead expenses and create cash flow estimates and a sales plan with proper accounting records. Past financial data and future income projections always come in handy in budget preparations.
Gets financing from banks and lenders.
To get a loan from a bank or any other financial institution, you must be able to present your business's financial status in proper order. Lenders often ask for accurate financial records of your business. These financial entities use this information to confirm your business's financial status and whether it is worth investing in. They also use these financial statements to determine their investment performance and how much loan they can give a business. A company that keeps proper financial records efficiently communicates its financial status and builds credibility with lenders by presenting clear and reliable financial reports.
Guides decision-making.
The management or the decision-making body of an organization cannot make any decision without reasonable accounting information to back them up. Accounting helps business owners and stakeholders make better business decisions now and in the future. It provides reliable figures on the financial status and the impact of purchases or supplier recruitments made. Managers and stakeholders make their decisions based on these findings.
Accurate financial reports also make it easier for managers to avoid losses and inefficiency. For example, managers can use accounting reports to make operations within the company more efficient and profitable. They could use financial accounting reports to make major decisions like opening a different branch to increase production.
Accounting is not just about whether the company has made profits or losses, but it is a vital tool for strategizing and making smart decisions for the organization.
Helps in filing financial statements.
Tax preparation and filing often seem daunting for most small business owners, especially if they do not know where to start. But with systematic and accurate accounting records, this process can be easy.
Looking for Accounting Services in Loganville, GA? Contact Our CPA today!
Acuff Financial Services is a professional financial services firm committed to helping small business owners in Loganville, GA, attain long-term financial success. We boast of an extremely knowledgeable accounting team equipped with the skills and expertise to help with business accounting. We follow standard accounting principles and are straightforward. With us, you can expect affordable accounting services, including affordable bookkeeping services, timely tax returns, and efficient payroll services. Call 770-554-8344 today to book a consultation with our accountants.
