Effect of accounting services on decision making in small and medium sized entities

accounting services in decision-making in small and medium-sized companies

Most of the businesses in operation are made up of micro and small companies in Colombia (and all around the world in general), and one of the factors that affects their success corresponds to accounting services, especially because they are given advice on how they should manage their finances in order to make the best decisions in commercial and fiscal matters.

On this occasion, we will explain some cases about how the decision-making of SMEs can be influenced by accounting services to improve their economic situation.

Tax planning

A common mistake many organizations make is in neglecting fiscal control by assigning this work to professionals who are not suitable for the position. This action brings problems to the company with the tax collecting entities and such a scenario could generate audits that lead to paying high fines.

That is why, taking care of the financial statements through an accounting service, the specialist will be able to calculate the tax burdens necessary for the company to comply with its obligations and not go through complicated situations in the tax area.

Ease of loans and financing

accounting services for small and medium businesses

A well-organized and transparent accounting makes a difference for those who seek credit in banks. Loans and financing are necessary to increase the working capital of a company, but these benefits will only be granted if it has well-structured financial statements.

Some reports that are usually requested and that must be carried out by a trained professional are:

  1. Income statement for the year

The income statement for the year compiles all the financial information (income, costs, and expenses) to know the profit or loss of an operation. This type of document helps managers make decisions that require strategic planning.

With this demonstration, some indicators can help in credit analysis, such as:

  • Return on assets
  • Net margin
  • Return on equity
  1. Statement of accumulated profit or loss

This tool uses the net profit shares between the Balance Sheet and the Income Statement for the Year to show the equity situation of a company. Through this control, the manager has a concrete vision of the decisions made.

When you deliver the tax returns to the bank, you give the idea that there is transparency and organization, revealing to the loan officers that your company has credibility and conditions to pay the loan and meet its financial commitments.

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  1. Improved financial and fiscal control

It is common to find small or medium-sized businesses without financial control, as when personal accounts are mixed with business accounts. In such cases, accounting services can be especially useful in the organization and in financial and fiscal control.

An expert in finance and accounting does not only work when you need to file your income tax return or when the company needs to formalize admissions and layoffs for your company. The accountant can prepare more complex reports, which are critical to the smooth running of a firm. Some of them are:

Cash flow

One of the first reports for efficient management is cash flow. It is a financial control for a certain period of time and analyzes all the inflows and outflows of cash.

For the report to be conclusive, all expenses, no matter how small, need to be recorded in periodic reports. The analysis time varies according to the need of the company to monitor the movements; They can be done daily, every week, every fifteen days or monthly.

Ledger

This book includes accounts receivable, payable, profit, loss, and various details related to company money. It is necessary in any industry, since it allows to control all the movements of the account, knowing the balances, statements, balances, and other information so that the tax obligations can be analyzed.

Daily book

The Daily Book is a record in which all the daily operations of the company must be transposed; this is a legal requirement. Thus, it has requirements and procedures, such as its external presentation and how data must be entered into the book.

Know what the legal forms of company are.

In this sense, accounting services will allow SMEs to have effective control over how to manage the capital that enters and leaves the organization to keep their financial indicators constantly growing. In the same way, they will be given clear instructions on how to manage the tax area to avoid problems with the tax collecting institution (DIAN).