Money management in the personal, family, or business area can only be carried out with good accounting. When we learn to keep good accounting, we understand better tax procedures, payments, balance sheets, and budgets. Knowing these factors, we will know what to invest in, how to manage profits, etc.
This recording and control system, called accounting, is much more than invoices, financial statements, and daily books. It is a great tool that helps and teaches us to know the present and future state of an economic project. It is a discipline that, when exercised constantly through making the right decisions, ensures excellent results in the long term. Therefore, in this post, we will talk about the importance of keeping the accounting of your business.
What is accounting?
It is a system of control, management, and registration of all income and expenses. Without leaving aside, each financial operation companies perform, such as documenting all movements, payment of liabilities, and other assets. Accounting itself is the way to measure the financial status of companies or businesses; doing so provides the company with better performance, development, and growth so that the business can continue to bear fruit.
By applying accounting tools, we can obtain valuable information about the company’s financial status, such as profits, losses generated, debts receivable or debts to attend, and the exact costs of production and service. It will also allow you to understand the cost-benefit ratio of the technical and human resources you invest in. With this data, it will be much easier to plan a strategy that generates profitability for your business.
What is the importance of accounting?
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- It keeps your company’s financial status up to date, which generates a technical and realistic approach to the monetary area. Thanks to this, your business can produce confidence and security for future investors, partners, customers, and others.
- Accounting also helps your business be even more productive and grow its capacity to generate, keeping the company well-positioned economically and socially.
- Also, it provides knowledge of the actual costs of products and services. This would allow for increased levels of productivity and competitiveness, as well as better management of financial resources.
- By applying this to account, it is possible to establish the sales values of products and adjust labor and operating expenses.
- Accounting allows companies to make plans, projects, goals, and long-term objectives, which is essential for business development.
- If you are not yet the owner of your own business and you are looking for investors for your venture or project, applying accounting as a fundamental tool for your projections will lead you to present concrete and accurate estimates that will give security to your future partners. People who invest in your venture will first want to corroborate your accounting; that will be the way to diagnose how solid your project is and what the investment risk would be.
- Accounting is essential to present the details between your company’s assets and liabilities. This is necessary when applying for loans or bank credits for any reason. You must comply with some requirements and documentation, which will be easier to obtain if you update your accounting.
When we talk about the monetary area, we are not only referring to the business area; we also handle money at personal, family, social, and other levels. That is why we will show below the importance of accounting in different areas.
Importance of accounting in a company
- As long as we apply to an account, we will correctly administer inventories, expenses, income, fixed and variable costs, and how many receivables and payables.
- It shows us the financial health of our company and allows us to share the information with other internal and external organizations.
- Comparisons of the company’s financial status can be made from time to time; it can be monthly, quarterly, or annually because it allows us to keep a record of the transactions made.
Importance of accounting in the home
- Applying to an account at home is fundamental; by doing so, you will be able to keep a better financial balance. We will be able to know how much money comes in and how much goes out.
- It avoids debts, shortages, waste, or misuse of money.
- You will be able to cover unforeseen expenses such as family emergencies.
How to do accounting at home?
- Although this area does not require so much formality, accounting is also fundamental. And to teach you how to do it, we have made these simple steps for you.
Always keep a record of all money inflows; for that, you can create a journal or a monthly budget.
In the same record, you can place all the outgoing and possible outgoings of money, such as purchases, fixed expenses, variable expenses, payment of services, doubts, and benefits, among others.
- Now add the total of both amounts and compare them, so we will define if there is a positive or negative balance.
- From that moment on, you can make decisions in correlation to the result of your financial statement.
- This simple and practical discipline will help you keep a better financial order and allow you to achieve and fulfill your short, medium, and long-term goals. And not only that, but you will also begin to notice a better return on your money due to proper money management.
Importance of accounting in the industrial area
- It will be possible to quantify the values of the assets and liabilities of the organization’s production.
- With accounting, the movement of profits, losses, production values, whether services or products and the definition of sales costs according to manufacturing levels will be known.
Accounting objectives
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- Seeks to provide efficient, direct, accurate, and solid results of a company’s management. Determines the financial results of the business activity in a specific time frame of the company, thus leaving straightforward and honest access.
- Keep a record of the operations and financial movements of the business, such as income and expenses.
- Maintain a balance sheet and financial control of the various areas of a company.
- Anticipate difficulties that require mandatory expenditures, thus helping to make the best decisions for the organization’s well-being.
- Optimize a better projection of the operation and future of an enterprise or business.
- Diagnose the development, productivity, and growth in the different areas of the company.
Advantages of good accounting in your company
The correct management of finances has to do with the application of accounting in your business, whether large or small. One of the significant advantages of accounting is that it will allow you to control your business, keep it under control, and keep it legal. It will also help you make investments, maintain control of doubts, exclusively manage tax payments, and many other things.
Without a doubt, accounting is a fundamental and mandatory tool for the financial area. That is why we will show you some advantages of keeping good accounting in your company or business.
- We will be able to know the production costs of products and services.
We can know the exact profit or loss of money at the moment.
The correct application of accounting reflects the benefits of the investments made and general and extra expenses.
- One of the advantages of accounting is that it allows us to know the current financial status of a business.
- Another advantage of accounting is that it will help you to be planned and to raise new projects.
- You will also be able to carry out business strategies freely.
Disadvantages of not keeping accounts in a company
Failure to apply accounting in a business or company leads to losses, a lack of control over the balance sheet, the relationship between its assets and liabilities, and ignorance of its equity situation. We can conclude that the lack of financial order produces failure in the management of income, which would end in an economic collapse of the company.
When accounting is not kept in a company, the order of priorities and objectives is lost. In creating a company, one of the tasks that must be carried out is to implement specific goals and main objectives; by doing this, we account for our business projections of where we want to get to and how we will do it. To put these two strategies together, accounting is needed. Otherwise, there will be little chance for the company to grow, develop and grow in size.
How to keep the accounts of a company?
Most companies hire an accountant to keep their financial records. Besides that, there are specific applications that can help us; one of the best-known is “contaplus.” Programs like this make accounting work more accessible. It is essential to mention that to keep the accounting of a company, it is necessary to go through the training cycle of a higher grade in administration and finance; this will allow you to have tall and solid knowledge in accounting and experience in the practice of accounting programs.
It is necessary for large businesses or companies to know the area; this will provide you with a better vision to understand the great importance and application of this discipline. Knowing what the costs of production are is another important aspect of accounting. Determining the final price of the services or products offered by the company and that this is at the same level as the cost of production prevents unnecessary losses of money and establishes the company’s financial picture.
The company account or business account is an efficient and helpful tool for bookkeeping. This has many functions; one of them is that you can always record all the movements and transactions made by the company.
How do you make sound financial decisions for your company?
The first thing is to know and recognize every aspect and state of the economic situation of your company or business; it is essential to acquire that knowledge in an orderly, analyzed, and recorded manner. Although not all decisions are made in advance, many must be made immediately for emergency reasons. Therefore it is essential to keep good accounting so that these decisions are made under priorities and do not affect the company financially.
If you are going to make a business decision, it is good to put the projects, plans, and business strategies on the table and, above all, to check the general objectives. All those people who own their businesses know that as the company or project grows, its goals must be renewed, as well as the tools and methods to carry out the accounting in an efficient and orderly manner so that the financial information of the company evolves and is much easier to access.
The use or practice of accounting is essential for making economic decisions in the business environment. To keep a correct accounting in your business, it is recommended that in the same way that in daily life, a monthly budget is made to make decisions related to personal finances. Also, in companies, companies and businesses should be allowed to know each of the economic aspects of the project, and based on that, they should make the most appropriate decision, always thinking about the growth and welfare of the same.
In the world of finance, there are two paths, one is economic growth and development, and the other is economic deterioration. When companies have to make an important decision, they have to take into account all the data they are looking to improve and dimensions, such as benefits for employees, higher sales, higher production, and other points.
