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Expert Answers to Biz Questions Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz. Why Accounting Is So Important For Your Business   Accounting is vital to the success of any business. It is often overlooked in the early stages of a company’s life, but it’s important to set a precedent with a strong financial foundation. This will help you keep everything organized, while freeing up time to focus on important activities. Though you can probably get away with doing your own bookkeeping in the beginning, it’s important to work with a professional, like Wiss & Company, as your company evolves. Accounting allows businesses to take raw numbers and translate them into a comprehensive account of profitability and performance. Accounting is a universal language, so there are general principles to which to adhere, which can be understood by anyone with a financial background. The evolving role of the accountant involves communicating financial information to non-financial people, as well. Follow the Money Businesses depend on accounting to track the flow of money, just like with an agents/broker portal. When you make a sale, this is logged in your accounts. If a sale is initiated on credit, the accounts will make note of when the cash is coming in. Your accounts will also track payroll and company purchases. There are two basic statements in accounting: the income statement and cash-flow. It’s important to distinguish between the two, because if a business has significant credit sales, it might have a shortage of cash. Analyze Performance Accounting is useful for detecting problems. You can easily monitor how well your company is performing, as well as a number of other aspects of business. Numbers can be deceiving when viewed in an isolated fashion, but with a deeper understanding of accounting, you’ll have a clear picture of what’s going on. For example, if your sales revenue is up, but manufacturing costs are up more, the reality won’t be as positive as it appears. Since companies are required to be transparent with their accounts, you can compare your financial position with other companies. You can measure profitability and the rate of return. The correct accounting metrics will outline the true earning potential of your company. Decision Making Managers use the information obtained from accounting to make informed decisions. They are equipped to make these decisions by addressing the following financial questions: Is the company able to pay debts? How efficient is the company? What is the projected cash flow over the next period? How much can the company invest in expansion? By utilizing relevant accounting information, you can make logical judgment calls that improve the efficiency of your business operations. Legality Good accounting practice that aligns with all the lawful regulations will help you avoid legal trouble. Tax considerations are important for large corporations, and incredibly complex. By engaging in proper accounting practices, you can steer clear of problems with the IRS. Accountants are relied on to provide accurate accounts, because filing with inaccurate accounting can be a legal disaster. Enter your search terms Submit search form       Search Idea Cafe Web Small Business Tax Center • Idea Cafe Home • Sign Up • Biz Grant Center • CyberSchmooz •Coffee Talk with Experts • People in Biz Profiles • Starting Your Biz • Biz Planning • Running Your Biz • FREE Trade Publications • Marketing • Financing Your Biz • Human Resources • Legal & Biz Forms • Managing Your Biz • eCommerce • You and Your Biz • Gen X • Work@Home • The Fridge • De-Stress • Send an Award • Send an eGreeting • Yoga @ Your Desk • Web Guide • Idea Cafe in the News • About Idea Cafe • Advertise on Idea Cafe • Contact Us • Privacy Policy • Site Map • Small Biz News Copyright 1995-2023, Idea Cafe Inc. Downloads are for personal use only, not for resale to others, and may not be reprinted in any form without written permission from Idea Cafe Inc. DISCLAIMER: We hope whatever you find on this site is helpful, but be cautioned that it may not apply to your own situation, or be totally current at any given time. Idea Cafe Inc. and all of its current and past experts, sponsors, advertisers, agents, contractors and advisors disclaim all warranties with regard to anything found anywhere on this family of websites, quoted from, or sent from Idea Cafe. and its related sites, publications and companies. We also take no responsibility for comments published by others on these pages. TRADEMARKS: The following are Registered Trademarks or Servicemarks of DevStart, Inc.: Idea Cafe®, Online Coffee Break®, The Small Business Gathering Place®, Take out Info®, Biz Bar & Grill®, Complaint-O-Meter®, A Fun Approach to Serious Business™, CyberSchmooz™, and BizCafe™.