Most people who are about to start their own business may associate the benefit of accounting merely with the calculations of income tax or even VAT, however, accounting offers a lot more than that. It benefits your business in the present and future and can help you make the right decisions for your business. Of course, this is also somehow dependent on the accuracy of the financial data recorded, therefore, many people rely on accounting tools or even a mixed currency counter that displays the correct amount of all sorts of bills for hassle-free bookkeeping.
If you’re not already aware of the advantages accounting has to offer to a businessman except for tax, read below!
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Liquidity Management
One of the key financial statements that require a business to draft is the statement of cash flow. It takes into account all the cash that will flow into and out of the business and shows whether you have a surplus or deficit cash. This lets you make decisions wisely as a business without cash can’t survive, although it can without profit.
If you have surplus cash flow, you can find ways to invest it rather than keeping it idle and if you have deficit cash flow, you can plan how to raise finance to keep your business alive.
Keep Track of Your Assets and Liabilities
Your assets such as account receivables, cash, bank, and inventory are the backbone of your business and in order to keep track of them, you need to prepare a balance sheet. It compares your assets with liabilities such as bank loans or account payables to help you evaluate the financial position of your business and therefore make the right business decisions.
Helps Stakeholders Make an Informed Decision
If you have well-maintained financial accounts, you will be able to gain quite a lot of benefits for your corporation.
For instance, your account statements will help your prospective clients make a decision on whether to work with you or not.
If you apply for a bank loan, the bank’s decision to grant you a loan will also depend on your financial position and performance, which will be evident from your financial statements.
Likewise, shareholders, who may want to invest in your business, would also like to see your financial statements before making a decision as this shows the credibility of your business.
Managers Can Perform Their Role More Efficiently
Managers are important to a business as they are supposed to make decisions for it as well as plan and control the activities. Apart from financial accounting, management accounting helps managers to have a clear view of the company’s status and make or alter plans and decisions accordingly.
For example, variance reports, budget sheets, and forecast statements, all help the managers to be well-prepared ahead of time for any kind of situation that the company may have to face in the future.
Determines Sale Price of the Business
Just in case you plan to sell your business in the future, properly maintaining and keeping your accounts can help you determine the resale value of your business without any disputes or issues. Hence, you can get a fair value including all your assets and liabilities without feeling guilty about possibly selling it below its par value.
