Accounting is a process of gathering financial information to be used in decision-making by a body or persons having the power to control or act on that information. Accounting is normally acknowledged as the collection, recording, interpretation, and reporting of information about financial and/or non-financial entities including corporations and companies. Accounting is a way of communicating information to make a decision; accounting provides an accounting system to support decision making. The principles underlying accounting is specified in the US generally accepted accounting principles (GAAP).
Generally small businesses have limited resources for funds and time to execute effective accounting systems. Most small business owners do not feel equipped to meet the accounting needs of their companies. In order to improve management’s efficiency and minimize errors and mistakes, accounting is needs controlled and reported in a timely manner. Accountants also provide support to management in the preparation of financial statements and periodic reports. The need for accounting services is often perceived as too costly for most small businesses.
Proper organization and management of finances are crucial to the success of any business. Without sound financial information, companies cannot make sound decisions about their short-term and long-term strategies, employees cannot be managed properly, marketing and selling efforts can be sabotaged, and business growth can be hindered. Accounting helps decision-making by providing facts and figures regarding company financials. Proper accounting helps businesses to make better use of their assets, plan for future costs, understand financial obligations, and make informed decisions. Proper accounting helps in decision-making by providing facts and figures regarding company financials.
In order to effectively use accounting reports, managers must be capable of analyzing the financial information in a manner that allows them to reach informed decisions. The need for accurate and reliable accounting advice is evident in the growing number of lawsuits and securities fraud. Management accounting professionals are required to understand all the implications of managerial accounting and comply with all legal requirements. Auditing and mismanagement of accounting practices often result in lawsuits.
Obtaining and maintaining accurate financial records is a vital requirement to maintain a successful small business. An accountant maintains financial records from receipt of financing to sales to purchase of finished goods to accounts payable. A bookkeeper prepares and maintains the financial records, including invoices and receipts, and may also make periodic reports to the owners or management to assist in decision making.
Management accounting professionals must analyze and evaluate the financial records to ensure that they comply with the accounting standards required by state government agencies. State Boards of Equalization, or SEC, requires certain information in order to calculate an accountant’s fees and to determine their annualized percentage of business revenue. Accounting standards and procedures may vary from one state to another. It is advisable to consult a local professional accounting service to obtain a reliable, cost effective accounting solution. Accounting services provide the essential expertise and knowledge required to support management and strategic planning.