One of the most vital functions determining the success or failure of a business is how they manage and keep track of the money flowing in and out. The accounting department in any organization picked at random will do just that.
Accounting monitors funds and transactions closely and keeps records of every transaction then uses these records to analyze the trends in financial performance and even predict future outcomes.
From providing day to day information to help run a business to dealing with tax compliance and payrolls, one cannot overestimate the power of proper accounting in business growth. Join me, Rudy El Gabsi, on this journey to get a glimpse of who needs accounting information – the users of accounting information as well as the role of accountants like me in business.
The administration of the firm needs to make informed decisions from day to day. This means they have to work with managerial accountants to provide them with useful financial information on a day to day basis.
Present and future potential investors need to have a look at a company’s financials to decide if their investments are safe. With these, investors can decide whether to increase their shares or do away with the investment altogether.
Employees of a business need some reassurance that their employer is stable and can continue to provide their families. Otherwise, they should anticipate retrenchment and start considering other job vacancies elsewhere.
Those that provide loans and other capital for the firm need to have a look at the financial statements of a company before and after issuing loans to ensure that their loans will be paid. Without proper financial statements, you cannot secure a good loan to grow a business. But if your business show promise of an upward trend in performance then all lenders will willingly provide capital.
Customers and suppliers are another bunch of interested parties who would like to have a look at the performance of a business to anticipate sharp changes in prices and seek alternative suppliers and customers if need be.
- The government
When it comes to regulation of the activities of the firm by government agencies, accounting information is a vital part of the ordeal. Agencies like the tax department need accounting information to determine how much tax a business is liable to pay. Also, the information obtained can be used by the government to generate national statistics.
In a nutshell, the role of accounting in business is to help internal and external stakeholders to make informed decisions affecting the business. Without this we would all be in the dark as to which company is doing better or has a better chance of growth- as in which is the sound investment.
A lot of time people come up to me and ask, “Rudy El Gabsi, what is the significance of the work you do for our company?” so just smile and tell them that without accounting information, they would be like blind men walking in the direction of a mine field. It would be impossible to know when you are making money or losing money