A business enters into multiple transactions in its entire life cycle. Be it debtors or creditors, or customers and bad debts, money is involved in every part of the business. This involvement of finance in every component needs to maintain accountability. Maintaining these business transactions is referred to as bookkeeping, wherein the accounting procedure involves in analyzing these transactions. Be it a start-up or even an MNC, the concept of accounting can never be avoided. This guide will help you to understand why the term “Accounting” is referred to as “Life Line” for any business. Keep reading!
1.Helps you to Maintain Business Records
Business transactions are to be recorded and maintained properly from the very initial point of business incorporation. There should be separate records which are to be kept in the name of debtors and creditors of the company. Neatly maintaining these accounts will help you to refer them properly, and you can get a clear picture regarding the number of debtors and creditors you hold at any given point. Referring that, you can balance them accordingly, which will be beneficial for your business growth.
2.Figures out the Insights
Once you analyze the accounting books, you can figure out minute details from it. The business insights such as financial stability, debtor, creditor, bad debt etc. can be easily known. These insights will help you to understand your business needs and requirements, its current status. Having a clear idea on the in and out of business will help you to build relevant growth strategies for your business.
3.Simplifies the Audit Proceedings
An audit process stands as one of the most crucial parts of any business entity. For an auditor, referring the accounting and bookkeeping records turn out to be a mandate. Non-availability of these books will lead to suspicious thoughts in the minds of the auditor. Moreover, you will not be able to earn a good audit score in the audit report, which will ultimately affect the goodwill that your company holds in the eyes of the government.
4.Manage the Financial Requirements
Managing the accounting books will help you to keep an eye on the financial stability of your business. If the accounting books are not well maintained, you can never have a clear picture regarding the financial security that your business possesses. Having an explicit knowledge of the economic ground of your business will help you to expand as and when required. Moreover, you can also get indulged in product marketing or branding and other marketing activities.
5.Business Valuation can be Done Easily
One of the core essentials of a business owner is that they should have an idea regarding the value that their business holds in the current market. Now, to understand the value of your business, or to carry out the business valuation proceedings, the accounting books are to be referred. By having a look at your company records, you will be in a better position to understand the current value of your business, and will also help in the mergers and acquisition art in the future. If the accounting books are not appropriately managed, you can’t have an idea regarding the real value that your business holds.
6.Real-Time Reports Can be Generated
Most of the companies in today’s world use accounting software to maintain their company records. Now, the flexibility that it provides is that you can prepare numerous reports based on the real-time data. Thus, with the blend of technology and accounting, you can get real-time reports by sitting in any corner of the world, which will, in turn, help your business to grow extensively.
7.Paves the Way for Shareholders
Properly managed accounting books will help you to maintain and attract current and future shareholders. Nobody wants to invest in a loss-making company, or a company where there seems to be no growth perspective. If your business records are well-maintained, you will be able to grab a large number of shareholders who will be willing to invest in your business and make it grow further.
In short, you can see that the points mentioned above are essential for your business. Negligence at any point can harm your business to a great extent, and ultimately, you mind end up incurring a loss. To avoid such a scenario, business owners prefer to take the help of accounting consultants who can guide them accordingly and simplify the accounting records. JAXA Chartered Accountants, a DMCC approved auditor has been helping numerous clients across the UAE to deal with their business books. Our accounting experts are well-versed with the relevant proceedings and can provide tailored solutions suiting your business needs. If you hold any query or want to consult our expert, do contact us today-we’d be glad to assist.