If you can’t control your money, you can’t control your business, as they say. Now who doesn’t know this? Yet most IT small businesses don’t understand the implication of this completely. Accounting plays a key role in business management and should particularly be paid attention to by IT business owners. That’s because most IT businesses rely heavily on accounting firms or staff when it comes to their finances and end up undervaluing accounting as an enabler in business management.
Here’s how accounting actually helps in managing your IT business.
Creating budgets for managing operations
That’s a given. But there’s more to a typical IT business budget than you realize. IT business is mostly service-based economy where a business gets paid in parts. Some IT firms keep a 50% advance policy before starting a project with an overseas client. A good accounting system helps you keep the actual cash flow separately from future receivable cash. This helps in creating budgets for expenses for regular heads like salaries, rent or fee and unexpected heads like inventory loss, wear and tear or repairs. An IT firm is able to anticipate revenues and expenses through a balanced budget and is never thrown into an emergency situation where business owners need to arrange funds for certain unexpected expenses. However, developing a great budget system can be a hassle for IT firms with no or little knowledge of accounting. Such firms can take the help of a cloud-based accounting software in order to fully manage and anticipate expenses and revenues.
A systematic accounts would help an IT firm sail through any number of taxation changes or unexpected legal compliances. While you may need the help of an accountant for a good knowledge of legal norms of IT businesses in India, a great accounting software that comes with default taxation setting can be handy. Such a good accounting practice will save your IT firm from penalties. For instance, IT firms need to go through facility improvements in compliance with safety laws. A good accounting practice helps keep a track of these compliances along with keeping good financial records which really help at the time of any legal scrutiny.
You cannot devise great management policy without analysing your business performance. Through good financial records, you are able to see where your money was used and what was the long-term advantage of a certain investment. This helps IT firms to evaluate clearly how certain expenses led to the overall operation. You get a clear idea about which expenditures have been fruitful and which ones have not been in order to take strong action and decisions.
A clear-cut view of finances helps you take informed decisions about future course of action. In order to survive in a competitive IT world, this is particularly of great importance. You are able to understand IT market norms in the light of your own financial data. You know the economic landscape that you are operating in. This helps you devise a more competitive strategy based on the past financial analysis of your business. You now know which operation costs can be cut, which tasks can be automated and which departments have under-performed. This is crucial in managing the overall business of your IT firm. Get an accounting software that gives you a bird’s eyeview of your finances so that you are able to create winning strategies.
An an IT firm, you need an accounting tool that contributes in overall business management. You must make every investment count, including accounting.