Why do businesses need accounting services?
Last updated on 20 May 2022
In a nutshell, accounting can be viewed as a report book for businesses, where financial data is captured to give the business owners, managers and other stakeholders the most accurate as possible information to make decisions about the business.
There are many reasons why keeping proper accounting records is crucial for a business, and many business owners underestimate its importance. We highlight the more pertinent ones below.
Recording transactions
A mark of good accounting practice is a systematic record of all financial transactions of a business. Business owners and managers should have access to such information whenever required. With the advent of cloud accounting services, such information can now be accessed 24/7 and anywhere with an internet connection.
Planning and budgeting
Without good accounting records, business owners will be flying blind when allocating their resources, including labour, machinery, capital expenditure and cash. Moreover, without a budget based on sound accounting information, the planning for business growth and operational requirements becomes challenging.
Assessing performance
With good accounting reports, business owners can assess the performance of their businesses. If accounting records are accurate, they can indicate the business’s financial health and the company’s current financial position (i.e. income, expenditure, profits and losses, assets and liabilities).
Cash flow and liquidity
Through the use of cloud accounting services, business owners can now track the amount of cash and other liquid assets at their disposal in real-time. The mismanagement of cash in a business can lead to catastrophic consequences, including bankruptcy, even if the business is profit-making on paper.
Investment and financing
When businesses seek new fresh funding, proper accounting records are always mandatory. Investors and financing from banking institutions use historical financial records of the businesses to assess the viability of the business and the risk of default respectively.
Internal control
Good accounting records can help businesses put in place proper internal controls with various checks and balances across the organisation. Safeguards and processes can also be implemented to prevent theft, fraud and negative consequences.
Legal requirements
The Companies Act requires all businesses to keep proper financial records. These records are to be shared with the shareholders, IRAS (for Corporate Tax filing purposes) and ACRA (for filing Annual Returns). Failure to do so may result in heavy penalties.
Getting help with accounting
Financial mismanagement can result in losses or business failure. Getting the help of professional companies that provide accounting services in Singapore can help business owners avoid making costly mistakes. Some of these companies can even provide business advisory services to help businesses assess their financial health as well as restructure and transform their businesses in a fast-changing business environment.
