For all businesses (Also see How to Start a Business in Malaysia?), accounting is crucial as it is helpful for business owners, management teams, as well as the shareholders to assess the financial condition of their companies. Accounting is more than just showing vital information about profit and loss, earnings and expenses, as well as assets, liabilities (Also see Understanding Current Liabilities) and equity. With this information that accounting provides, business owners will be able to make sound decisions as well as plan for the future of the business based on reliable data.
The primary purpose of accounting would be recording business transactions in a company’s books of accounts so that the business owners or the management team get to determine and measure the financial information of the company. Also, the tax authorities demand all businesses to at least keep records that help in tracking all your revenues and expenses.
Apart from recording business transactions, accounting can help business owners in planning and preparing budgets. Business owners should make a plan on the allocations for labour, raw materials, equipment and so on so that they can accomplish their business goals. By making plans and preparing budgets, business owners will be able to predict the demands and the resources they need. Thus, they will be able to balance different parts of the business.
Besides, business owners will know the performance of their business by referring to the accounting reports. These reports present a dependable source of the key performance indicators. Hence, they can make comparisons between their present performance with the past as well as compare themselves with the competitors.
Furthermore, accounting information can help business owners to make vital financial decisions. According to the data, they can decide on the policies and principles they can establish in make the business operations more efficient. The accounting information helps business owners know the amounts of revenue and expenses too. Hence, they can know whether they should make any adjustments to the pricing of the goods and services provided or make changes to the resources required for the manufacturing process.
As we can see, accounting (Also see Work in Process Accounting) plays a crucial role in all organisations. Most business owners do not know how to handle their financials when they first started running a business, and some of them choose to ignore it. However, this is one of the main reasons that caused small businesses to fail. Weak financial management is fatal, especially for small businesses, as their budget and resources are more limited. In this case, accounting is particularly important as this provides the business owners with the information they need for decision making so that the business can continue growing.
Thus, small business owners should hire an accounting firm in Johor Bahru to ensure that they are always on top of the financials of their company. It is a better choice than hiring an in-house accountant as outsourcing the accounting (Also see What Are Accounting Concepts and Accounting Conventions?) task will only cost them a fraction of the cost needed to hire a full-time accountant in their company.