Running a business, without understanding the finances of the business, is like driving a car with a blindfold on. In order to run a successful business, you need to understand the financial position of your business. Business relies on knowledge. Do you know how much profit you will make on a certain transaction? Do you know the cost repercussion of exchange rate fluctuations? Do you know the bottlenecks in your cash flow? Without these crucial pieces of information, your decisions are merely guesses. If you don’t know how much profit a transaction could make, you don’t know how worthwhile it is. Exchange rate issues? You need to know how much to increase your prices by. Cashflow? The biggest downfall of many new businesses in the first year is mismanaging their cash flow. Often, businesses that could be viable get brought down by cash flow issues. Having all this information gives you the knowledge to make intelligent, informed decisions, based on facts and figures. It removes the guesswork from your planning and helps you to make good financial decisions.
What Is the Purpose of Accounting?
Accounting gives financial insight into your business. Accounting is important, as it can both look back and produce financial records for what has been done, as well as, use historic information to make financial forecasts for the future. Being able to make financial forecasts is a vital element of accounting, as this enables us to make considered investment decisions, or to secure financial investment from individuals or institutions. Accounting takes the guesswork out of running your business and enables you to streamline and refine it. Whilst it is a legal requirement to submit company accounts, accounting should never be seen as a duty, but rather as an incredibly powerfule business management tool. Good accounting system can save business owners significant amounts on their taxes, often paying for the cost of the service.
Accountants Can Help Large or Small Businesses With:
Accountants can work with small businesses to varying degrees. Some business owners choose to simply use an accountant for their legal requirements, to file company accounts, or calculate taxes. However, some business owners see accountants as an integral part of their business, working with them to produce reports to improve their business. There are a whole range of areas of the business that an accountant can help with.
Financial Control and Decision-Making
The more business owners know what is happening in their business, the quicker they can react to problems. Many issues arise from crucial information not being available to key decision-makers. Your reports could show that the sales of a certain product have dropped off over time, and the buying price of said product is rising. You can then make an informed decision based on the available information, for example, stop selling that product. If you didn’t know this, you could go ahead and buy the products, which would then tie up your working capital for a long time, and have negative implications on your cash flow.
Compliance and Accounting Regulatory Requirements
An accountant will work with you to ensure that you are fully compliant and up-to-date with all the regulatory requirements. Many business owners find it hard to keep abreast with changes to laws and regulations. When you work with professional accountants, you are taking the pressure off yourself, and outsourcing this to a trusted person, who will ensure that you are meeting all your requirements.
Business Financial Performance Evaluation
Studying how profitable a product or service is, is incredibly helpful to help you make decisions. Accounting can enable you to compare the sales or profit margins of products. It could analyse the value of sales generated from different regions. This in turn could alter your marketing or business strategy, so that you are concentrating on the more profitable areas of your business.
Business Planning and Accounting Forecasting
Planning for the future is crucial. Forecasting gives business owners the ability to make coherent decisions. If you can see growth occurring in a certain product line, then you can use this to produce a forecasting report. This can then show you that you need to invest in this product line to keep up with the projected increase in demand.
Business Monitoring and Managing Cash Flow
Cash flow can bring an otherwise successful business to its knees. Managing your cash flow carefully will enable you to optimise your working capital, spending wisely in the best places. This is particularly important in a small businesses or start-up, where your available cash reserves will probably be small.
Stakeholder Communication and Investor Confidence
If you have current investors or are looking ahead to gain investment in the future, you will need excellent reports and records. Investors will want to see evidence of where their money has been spent, and new investors will need to see future projections for their expected returns.
Fraud Detection and Risk Management
Fraud, sadly, does occur. Keeping a close eye on your reports and records will make it more likely that you will spot an issue. Accounting reports can show up issues, such as buying a greater quantity of product than is required or low margins due to warehouse theft. Anything that flags up as unexpected or out of sync will give you the warning to investigate further. Some natural fluctuations will always occur, but it is always good to investigate any anomalies thoroughly, and our accounting professionals will help you to do so.
Do You Need an Accountant for Your Business?
If you are looking for an accountant to work with you and your business, then you have come to the right place. Here at Elver ECommerce, we work primarily with e-commerce businesses, helping them to grow and succeed. Whether you want to streamline your systems, build on your product range, or increase sales, our accounting reports can help to give you the information that you need to make the best decisions for your business.