Why do people start a business? How do they manage to sustain the business goals they set upon starting their own businesses? Business owners start a business mainly because they want to provide services to people and in return get some profit from those people who pay for the services they offered. Business owners should have a clear understanding how to grow their business, what strategies they need to do to grow it, and foresee where their businesses are heading to.
In order to do that, every business should have a good accounting and finance management. These two have a very important role in growing and planning strategies for the business. It is significant for the owners to know where their money is going and coming from so that it will be unlikely for them to lose control of their businesses. Good accounting and finance give them a chance to strategize to make sure the business continues to grow, and it can get through unanticipated financial mishaps.
Table of Contents
• Maintain and Keep Business Financial Records
• Compliance to Legal Business Laws
• Create a Financial Plan
• Analyze How the Business is Doing
• External Connections
• Internal Connections
• Creating Strategies
There are some of the reasons why good accounting and finances are important in business management. Knowing what a good accounting and financial management can do to businesses can guide the owners to have a successful and less stress journey in growing their businesses. Some of these are:
Maintain and Keep Business Financial Records
Keeping track of business financial activities can be done in accounting. Accountants and small business owners monitor the cashflows of the business' daily operation by using the balance sheet. If done correctly, this will be a great help for them to control the business financial future and will provide better understanding where the company's money is going and coming from. This will help eliminate the risk of spending and losing money in not value adding things.
Compliance to Legal Business Laws
Having an up to date, fact-based and truthful financial records will help a business comply with important business laws. Not paying attention to minor details can result to major consequence on a business tax management.
The managers in charge in finance need to have a good knowledge about the payments to deduct, the amount of taxes to be paid and the right time to pay those taxes. Some businesses even hire seasonal accountants that work for them to check the business financial records because the last thing a business owner wants is to have poor financial records because once they get audited and proven that they are not legally compliant, the business can face serious legal troubles.
Create a Financial Plan
Financial plan or creating a budget is what gives the business direction. To establish a good budget, it is important to use the financial records and have a good knowledge about the business cash flow. The budget provides the business owners idea about the present financial situation of the business and assist them in steering up the business towards the sustainable success and development.
There are few things to consider in making a budget for the business. Some of these are the profit, expenses, the future plan and foreseeing the unlooked-for adjustments. Keeping a good number on these things is important in managing business. It is necessary to regularly check the original business plan and make some adjustments along the way depending on how the accounting and finance status is doing.
Analyze How the Business is Doing
It is a good habit for a business owner to check how his business is doing. He can do this by assessing and comparing the past and present financial records of assets and liabilities and other aspects that involves cashflows. He can use that information to determine how the company is performing over a period of time.
These financial records give the business owners a chance to know what mistakes they did in the past and learn something from the past mistakes. They can also easily foresee the problem before it becomes a real actual problem. Having a good knowledge of the business financial status can also give the owners ideas on how to do improvements for the business.
External Connections
Financial information of a business is very essential in making deals and communicating with external parties. Correct and transparent accounting and finance management can be of good use when the business needs a loan from a bank or making a good impression to entice prospective investors.
A satisfactory financial management makes it simple for the business owners to show their external stakeholders the financial statements giving them a quick and easy overview of how the business is doing. The stakeholders and investors are given access to these reports for them to decide if they will continue being involved in the business.
Internal Connections
Internal stakeholders are important too in the business. Financial reports can also be communicated with them. This kind of information maybe essential for the employees who shows interest in stock-based remuneration and profit sharing. It is important for employees to know the positives and negatives of the business, and this can be done by being transparent about the financial records within the team.
Creating Strategies
It will be easy for the company to create good business strategies if it has a good accounting and financial management. Good strategies can be made if the business has a good accounting and financial records which are meticulously analyzed.
Knowing and understanding the business financial records gives more confidence to the owners to make reasonable and practical financial decisions about the smallest up to the biggest elements of the business that involves finances. Making a business budget is a serious matter. It should be well thought of because it is the business guide in making strategy and this strategy is the answer to a business' success and profitability.
Accounting, which is commonly named as the "Language of Business", plays a powerful role in a small business. This covers up financial data entry, summarizing, analyzing and investigating. These things are a big help to business owners, managers, and stakeholders to assess and understand the business financial health. Understanding the accounting and financial status of the business also helps them deal with the business problems well and give them the confidence they need in making strategic business decisions.
