Finance is the essence of any business, just like a soul for a body which is the reason for it existence, similarly finance is the reason of existence to any business firm, be it a profit making or non-profit making organization. Managing finances comes under accounting and getting an efficient accountant is as important as an efficient family doctor to ensure the good health of family members.
Accounting is actually a vast subject full of methods, processes, principles, laws etc. to manage the finances or funds. It involves recording of financial data in different methods, processing them to get outcomes that would show the funds performance, financial health of a firm and would also help the management authorities to take informed decisions.
Accounting is a field of study and profession for many who get specialized in carrying out these accounting activities.
Let’s quickly go through some of the important functions of accounting:
Recording of Cash inflow and outflow of a company – Business is all about earning profit in return of some service or products and even if it is not profit there would definitely be a fund flow.
Since every organization whether it’s a limited company, public company, government organization or non-profit organization, there is always a account department that carry out all the accounting or finance related task like disbursal of salaries or wages, managing and tracking cash inflow and outflow and all other minor or major monetary transactions.
Preparation of financial statements – In first mentioned function, we talked about recording all the monetary transaction of the organization. Since this financial transaction are recorded for a long time period, let’s say for a financial year.
This is required to be recorded in a systematic way in different form so that can be processed without hassle when required or at the end of the year. Bookkeeping, Ledger, Income statements, accounts receivable, accounts payable, balance sheets etc are different forms of accounts that are being prepared and data is being record timely for analyzing it timely.
Analyzing and interpreting data – One the accounts are prepared, they are processed or analyzed in many different accounts like ledger, income statements, balance sheet etc. at a certain point of time in a year to interpret or find out the answers like the expenses occurring in the organization, funds inflow and outflow, fund performance, gross profit, net profit etc. which overall shows whether an organization is performing well or not.
Overall, the data is being analyzed timely to keep and maintain the sound financial performance of the organization to ensure it sustain longer in the market.
Provide quantitative information to take quality decisions – After processing and analyzing the data, the results are summarized to get them to the management authorities, shareholders, and other business stakeholders who are entitled to have them and take decisions based on that.
It helps the management in planning, organizing and executing the decisions that would help the organization to maximize the resources at best and ensure profit maximization along the overall growth of the organization.
These are the core functions of accounting. In actual, account is much vast than what we could think of about it. It is just not about recording, analyzing of the monetary transaction but it also involves to have a deep understanding of accounting laws, norms and principles that are accepted widely and necessary for any firm to maintain those accounting standards to sustain in the market.
That is why accounts being a vast subject, it become a profession in particular for many and the person who study, does accounting is known as ‘Accountant’.
An accountant in an organization is just not responsible for carrying out all those accounting activities that we discussed above but an accountant is also responsible for following all the laws in accounting that are acceptable. He/ she must ensure the accuracy of financial records/ data for organizations, individuals and stakeholders. An accountant, apart from the internal financial activities, also takes care of the taxation.
Hiring an efficient accountant to manage the financial health of your organization is crucial for it success. Here we will understand how it could impact your organization:
- An efficient accountant can help you in making strategic decision to save funds while finding ways for year-end deduction that would further save the funds and maximize the profit.
- If an accountant is very good at his profession, he would definitely know many tactics to end up paying lower taxes to the government.
- An accountant keep track on all the assets and the depreciation on them if applicable. He keep track on the value of asset and may help you to utilize all the resources at its best.
- He could help the management by providing them expert advice in optimizing the sources and maximizing profit by controlling daily expenses or investing the funds etc. further as he has expertise in it.
Accounting has been a separate yet integral part of every organization which is inseparable. However, with the rapid changes and development in the industries and working pattern, now a days many firms does keep account department for their basic functions and to keep check on day to day monetary transactions but outsource the services for special or more crucial financial task like to prepare the financial statements, to file tax returns, audit purpose etc.
Well, big sized companies would definitely have an entirely separate account department in-house, but small companies might not afford to have a separate work force to handle accounting activities. Therefore, for such companies outsourcing the accounting services is an another ideal way of saving funds who cannot afford to pay monthly wages to the employees hired in accounting department and prefer to pay commission or when required their services.
There are many accounting firms started and are working well in the market by providing range of accounting services like tax filing, bookkeeping, payroll, audits etc. small to medium size firms. Options are many, carry out the proper research before choosing the one for your own organization.