7 Reasons Why Accounting is Important for Small Business

You run a business to earn money. But, earning money also involves keeping an account of its transactions including income and expenditures apart from ensuring compliance with the country’s statutory regulations, managing investors’ money, paying government taxes and financial information needed to make business decisions. This explains the need to hire the services of one or several accounting firms in India to avail their accounting & bookkeeping services and benefit from their expertise. 

Small businesses cannot do without making necessary provisions for accounting & bookkeeping services. Apart from recording income details like profit and loss or creating a balance sheet to know the financial status of the business in a year or generating a cash flow statement to justify the imbalance between the P&L account and balance sheet, there are myriad reasons for which you must seek the help of an accounting firm. Some of them include:

Product Pricing and Service Charges

Updated records enabled by accounting & bookkeeping services help in decision making, thus, propelling the business efficiency. Decisions regarding the amount you must charge on your products or services are taken based on accounting information. Product or service pricing is not easy as one needs to be aware of myriad costing concepts like fixed costs and variable costs. Information like these is only possible through cost and management accounting. Also, the opportunities available in your line of business can only be gauged based on the analysis of competitors’ business performance. Choice of financing opportunities is only possible after an in-depth study of accounting details.

Assessing Business Performance

Your business’ financial records are more than just numbers. If interpreted correctly, they tell you about where your business stands. Reading your firm’s P&L account, balance sheet, cash flow and funds flow statements will give you a better understanding of where your business stands compared to your competitors.  The current financial position of your business will tell you where to invest and the liabilities you need to get rid of to advance with your business plans. Comparing your current financial details with your prior accounting records will tell you at which you have grown each year. 

Enables Statutory Compliance

Different countries have different rules regarding taxes or maintaining books of accounts. If you are doing business in India, hiring any of the accounting firms in India will help as they would apprise you of the various business processes and changing regulations like the introduction of the GST, investment in tax-free bonds, compliance with employee provident fund (EPF) rules, etc. 

Submitting Financial Records

This is important as businesses need to be registered as per their form, i.e., proprietorship or company. Those intending to run their business like a company must submit its financial statements to the Registrar of Companies for approval. Besides, filing of numerous taxes like direct and indirect taxes necessitate filling of necessary financial details or information.

Making Business Plans

You need to have a budget in place before you assess your future business prospects and estimate its projection in future. The right accounting records help to gauge requirements before you proceed with your business plan while cautioning you against the loops and holes hidden till date. Tying up with the right accounting firms in India allows you to avail increased services like a better business outlook, tie-ups with financial institutions for necessary funds, management expertise, technical help, etc. 

Cash Management

Managing business funds and cash is crucial as a sudden shortage of necessary funds can result in business failure. Checking your accounting records allows you to check the liquidity of your business. Having enough cash is necessary to pay off your business loans and liabilities, thus, doing away with the risk of bankruptcy. You must also have enough funds in your corporate accounts to pay off the direct and indirect taxes timely. 

Organisation Control

Maintaining and checking accounting records regularly reduces the risk of frauds, theft by your employees or stacking up of obsolete products at your stores. The details point out to the source of mismanagement, thus, prompting you to implement necessary controls and save yourself from sudden losses. Also, regulations require business enterprises to be updated about their financial records and product information. Inability to submit information regarding shareholders and taxes paid can result in the state wrestling control of your organisation.