Why is accounting important to your business?

Why is accounting important to your business?

24th January 2020

Accounting or accountancy is how a business’s financial or non-financial information is measured, processed and communicated. Regardless of the size of the company, accountancy remains one of the foundation stones of a thriving operation. Even small, one-or two-person businesses will benefit from generating a statement of revenue, balance sheet and cash flow. These resources can help executives find patterns that need improvement, or identify areas where the company can develop and grow.

Accounting in larger firms

The practice of accountancy increases in complexity based on the size of the company. For example, a large corporation is likely to require assistance when it comes to things like sharing details with future creditors or investors. A larger company might even need to borrow money to stimulate a new period of growth. In these cases, creditors need to see a statement of cash flow reflecting adequate liquidity and the ability to repay the loan. This is usually presented in the form of complete and comprehensive records of all company income and expenditure, such as receipts, invoices, purchase orders, and in and out payments.

Keeping records and documents

Proof of the company’s financial trail is a critical part of running the business legally and efficiently. Keeping up to date records also helps to detect and prevent fraud or theft. Using a good record keeping system will help you to:

  • Claim and receive the appropriate amount of benefits or credits
  • Apply for additional funding
  • Pay tax on time and correctly to avoid penalties
  • Track expenditures, debts and creditors
  • Save time and accounting costs

If you’re setting up a new business, it’s essential that you start on the right foot with a proper record keeping system in place. All supporting documentation such as receipts and agreements should be filed securely. Maintaining comprehensive and up-to-date records can allow you to comply promptly with tax and VAT legislation. Imprecise or missing records will very likely result in long-term complications and miscalculated tax returns, which will attract penalties.

Accountancy and technology

As is natural in our digital world, accounting has developed considerably since the early days of abacuses and attaching devices to paper ledgers. Even modern calculators have become largely defunct. Today, technology can be used to translate financial data into financial information. Accounting technology is designed to automate activities in a way that saves a lot of time and eliminates much of the risk of human error. Of course, the need for specially trained individuals is still central to the role of accounting, but technology acts as a reliable support in compiling data, implementing formulas and providing secure storage for sensitive information. In turn, it also means that the modern accountant must remain well versed in all relevant aspects of information technology. This includes a comfortable understanding of cyber security that’s designed to protect the privacy of the business and client.

Are you looking for highly trained people to handle all your accounting needs? Start a conversation with us using our contact form, or send an email to info@ctaudit.com.mt

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