Summary: Maintaining proper accounting records is tedious and time-consuming. But accounting function is one of the most important tasks in business making. Accounts must be handled with care and diligence. Why it is important to do so?
Purpose
The main reason of keeping accounting records in the first place is to monitor your business progress, pertaining to financial, operational aspects and more! The ability to know if you are on the right track or overly-invested, identify potential errors and mistakes will ensure your business growth in a smoother journey. If bookkeeping is not done well, information will be hard to extract from the existing records. This may affect your company’s efficiency.
Compliance
Every so often, you are required to submit different types of accounts-related reports to your local government authorities according to the regulations they have stated. The entity would face legal consequences if there is failure in doing timely submission or provision of inaccurate reports. As a result, the corporation may suffer losses by arranging manpower to resolve the troubled issue and pay the penalties imposed. This could have been avoided if compliance procedures and payments were done in a timely manner.
Tracking
Keeping proper accounting records also assists in protecting the directors’ own interests. If the business transactions, which implicate directors, have disputes, the accountant can investigate with accurate information and useful evidence with minimal fuss. Common business risk like unusual wastage or misusing of resources would be minimised or detected just in time to save the situations!
Funding
If additional funds are required for business expansion or investment on research and development, the company image in front of the potential investors would be increased if your company has an accurate and updated accounting system. This would build up their trust in your corporation’s internal running procedures that the business practices are transparent. Keen investors are interested to know how their contributed funds will be invested and when they can witness the harvest. The same concept goes to bankers as well: Accurate and updated accounting information would facilitate the banks to analyse the company’s key performance indicators and likeliness of business risk.
Management
Advanced business planning needs the latest corporate performance results. It is very risky to make critical decisions without the relevant information to back it up. With a better understanding on the entity’s current market position, appropriate decisions could be made in the current or near-future term.
