Why Are Accountants So Important to a Corporation

When becoming a business owner, setting up your business can be a little bit overwhelming – especially when it comes to the finance side of things. That’s where financial accounting and management accounting comes in. Accounting plays a huge part in helping businesses to keep on top of their affairs, and are so important to corporations, businesses, and especially small businesses. Here’s how.

Budget planning

It may seem obvious that a new or established business will require a budget of some sort to keep a watchful eye on the business finances. Yet actually setting a coherent budget up can be really difficult. That’s where an accountant comes in. Accountants can play a crucial role in helping a business track income, revenue, and anticipated expenses. A good budget helps to break these down per month, quarter, or tax year and even into departments where necessary.

A good accountant will be familiar with various types of budgets and will be able to determine which budget best suits their client’s needs. They may choose a static budget, a performance-based budget, a zero-based budget, or variance analysis. Many accountants will use accounting software to help them manage the budget.

Lending and debts

Businesses will often need to borrow money from financial institutions in order to fund further growth. In order to get these institutions to agree to lend money, businesses have to provide financial statements. These will have been prepared by an accountant to ensure that they follow the GAAP – the generally accepted accounting principles.

Accountants are also able to aid in ensuring any loans taken by the business will not bankrupt the company in the long term. They will ensure that the business is likely to earn enough to pay back the loan within the period demanded. Likewise, accountants can help corporations to balance their budget in order to ensure that the business pays off all debts as quickly as possible.

Record keeping and organisation

It is paramount that businesses have an up-to-date record of all of their financial data, financial transactions, and cash flow. Accountants will make sure that a business have the three key financial statements:

  • A balance sheet
  • An income statement
  • A cash flow statement

These records need to be accurate and they must follow any regional legislation, regulations, and generally accepted accounting principles. Accountants will be familiar with accounting software and financial functions, enabling them to easier organise all of a business’s information. Keeping financial records is a great way for businesses to fully understand their financial health and position, and is hugely useful for internal and external auditing.

A word from Auditox Accountancy on decision making and business growth

Accountants, especially those who focus on management accounting like Auditox Accountancy, are there for more than just spreadsheets – they are also able to offer advice based on the business’s financial status in order to help further business operations. Their work and their advice can help management teams and the business owner when it comes to making smart fiscal and business decisions.

Accountants can advise about the best time to release new products, when to price-adjust products, the cost-benefit of new services or items, and even help managers and business owners plan around their staff. Payroll, bonuses, and hiring are all financial decisions that should not be taken lightly, and employers can rely on their accountant’s advice to help them make the right move. They can do so by assessing the company’s financial statements, financial reports, business transactions, and any pre-existing financial commitments.

Impressing investors

Many businesses rely on money from investors to help fund growth and achieve financial goals. Accounts can support businesses in their search for investors by helping them with communicating financial information. In order to convince investors to collaborate with the business, businesses must provide investors with their complete records; this includes future projections, financial statements, their financial position, financial commitments, and even their business transactions.

Investors then use this financial information to decide whether or not the business is worth investing in. If the accounting reports show that the business’s financial trajectory is not looking promising, investors are unlikely to fund them.

Alternatively, if the reports show business success, smart fiscal decisions, strong financial performance, and a large enough gross margin, then investors are much more likely to support small businesses or corporations.

Cash flow

Keeping an eye on a business’s cash flow is an easy way to help keep the business afloat. The cash flow statement produced by accountants can help to demonstrate whether or not the business is succeeding by evaluating financial transactions. Accountants can also use the cash flow statement to identify profit opportunities!

Financial forecasting

One of the most useful skills of an accountant is the ability to use financial statements and accounting systems to forecast the business’s financial health and gross margin for the next financial period. This is classed as management accounting, and is a skill called future projections budgeting.

Accountants are able to use the financial information that they have gathered and stored for businesses to judge where the business’s trajectory is heading, and they can use this to make any necessary changes (with management’s consent) in order to maximise revenue, minimise loss and ensure that all financial commitments are handled.

Tax season

Tax season can be incredibly stressful for a small business owner. Especially a small business owner without an accounting manager! When January 31st rolls around, and the time comes to complete the necessary tax returns and VAT documents for the tax authorities, every business will be eternally grateful that they made sure to hire good accountants!

The accountant’s efficient record keeping and complete record of each business transaction not only plays a vital role in keeping the business afloat but it makes submitting tax returns much, much easier. Whether businesses are filing self-assessment income tax forms, business tax forms, VAT, or anything else, accountants are there to help. They are required to know the ins and outs of the tax regulations and deadlines and will be able to ensure statutory compliance with every rule. They will also check each document before submission to ensure your business pays the correct amount of tax.

Regulations

Running a business can put a lot of strain on a small team or an individual. By hiring an accountant or an accounting team, businesses can help to prevent any miscalculations and errors as well as the subsequent financial implications.

Missing deadlines or filing incorrect taxes can lead to significant fines which can really harm a business’s financial status. But beyond that, without an accountant, there is nobody holding the business accountable financially. This can potentially lead to potential fraud, misappropriation, or equity concerns, and can also lead to external audits being done on the business’s financial statements.

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