Explaining why accounting is important to a business is something that shouldn’t need to be done. Financials, projections, and general information accuracy are the life blood of any business, whether they’re doing well or barely scraping by.
Staying on top of your accounting is like keeping your body in good health. It will allow you to do more and live longer. And it will also let you know if there’s trouble ahead.
Yet, just like people do with their health, businesses so often overlook or undervalue accounting. That can lead to some serious issues.
And so, today we’re going to dig into just why accounting is so important.
Provides an Overview of Status, Health, and Stability
Accounting forces you to confront your financials. A person who doesn’t have much money to their name will often avoid looking at their bank statement because it makes them sad. As a business, you don’t have a choice.
You need to know what you’re making, what you’re spending, how much money you have, and how long you can keep going at your current pace.
This shouldn’t be discouraging, but empowering, allowing you to see what it takes to grow while setting goals for where you need to be. There are a lot of unknowns in starting and running a business. Your company’s financials should not be one of them.
Allows You to See the Past and Present so You Can Prepare for the Future
Business can often be cyclical. Patterns and trends repeat. With accounting records, you’re able to look at the past so you can prepare for what’s ahead. Whether it’s knowing that sales slow in a certain season or certain events cause a surge in business, you’ll be ready for what’s coming.
Proper accounting records also allow you to see how far you’ve come (or if you’re not doing well, where things went wrong).
Makes Decisions Easier
As a business owner, your decisions carry weight. They have consequences that will positively or negatively affect your business and the people who work for you. Sometimes, it can be very difficult to decide what the best course of action is.
Accounting can help you weigh the options, map out the hypothetical outcomes, and ultimately, make your choice much easier to make. Often times, by running the numbers, the right answer is so obvious, you’ll wonder how it was even a question in the first place.
Removes Unnecessary Surprises
When surprises pop up in the business world, they’re usually negative ones. Your sales weren’t as high as you thought they’d be. You’re suddenly out of money despite continuing growth. You need to cut a position or two.
By staying on top of your accounting, you can either see these situations coming from a ways out and prepare, or you can avoid them entirely by making smarter decisions based on what you know.
Numbers Don’t Lie
To get a business started, you need some optimism. You have to have faith that you’ll succeed despite the fact that so many other businesses fail. But you still need to keep in touch with reality or your optimism will turn you blind to problems around you.
Whereas your ambition and vision push you to take risks and charge forward, accounting keeps you grounded. Numbers don’t lie, and because of that, they often bring a much needed reality check.
It Holds You (and Your Employees) Accountable
Because the numbers don’t lie, accounting forces you to be accountable. You know the truth. You know where you stand. You can’t plead ignorance or try to spin things in a positive way. For better or worse, it is what it is.
The only way to improve your financial standings and overall accounting health is with action and organization. A great way to start is with professional assistance. At LWS, we provide our clients with a variety of accounting and payroll services to keep their business healthy.
If you’re ready to take your accounting seriously, contact us today.