Business Tips Australia

Can a business run without accounting?

7 REASONS why Accounting is crucially important for your business:

Accounting plays a vital role in running a business because it helps you track income and expenditures, ensure statutory compliance, and provide investors, management, and government with quantitative financial information which can be used in making business decisions.

If you put a full stop to bookkeeping, your books will no longer show a clear picture of your company's financial viability. Without accurate records, it can be difficult (or nearly impossible) to track cash flow projections and statements.

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Can a business run without accounting?

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Here are 7 reasons why accounting is important for your business:

#1 - It Helps in Evaluating the Performance of your Business

The success or failure of your company can be deduced from the data contained in its financial records, which detail both operational results and the company's current financial standing. In other words, they serve as a window into the inner workings of your company's finances. Accurate budgeting can be achieved by a comparison of current data with historical accounting records, which can be done with the support of clean and up-to-date records.

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#2 - It Ensures Statutory Compliance

The best way to ensure your company complies with applicable laws and regulations, which might differ from state to state, is to implement and maintain effective accounting systems and procedures.

The tax preparation for a small business can be handled by an in-house accountant or with the help of an external tax preparer. The best way to make sure all tax responsibilities are met is to employ accurate accounting procedures throughout the year, regardless of the method used. A proper accounting system is essential for this purpose. The failure to pay taxes in a timely manner or to pay the correct amount can result in hefty and potentially crippling fines for a firm.

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#3 - It Helps to Create Budget and Future Projections

Your financial records will play an essential role in budgeting and future projections, which may make or break a corporation.

Your company's profitability relies on the analysis of past financial data, which is used to inform future decisions and strategic planning. When provided by well-organized accounting systems, this monetary data is ideal.

In order to keep operations on track, budgets must be created and followed even by smaller organizations. To ensure that bills are paid, employees are compensated, and the business maintains its projected earnings and income, the budget process entails reviewing all of the financial demands of the organization and developing a financial road map. Fail to implement a reliable accounting system, and your company could end up underestimating its earnings and eventually failing.

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#4 - It Helps in Filing Financial Statements

Financial Statements are important. They reveal crucial facts about a company's health, resources and operations. Businesses can benefit from the transparency provided by financial statements.

Specifically, they draw attention to the areas of the business with the highest return on investment (return on investment). In addition, annual financial statement filings by businesses are crucial.

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#5 - It Helps Protect your Business from Embezzlement

If you don’t have a proper accounting system in place, you will have a hard time learning if your company is being financially defrauded in any way. An unscrupulous employee could take advantage of lax accounting procedures to slowly siphon money from your business, and the result could be financial insolvency and business failure. Understanding how to develop and read balance sheets, cash flow charts and other financial documents will organize, protect your business and secure your financial future.

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#6 - It Helps with Understanding Accounts Receivable

Just as important as understanding where your money is going is understanding where your money is coming from. A proper accounting system tracks sales and income and ensures that clients and customers are paying as expected. A company that allows unpaid accounts to go uncollected and provides services or delivers products without compensation puts itself at financial risk. For a small business with thin profit margins, losing money in this manner can present a significant financial deficit that could potentially bankrupt the operation.

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#7 - It Helps with Understanding Accounts Payable

Businesses have what are called accounts payable, which are the bills that must be paid to cover daily operations. Accounts may be paid late or not at all without a reliable accounting system in place, leading to a host of issues. There are a number of disastrous events that can befall a company, including a halt in product deliveries, the loss of utilities, the cancellation of insurance, and so on. Any one of these issues may have a devastating effect on a company's output and continued existence.

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With the right accountant, your annual accounts and taxes will be taken care of. A good accountant can help you keep track of your expenses and income and give you accurate financial statements and budgets. This will free you up to work on growing and improving your business.

If you are interested in a prosperous future from a personal and/or business standpoint, reach out to our team of dedicated specialists.

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