Accurate accounting not only makes the tax season a breeze but also helps in effective cost cutting and increasing the value of your business.
Just like a healthy diet can make a person appear strong to the outside world, proactive accounting can increase the value of your business and make it look better to outsiders — including customers and potential investors.
As a small business owner, you will know that your company requires accurate accounting techniques and this is where you will have to understand the importance of accounting for business.
So, if you have been procrastinating about making the transition towards more accurate and automated accounting, we have listed down ways how it can help a business be more valuable:
1. Effective Marketing
If you are an uninitiated individual in the entrepreneurship world, you might think that accounting is all and everything about numbers which doesn’t have much effect on the other aspects of business operations.
But here’s a key information we might think you are missing:
An up-to-date and accurately maintained accounting helps a business prepare a more reliable revenue and earnings forecast.
Any seasoned business owner would tell you that forecasts aren’t just for creating budgets and future growth roadmaps. They in fact can be used to understand whether your current marketing efforts are working, or whether they’re missing the mark.
Without updated and accurate information about your earning, expenses and cash flow, there is no way to tell if you can afford to launch a new marketing campaign.
But as soon as you have your finances in order with precision and accuracy, you would start getting answers to marketing questions such as:
When is the right time to initiate a marketing campaign? How would the new pricing and promotions affect your sales? What marketing venue has the best return on your investment?
The answers to these questions will effectively
2. Stability Throughout Customer Base
A business without accurate accounting is like a ship drifting at sea without a captain — you never know when it might strike an unforeseen iceberg or reach the harbor safely.
And as we all know, customers don’t want to board a sinking ship, so it’s important to maintain accurate accounting data, control your budget, and keep the customer experience stable.
Consider this: when money is tight, you probably have to cut costs elsewhere. You might even need to let go of those employees that have built relationships with customers or start serving them yourself.
Sometimes it’s possible to cut costs while maintaining quality in different business aspects, but other cost-cutting measures impact customer satisfaction and loyalty.
3. Investments Empowering Quality and Efficiency
Accurate accounting would help you know when and how money is coming and going from your business. It can also help you plan for enough cash reserves to endure a severe cash crunch.
But one of the most underrated advantages of accurate accounting is that it also helps business owners consider the consequences of investment decisions.
Could introducing a new equipment have a significant impact on your processes? Could subscribing to an enterprise software help employees get their jobs done faster and with less stress? Could it delight clients by improving turnaround time or providing a higher-quality product or service?
Timely accounting information means you’re better prepared to take advantage of such investments when an opportunity presents itself. Without it, you will always be in an uncertainty in knowing when is the right time to make such investments, or if you can afford to make them, and what its impact on your cash flow would be.
4. Uncompromised Security ensures uncompromised accessibility
Businesses that maintain all of their client and accounting records in spreadsheets on a desktop or laptop computer are at serious risk of losing their financial data.
You are just one infected USB, email attachment or website click away from getting a deadly virus. A stolen computer or hacked systems can destroy your business before it grows.
But, if your company’s data is stored in a cloud-based accounting software that, what happens to your local system is just a blip on the radar. If ever your computer is infected by a virus, you just use another computer to simply log into it, and voila, all your numbers are right in front of your eyes.
In other words, you’ll always be there when your clients need you because your numbers will always be there for you.
5. Creating and controlling budgets
Why is accounting important? Well, one of the prime reasons accounting for a business is vital for your company is that it helps business owners to create and control the company budget. If your organization doesn’t have any budget then it’s as good as a captain-less ship, drifting at sea. Therefore, proper accounting protocols will prevent your business from sinking like the Titanic.
Company accounting will help with forecasting revenues as well. As long as business owners pay attention to accounting information, they will be able to forecast their company revenues better. When companies can forecast their revenues then they can understand the current market scenario and efforts, along with the changes that need to be made. If a business can’t forecast revenues for the company then they won’t know if it’s safe to make any business-related expenses.
6. Personnel decisions
Companies feel the need and importance of accounting because it helps them make important personnel decisions. This means that employers are aware of when to bring on additional staff members and when any employee needs to be laid off because this can determine whether the business will have a profitable year or not. Once you get a hold of how much you’re spending on the business (payroll and taxes), then you’re prepared to make sustainable growth decisions for your company.
7. Monitoring effective business growth
Business accounting is a good idea for employers because it provides them with the opportunity to monitor the company’s financial roadmap. Once you get the hang of your assets, liabilities, as well as the on-hand revenues, then you can track the growth of your business easily and help it reach greater heights.
Bonus: Sustaining Positive Relationships
Relationships with vendors and customers play an enormous role in the success of any business.
When vendors question why a bill hasn’t been paid, or customers ask why the service they ordered hasn’t been fulfilled, a cloud-accounting platform can help you quickly look for information, find the most relevant data that answers those questions and serve those customers and vendors without hassles.
This ensures that the relationship between you and your customers/vendors will be always constructive in nature.
You started your business to serve your customers and do what you love. That probably doesn’t include spending hours on accounting and bookkeeping.
Fortunately for you, accurate accounting doesn’t have to take hours out of every week. There’s an ever-growing suite productivity tools and technologies that can take the pain of managing invoices, bills and receipts and ultimately giving you more time to work on your business instead of in your business.
Got thoughts on ways to increase the value of a business? Don’t sit back and take the discussion to the comment board below!