No business can run smoothly and successfully without established accounting services. Accounting plays an important role in small business management. It keeps track of all financial transactions of a company which helps business owners make informed decisions. It also gives businesses a clear picture of their financial condition, calculates tax liability, and prepares the company for financial auditing and reporting.
An established accounting system makes the difference between creating a successful business and filing for bankruptcy after a few years. According to reports, two-thirds of new businesses survive for only two years, while 44 percent last for four years. Experts suggest that the main reasons small businesses fail are because of overspending when starting a business, poor capital structure, and lack of cash reserves; all of which could be prevented with good accounting controls.
Tracking Financial Information
Accounting is a system used by businesses to track financial transactions and information. It uses a double-entry method which records transactions using debits and credits to individual accounts. Financial accounting services in the Philippines record all transactions of the company and summarize the amounts on the financial statements at the end of each month or year. They prepare financial statements, including sales, revenues, expenses, assets, liabilities, and cash flow of the business. Stakeholders of the business, including banks, stockholders, and owners of the company analyze these pieces of financial information and use them as basis in making lending and investing decisions.
Assessment of the Company’s Effectiveness
Accounting information allows companies to assess the effectiveness and efficiency of their business operations. They can compare the prepared financial statements to industry standards or to a leading competitor to check how well their business is doing. Business owners can also use the historical financial accounting statements to create new ways of analyzing and forecasting future sales.
Accounting is even more important for startups. It helps new businesses create a sustainable budget for different business operations and make financial decisions. It also helps them prepare tax returns and manage their finances better. While some hire accounting firms or Certified Public Accountants (CPA), most startups outsource accounting services in countries like the Philippines. Outsourcing accounting services helps new businesses cut costs, manage other tasks, and focus on more important areas of their businesses.