by 
The Curious Bag
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Accounting is an essential part of running a small business. The accounting process categorizes the information you or your bookkeeper record about your income and expenses and analyzes it so you and your partners and financial backers know where the company stands and how it should proceed. Accounting affects your business in at least five ways, according to Donna Rodriguez, owner of Business Essentials, Inc.
Shareholder Reports
Proper accounting lets you look over your business transactions--income, expenses, asset acquisition and dispersal--on a regular basis. By having accurate, current reports available, your partners or shareholders can be kept up to date.
Tax Filings
Proper accounting allows you to provide accurate information to the Internal Revenue Service at tax time and spares you worry about possible audits.
Avoid Fraud
Proper accounting can help you deter or discover any illegal or fraudulent activities going on in your business, for example, embezzlement by a bookkeeper.
Banks and Investors
Proper accounting provides accurate, detailed information about your business's viability to the lending institutions and potential investors you interact with and report to.
Business Forecasts
Proper accounting gives you an accurate picture of what you've earned and how much you owe every month, quarter and year. It shows trends in sales and expenses in your business. Knowing this will help you forecast future income and help you budget for potential expenses, such as new investments.
Source:
Donna Rodriguez, Owner-Operator; Business Essentials, Inc.; Bakersfield, California.
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