Otherwise known as “Language of Business”, accounting is very important for businesses to keep a track of all the financial activities. Without installing a proper accounting system, you can only dream of running a business successfully. You can make a good investment, hire a bunch of talented people, and use the latest technology, but it would be all for nothing if you don’t use accounting.
You need to gauge the financial health of your business regularly so you can make the right decisions and take the right actions and for that purpose, you need accounting.
What is the role of accounting in business?
Accounting measures the financial activities of a business and provides quantitative financial information to the management, investors, government, and other stakeholders. The information is then used for making important business decisions. But, the role of accounting is not limited to evaluating the financial performance of a business, it can also help you get the most out of your tax return.
Budget making and future planning
For making budgets, every business needs a way to assess their income and figure out if they are making or not. Accounting helps businesses keep track of everything such as loss and profits, any debts, or a list of customers who have their dues pending.
All of the above parameters are vital for a business to consider before jumping into making a budget and planning the company’s future. With accounting, you can keep track of your finances for the previous years which will make it easier for you to plan your budget for next year.
Do you have a record of all the transactions made by your business in the last year? If no, then your business is in dire need of an effective accounting system. You need accounting to record transactions which can be crucial for your future development. You might need all of your transaction history for any official inquiry, and if you don’t have it at that time, it might be problematic for your business.
Well informed decision making
If you need to buy furniture or electrical appliances for your office or if you sell different products and you need to revise your prices, you will need a guide to make these decisions. Accounting will help you single out every factor that will affect your business if you want to revise the prices of your products.
The expenditure and resources used to carry out those commands and the end benefits estimated by accounting will help you make an informed decision.
Analyzing the financial position
The financial position determines whether a business has used all its resources appropriately. The cash flow, investment of the capital, loss, and profits, and the liabilities of a business are the different parameters that are analyzed by accounting to declare the financial position of a business.
Evaluating business performance
At the end of the day, it all falls down to the performance of your business. Without accounting, you will not be able to contemplate whether your business has been successful or has endured loss over the last year.
Generating accounting reports and keeping records will help you compare the current business performance with the previous years and also with the competitors.
Should you become an accountant?
We have already established that accounting is crucial for every organization that wishes to manage its finances properly. The demand for finance professionals with an accounting degree is very high, so you would have a lot of options. Here are a few reasons why you should become an accountant.
You can get a job without a degree
Where some organizations demand a degree from the candidates, many give priority to a candidate’s skills and experience. If you take accounting courses for beginners or get an accounting certification, you can get a job easily.
You can work in any industry
The jobs in accounting are countless, and there isn’t one organization that doesn’t need finance professionals. Every industry, from health to fashion, and nonprofits to government agencies, needs accountants to manage their finances and guide them.
Excellent pay and benefits
The accounting jobs come with very good pay and economic benefits. The median pay is about $70,000 per year, but you can make up to $90,000 per year if you are an accounting manager or a forensic accountant.