Running a small business can be quite a complex endeavor. A large number of small business owners often find themselves underfunded and understaffed. As a result, they have to manage multiple aspects and departments of the business on their own. With too many things going on, keeping track of every business process becomes a huge hassle. However, regardless of the situation, business owners have to make sure that the accounting of their venue is properly in place. Kavan Choksi especially points out that delays in record keeping and other accounting issues can have devastating consequences for the business, and hence must be avoided at all costs.
Kavan Choksi underlines the key accounting objectives for small businesses
Accounting is immensely important for all small businesses. After all, it aids the owners, managers, investors, and other stakeholders of the business to orderly evaluate and gauge its financial performance. Accounting offers vital insights in regard to liabilities and assets, profit and loss, as well as the cost and earnings of a business. All such details are vital to planning and controlling processes within a business.
The key objective of accounting is to properly record financial transactions in the books of accounts with the aim of identifying, measuring, and communicating economic information. Here following pointers further discusses the key accounting objectives for small businesses:
- Recording transactions: Maintaining accurate, systematic, and complete records of all financial transactions of a business is the prime goal of accounting. Such records are the backbone of the accounting system, and help business owners to retrieve and review the transactions whenever they need or want.
- Planning and budgeting: Business owners can capably plan how to allocate their limited resources towards accomplishing the objectives of the business. These resources can range from cash and labor to machinery and equipment. Budgeting and planning are vital to business management, and allow entrepreneurs to plan ahead by anticipating the needs and resources, while properly coordinating distinctive segments of a company.
- Decision making and business performance: Accounting aids business owners in their decision making process, and makes it easier to develop processes for improved business efficiency. Entrepreneurs can use accounting reports to determine how well a business is performing and make decisions as per its accordance. Financial reports of a business are a dependable source of measuring the key performance indicators. It helps business owners to compare themselves against their past performance as well as against the competitors.
- Financial position: The financial statements that are generated at the end of the accounting cycle of a company tend to reflect the financial condition of a business at that time. It provides an idea about how much capital has been invested, the profit and loss of a business, along with its assets and liabilities, as well as how much funds the business has used.
According to Kavan Choksi, sub-par financial management is among the biggest reasons for small business failure, especially in the first year of the business. As these businesses have a limited budget and other resources, proper accounting is immensely vital for them to acquire information that helps businesses in their development and growth.