Benefits of Accounting & Reporting for SMEs
One major challenge that SMEs face during start up or growth is access to funding. Accounting and reporting can therefore support SMEs by providing lenders with transparent information to aid in assessing the risk of borrowing and improves chances of obtaining the funding. Foreign investors will require that SME reporting meets international standards such as the ones set by the International Accounting Standards Board (IASB). Lenders and investors are more likely to fund your business if they feel that owners and managers have a good understanding of their business finances and their implications; as well as providing financiers with a better understanding of your business and its ability to honor its obligations.
Accounting and reporting also provides owners and/or managers with the necessary information to make business decisions such as the allocation of resources, determining the amount of funding required etc. The financial statements keep track of assets, liabilities, income and cashflows thus keeping track of the financial performance of the business. Key measures of performance can then be identified to help owners and managers understand how well or bad the business is doing compared to previous years and competition in the industry. Financial statements also show the financial condition of the business at a particular point in time by answering questions such as: How much cash does the business have? What are the current liabilities? Is the business profitable? How much capital has been invested? Etc.
Accounting and reporting can help identify underlying problems and correct them to improve efficiency and profits. Adhering to Generally Accepted Accounting Principles (GAAP) provides checks and controls that prevent theft, mismanagement, human error, fraud, and obsolescence leading to better accountability as everything is transparent and easily traceable.
Accounting and reporting ensure that tax liabilities and statutory deductions are addressed appropriately thus proper accounting systems and procedures help ensure laws and regulations of the country are followed.
Financial records are used in budgeting and forecasting to help control costs and keep the business profitable.
Conclusion: Financial matters aren’t always easy, and your business may require a Professional Accountant to help you make better decisions and comply with legal requirements.