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Accounting allows you to keep a record of all the financial transactions of a business. Each and every expense incurred by the firm and the income received is recorded in a timely manner with the help of accounting. Accounting is a must for all types of businesses irrespective of their size and niche. The objectives of accounting are explained as follows.
Systematic Record of Statements
The most basic objective of accounting is to maintain all the transaction data that includes all the inflow of money and the various expenses incurred by your business on a day-to-day basis. Maintaining these records manually is a tough job and can lead to several miscalculations. Plus, you may miss out on certain transactions if they are not maintained properly. Thus, accounting saves a lot of time and efforts and ensures that there are no errors in your accounting statements.
Monitoring the Performance of the Company
You can easily view the profit and the loss statements whenever you want. This is possible with the help of regular accounting maintained by businesses. As accounting contains details of all the revenues and the expenses of the business, it is possible to see the amount of profits earned or loss suffered. By comparing the previous year’s and current year’s statement, you can analyze the performance and position of your business. If you see that your performance isn’t positive, you can tweak your business plans for better results which and accordingly make proper business decisions in the future.
Communicating to Stakeholders
The stakeholders of your business will be interested in knowing the financial position of your company and what are its future growth prospects. The stakeholders include shareholders, investors, creditors, financial institutions, and even your customers. Your accounting statement gives a clear understanding of your company’s performance and thus, allows the stakeholders to make crucial business decisions such as investing in your company and so forth.
Avoid Manipulation of Data
A lot of manipulation and scams can occur in the process when you run a business. With the help of accounting statements, you can conduct an internal analysis and see if there were any manipulation of resources, scams, false accounting figures, etc. Accordingly, you can take strict action and safeguard your business from these ill-practices.
Helpful for Generating Capital
It may happen that you might need resources and capital for your business operations. But, you don’t have the capital on your hands and need to obtain it from an external source such as an investor or a financial institution. Before they finance your business, they want to know if you are able to pay back the financed amount. In the case of investors, they want to know if they are going to get a good return on their investments. Past accounting recording can help them to determine if it’s worth providing you with the required capital. If your accounting statements provide accurate information in the correct manner, then you do not have to worry about explaining your creditworthiness to the investors. Thus, accounting statements can be beneficial in generating capital for your business.
Accounting is extremely crucial and without proper accounting, a business cannot function effectively. Therefore, consider taking help of a small business accountant Edmonton who can assist and guide you to prepare your books of account as per the established standards.