To manufacture means to make something from the beginning. Usually, a manufacturing company is compared with the industrial sector, is one of the most industries second only to the agricultural sector. Without a thriving manufacturing sector, it is impossible to expect that the economy of a country will alleviate itself. This is the reason that it is necessary to use proper accounting and bookkeeping so that the manufacturing company does not face any problem.
Let us see some of the features of accounting which will allow the growth of a manufacturing company.
Why does the Company Require Accounting?
By using an accounting service, a manufacturing company will be able to keep track of the present condition of the company and will accordingly be able to take decisions for the future of the company. The various reason to employ accounting are:
1. Understand the Present Condition of the Company
The accounting will allow the management and potential investors to understand the present economic situation of the company. The accountant or the outsourced accounting firm will prepare a report after performing the accounting function. This report will comprise of the various financial facts and figures by which the management will be better able to understand the present situation of the company.
2. Decide the Future of the Company
Once the management understands the present condition of the company, they can take the properly allocate the resources at hand. After assimilating and analysing the various accounting reports, the accountant will generate certain recommendations and alternatives which if followed by the company will ease the journey towards a better future of the company.
3. Inventory Cost and Cycle Time
Proper accounting will allow the companies to understand the various costs associated with the manufacturing processes. The management needs to time the duration of all the manufacturing processes. This data will allow the administration to understand which method is the most time taking, and after getting this knowledge, they can streamline the process to take less time.
4. Better Cash Flow Projections
The accountant needs to understand and highlight the KPIs. KPI stands for Key Performance Indicators. The proper understanding of a companies' KPI is very important as focusing on them will allow the company to grow more.
The accountant or accounting firm needs to keep in mind that the KPI for every company and every industry are different. The nature of the company, the size of the company and the industry in which the company functions play a very important part in deciding the KPIs of the company.
5. Take Better Decisions
With the reports prepared by the accountant, the administration will be able to compare the various facts and figures with the historical data of the company, which will allow for better decision making. Comparisons can also be made with the data of your own company and your competitor. Such a strategic move will not only allow you to understand the industry in which you are working but will also enable the company to modify any strategy at a moment’s notice.
6. Bring in Potential Investors
After a specified time (usually a week, month, quarter or a year) or after every time the accounting services are performed, an accounting report is generated. This report will comprise various important financial figures and Key Performance Indicators, which will allow the multiple investors to calculate and understand if the money which they are investing is being put to good use.
7. Finding New Opportunities
Sometimes the analysis of the accounting reports will help the accountant to understand the present scenario of the industry and the surrounding markets. This knowledge will assist the management of the company to find out new and creative opportunities in the market and increase their sales.
8. Embracing the Various Technological Advancements
Along the years, there have been many advancements in technology, which will increase the efficiency and effectiveness of a company and will decrease the time taken in completing a process. Outsourcing the accounting and bookkeeping functions and use of accounting and bookkeeping software are some of the most common ways in which technology is employed in the accounting process of a company.
These are some of how accounting can assist a manufacturing company and help them achieve financial growth. If you are looking for accounting firms anywhere in UAE, you must avail services of “JAXA”. We also offer various services and for more details on the services we provide do contact us – we would be happy to help.