What are accounting services and why are they so important for a business?

For a company to be incorporated and kept in constant growth, it is necessary to have knowledge regarding accounting and business administration, in order to properly take advantage of the physical and financial resources of the organization in relation to the fulfillment of its objectives. Hence the importance of accounting services for many companies when executing their business operations. In this article we will explain more about it.

Learn about the legal requirements to start a business in Colombia.

What is the importance of accounting for a business?

The importance of accounting for businesses includes routines related to ancillary duties, financial planning, and strategic planning. The accountant is responsible for the tax and accounting department, which implies taxes filings. These, in turn, rely on correct accounting information gathered from invoices, financial reports, and bank statements.

In addition to this more mechanical activity, the accountant also has the routine of generating reports or managerial statements for the decision-making of managers. Next, we will let you know the main reasons for accounting services.

What accounting services are offered to companies?

Within accounting services there are numerous practices that can be carried out so the company can improve its financial management. Some of them are:

• Preparation of financial statements

The preparation of financial statements is essential in several situations. If your business needs a loan or financing, for example, statements such as the Balance Sheet and Income Statement for the year will be required. These two documents should be prepared based on the daily movement of the organization and demonstrate the importance of accounting for your business.

In addition, bank statements and billing reports may be required to obtain third-party capital from financial institutions, which must be up-to-date and consistent with the reality of the company.

Another possibility linked to the need to prepare the financial statements is linked to a possible problem with the tax authorities. Either due to differences in tax collection or even possible absences in payment. Only with an updated bookkeeping you can verify the details of the payments so that any possible doubts are taken care of.

Finally, if the company wishes to participate in a bidding process, the financial statements and entries must be updated. Since several documents, including accounting documents, are required to participate in this process. 

• Cost analysis

Another great advantage of using bookkeeping is the possibility to know, in detail, what are the costs, expenses and income of the companies. This detail is used for various issues such as the correct definition of the sale price of the products and services to be marketed.

With a precisely calculated sales price, it is possible to know the minimum quantity that must be marketed, how much each product or service can make profitable individually and what the overall result of the company is like.

Knowledge of income and expenses will also allow for promotions or differentiated prices, according to times of greater or lesser movement in the company. In addition to these points, it is possible to determine where exactly the money of the company is going, and in the case of overspending, it is possible to cut or replace some costs or expenses.

In the case of revenue, you can understand who your main customers are, what is the frequency of their purchases and the value of the average ticket. This makes a big difference when analyzing the results of your organization, as well as whether a product or service should be reduced, among other trends.

• Financial planning

The financial management of companies can be optimized with the use of some financial tools; These can only be prepared by a professional accountant. In this context, a tool that stands out is cash flow, which should relate the entire financial movement of the organization, comparing opening cash balances, banks, and short-term investments, as well as income and expenses for the period.

The cash flow will show how much the business has available. Or even, the values ​​that will be available in a certain period and that can be used according to the current needs.

In addition, it provides the financial organization of your company. Thus, the expenses and the receipts are known in detail. This information can and should be verified against cost, expense and income reports for a more complete analysis.

• Account control

With integrated, computerized, and optimized bookkeeping, this control is much easier, faster, and more objective. Posting on a daily basis all goods transactions will sync the stock and connect different departments to let them know not only the quantities but the amount you must pay to the supplier, as well as the cost of the product to calculate its sale price.

In addition to inventory, supplier and customer accounts also stand out, because a large part of the company’s money is generated and invested in them. With an integrated and updated bookkeeping, you will be able to know how much you must pay to your suppliers, what is your cash availability and how the amounts will be received.

This will allow you to control deadlines, look for better conditions and be attentive to bad debts, looking for ways to avoid them.

Learn what a private company is and its examples.

As you can see, accounting services are essential for the operation of a company. It allows not only to obtain loans, but also to know and correctly calculate the taxes and the sale price of the products. In addition, it avoids possible problems with the payment of taxes, preventing having to pay high fines as a result of an irregularity in fiscal control.