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Why Accounting is Important for Your Business

When you are putting up a business, your real goal is not really to provide products or render services to other people who are willing to pay for what they could get. You are putting up a business because you aim to take in money – you aim to reap in profits which you could use for both business and personal use. Every business has its financial side, and no undertaking could operate without taking into account the funds that go in as well as those that go out. To properly manage the finances of your business, you need to account – you need accounting.

Author: Diane G. Sigler
Date: Apr 22, 2013 - 9:29:41 AM

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Last month, a friend of mine was thinking of putting up a small business. As meticulous as she was, she wanted to dig onto the deeper details of running a small, from operations to procurement and personnel management. However, there was a bit of lapse in her part when she forgot one very important part of any business undertaking – accounting.

While my friend just forgot to think about the accounting aspect of her small undertaking and had no real intention to undervalue this side of business management, it is sad to admit that some start-up businessmen and entrepreneur had failed to realise the real importance of business accounting. They thought that they could achieve success in their businesses even if they do take accounting for granted.

When you are putting up a business, your real goal is not really to provide products or render services to other people who are willing to pay for what they could get. You are putting up a business because you aim to take in money – you aim to reap in profits which you could use for both business and personal use. Every business has its financial side, and no undertaking could operate without taking into account the funds that go in as well as those that go out. To properly manage the finances of your business, you need to account – you need accounting.

According to some investor dictionaries, accounting is the practice and body of knowledge that concerns with the systematic recording, reporting, and analysis of financial transactions. The person tasked to handle the accounting task, the accountant, is expected to follow some set of accounting rules that will make the task easier to understand and reflect the true financial situation of a business.

Accounting is not only concerned on keeping track the funds of your business. Accounting provides vital information -- based on the financial results of your business – that will tell whether your undertaking is doing good or not. Accounting also comes with the process of analysing the financial results of the business, thereby allowing you to effect any changes or modifications.

For example, liquidity ratios will allow you to see whether your business has enough cash and convertible that would allow it to repay its short-term debts as well as meet unexpected cash needs. Profitability ratios, on the other hand, will allow you to see whether your business is really doing well and is generating enough income. Solvency ratios, meanwhile, will allow you to see whether your business has the ability to meet long-term debts.

If you really want your business to succeed, you need to see how it is doing – something that could be achieved through the process called accounting.

Diane Sigler works for an accounting firm based in London. In her free time, she writes custom accounting essay as well as custom business essay.

View all articles by Diane G. Sigler

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