Mistakes can include messing up a tax form, claiming too many expenses, claiming too many charitable donations , and more. Having a good accountant on staff prevents mistakes and decreases the likelihood of an audit, especially for small businesses. Coming into a large inheritance as an individual or giving a large financial gift makes your taxes more complex, too. An accountant can help you manage the money and make your life easier. A good accounting system provides the information necessary to make decisions about the future of the organization.
Analysis of financial records can also help a company make decisions about hiring employees, making purchases, gifting charitable donations, and more. Preparing for tax season would be a nightmare and take up a lot of your valuable time. Having a good accounting system and accountant on staff makes the money-managing process much smoother and faster.
An organization can now spend time on other areas of business. During tax season, it can be challenging to know what you can deduct. An accountant can also point out deductibles you might not have known about. This is helpful for both organizations and individuals. Disclosure: TheImportantSite may be compensated by course providers. Here are ten reasons: 1. No matter what your business does, a financial model is a crucial tool that condenses all the scattered knowledge you have of your business into a tool that makes it clear for you, and anyone else.
A proper model will allow you to understand how changing the frequency and volume of your purchases can simultaneously reduce your cost per unit, while also driving up warehousing costs. Maybe you want to expand your marketing business from just doing SEO to also doing Facebook ads. A model can tell you how much you need to charge, and how much you need to spend on acquiring new customers, compared to the cost of hiring someone with that new expertise.
Applying probabilities based on your confidence in those projections can help determine whether its worth doing at this time. A robust model can help put so much of what makes your business tick into a neat spreadsheet and help you make clear headed decisions. A budget is what allows you to set expectations for desired results, and determine what spend to achieve those results is acceptable. Business processes are like chores. For a business, the amount and complexity of the chores is much higher, but so are the stakes.
But forgetting to pay suppliers can strain relationships, and not tracking your volumes of inventory can lead to spoilage or stockouts that mean unhappy customers. For too many business owners, putting out fires is essentially a way of life. Having solid business processes can help break up the work so that its not burdensome to do, and so that you stay ahead of any potential mistakes.
Costing is in my opinion one the most crucial and valuable pieces of information that accounting can generate. Consider a simple illustrative example of someone buying watches from China that he then sells direct to consumer for a small margin, making money on volume.
He purchases in shipments of units split evenly. Financial accounting follows the generally accepted accounting principles GAAP to do this. The GAAP is predicated on some fundamental principles in the accounting world. They can be referred to as general rules that make up the foundation for the more detailed and legalistic accounting rules.
The GAAP offers a business many benefits:. The GAAP ensures that companies who distribute their financial statements to the public follow a universal format.
It standardizes accounting definitions, creating consistency every year in companies' methods in preparing their financial statements. Businesses will typically need loans for expansion opportunities without eating into any operational funds.
Financial accounting is a huge component of whether creditors are willing to offer loans to a business. Financial statements outline not just all the assets of the business but any short-term and long-term debt. Once the risk level is understood, lenders can decide how much money to lend and what interest rates to charge.
After receiving the loan, accounting can keep business owners accountable for their debt. Even if the loan was used in an asset, accountants do their best in ensuring that the creation of this asset can cover the costs of the loan. A common reason for businesses going bankrupt is the mismanagement of cash. For this reason, accounting helps determine the amount of liquidity your business has. Liquidity refers to how transferrable your money is, or your business's ability to cover any immediate and short term financial debts and obligations.
Public companies all have financial statements that are reported according to the financial accounting standards set by the Financial Accounting Standard Board FASB ; this specifically includes information about how well or poor a business is doing in the quarter. When companies go public, they allow the public to secure shares of equity.
Stocks help the corporation quickly secure a lot of capital, which is essential for the growth and expansion of any business. There would be no way to know if the company is worth staking in, thus reducing the chances of public or private investment.
Businesses want investments so they can increase profits. If no one invests, profits can only reach so far. When you become a business owner, it becomes pertinent to work within the realms of the law. When organizations start amassing large quantities of money, the possibility of breaking fiscal laws becomes more apparent.
Everyone has to pay taxes, especially businesses. This comes with the potential danger of monetary penalties, seized assets, and even prison time in severe cases. Accounting prevents errors and omissions in financial statements. When the financial reports are done right, you eliminate the risk of being audited by the IRS. Accountants keep businesses clean; they make sure that all money is accounted for, and no dollar goes missing.
Many states have implemented laws about closing the gaps in pay between co-workers of the opposite gender. These laws prevent various behaviors.
While this is a human resources problem, its relation to pay connects this issue with internal bookkeeping.
The requirements mandated by equity laws make it crucial to have all salaries within a hierarchal group of jobs conform to the same standard. While not technically a law, these are accounting principles that are updated periodically.
Lenders may not want to work with you, thus lowering your credibility. Businesses are particularly vulnerable to fraud, especially small and midsized businesses. Because of the business's size, the effects of being targeted by fraud can be so much more damaging and harder to come back from.
Businesses generally experience one of three types of fraud: theft, financial statement fraud, and asset misuse. Theft is usually done by directly stealing cash, claiming fictitious expenses, or stealing property and assets.
Surprisingly, theft is usually done by employees. Accountants can deter this by implementing checks and balances in the workplace to ensure that no one person has control over a financial transaction. For example, if one person writes a check, then a different person has to sign it.
Financial statement fraud has to do with inaccurate reporting and general corruption in which employees financially benefit from violating their responsibility to the company.
To deter fraud, businesses often hire at least two people to handle the financial functions of the business interchangeably, keeping track of the handling of cash. They look out for unknown payment recipients, checks that were signed over to a third party, and anything that reveals intentions to remain anonymous. Asset misuse could look like billing schemes, check tampering, using company computers after hours, and more.
It involves company assets being used at inappropriate times, thus cutting into the costs of the company. Because asset misuse and other types of fraud result from employees accessing assets through a lack of control, accountants can establish proper internal controls for their business to prevent this. Internal controls promote accountability and prevent fraud in businesses. Financial information often needs to be communicated to external parties. Businesses will always have stakeholders, both external and internal.
External stakeholders are individuals or entities outside of a business who have a reason to care about the business's performance. Accounting mandates the task of digging up and revealing the numbers involved in the company's financial prospects to external stakeholders, which can seem like an intimidating process. However, communicating the financial prospects of a company can attract the eyes of investors.
Ultimately, everyone wants to make money. The law mandates public companies to publish their financial performance information every year for interested parties to look at. Not only is it necessary to communicate with external stakeholders, but internal stakeholders are just as important in sharing financial prospects as well. Internal stakeholders are usually entities within a business that are significantly impacted by the performance of the business.
0コメント