As a small or medium-sized business (SMB), it might seem convenient to do away with the accounting function entirely, as a cost-cutting measure, and figure it as the company goes along. One couldn’t be farther from the truth.
This is because the pitfalls of starting accounting off on the wrong foot are practically invisible to someone lacking experience in the field, despite having knowledge of managing business accounts. This is especially noteworthy since keeping up to date with basic accounting principles is a prerequisite to any business, irrespective of its size or revenue. Sorted accounting and bookkeeping services help a company not only track its expenses but also strategize business growth.
Accounting involves more than just managing the books of a company. A few general facets where accounting comes into play are:
- Preparing budgets, so as to allocate resources as per company strategy as well as cut down on inefficient operations
- Determining one’s financial standing, for better planning loans and cash flows
- Managing accounts receivable and payable, to delineate a company’s major liabilities and revenue streams
- Translating company mission to financial goals every year or quarter, to earmark the short-term goals of each function of the company
Role of Accounting in an SMB
Maintaining of account books is crucial for any business, no matter if it is large or small. Unfortunately, most of the small and medium businesses often neglect this process, resulting in a direct detrimental effect on the company. This can, of course, be precluded by hiring or outsourcing an accountant for one’s business. His/her role goes beyond financial recording and bookkeeping.
Here are the ways in which accounting contributes to a business, especially an SMB.
1. Acts as a Financial Barometer
For small businesses, there exist primarily 3 chief measures of financial accounting: balance sheet, profit & loss statement, and cash flow statement. A balance sheet juxtaposes your assets (what you own) against your liabilities (what you owe), giving you an idea of the company’s net worth. A profit & loss statement, as the name indicates, illustrates your profits/losses for the financial year. A cash flow statement lists your money inputs and outputs, giving you a sense of your liquidity, which in turn helps one in planning future operations.
An accountant should be able to help you in not only setting up these tools, but also utilize them to steer the operations of the company. This is especially significant in the inceptive stages of a business.
2. Tax, Tax, Tax
The last quarter of any financial year is likely to be mired with this 3-letter word. It is what gives any wage-earner nightmares, more so if it’s for corporate income. This is because tax deductions can have sizeable implications on the net revenue of a company.
An accountant can help you by discovering these potential deductions and counseling on how to make operational decisions for year-end deductions. Many corporate entities forget to account for factors like depreciation and out-of-pocket expenses. An accountant would come in handy in encompassing all such facets, and save you a great deal in the short as well as long term.
3. Did We Mention, It’s Mandatory?
Maintaining accounting records for businesses is mandatory by law. Thus, having this function sorted keeps you from infringing the law. An accountant can handle matters for you when it comes to liaising with government authorities and producing the specific documents that the latter may call for.
4. Saves Energy, Time (and Headaches)
Thinking of how much effort and time you are likely to exhaust should to decide to manage your accounting yourself (besides the possible mistakes you could make in reporting, and the consequent losses from unwieldy financial calls), the advantages of getting an accountant decidedly outweigh the cost.
As a business owner, your focus should be on carrying out your business. Investing in a professional accountant and utilizing them as a strategic business advisor would help you in maintaining that focus and, at the same time, prevent you from straying from your business goals.
Professional accountants generally come with considerable experience and expertise when aiding an entrepreneur in starting their small business accounting. When start your business with an experienced accounting firm, you would gain from veteran mentorship on the ideal course to steer your business forward. A start-up may encounter a phase in its lifetime where its growth becomes stagnant. Many businesses shut down at this stage; only those that have their accounting in place have any chance of pulling through. JAXA offers customized accounting solutions for businesses in the UAE. Even when you outsourcing to us, you still get the comfort and reliability of an in-house accountant. Do contact us for accounting and bookkeeping services in the UAE – we’d be glad to help!