When you launch a business, you suddenly have a tonne of brand-new obligations. among the most crucial? commercial accounting. But what is accounting exactly? What benefit does it offer your company? And how much time will that take? The good news is that accounting doesn’t have to take up all of your time if you have the correct people, resources, and technologies. BTS & Co is the one of the best accounting firm in Pakistan.
What is accounting?
Accounting is the process by which your company collects, categories, and comprehends its financial data. It can be compared to a large machine that you feed with raw financial data, such as records of all your business activities, taxes, and projections, and that outputs a narrative about the financial health of your company. You can receive a detailed view of your financial situation through accounting. It provides information on your company’s current assets and liabilities, your cash flow, whether you’re earning a profit or not, and which areas of your organization are genuinely profitable.
Bookkeeping versus Accounting
Maintaining your financial records in order involves both bookkeeping and accounting. While accounting makes use of such financial data through analysis, strategy, and tax planning, bookkeeping is mainly concerned with documenting regular financial activities and transactions.
Why accounting matters for your small business?
Accounting aids in expansion planning
Every wonderful journey starts with a map. Setting goals is crucial while strategizing the expansion of your business. What should your profits resemble in a year? Five years from now, perhaps? You can manage your business finances better if you keep your accounting up to date. This data is crucial for determining how quickly your company is growing and for assisting in making future decisions. You won’t have a complete view of your finances without proper reporting.
Your cost of products sold has it gone up? Margins getting thinner? Are your growth objectives realistic? You won’t have an unbiased response if you don’t have financial statements. Bts & Co provides accounting expansion planing all across Pakistan because we are the accounting firm in Pakistan.
Accounting is necessary to obtain a loan
If you want to borrow money to start or expand your small business, you must have current financial statements.
Consider the scenario where you want to use one of the large banks to apply for a Small Business Association (SBA) loan. On average, three years’ worth of financial statements are required, along with a one-year cash flow forecast. Without an established accounting system, delivering any of these is essentially impossible.
If you want to sell your business or draw in investors, you need accounting
It’s a good idea to have your options open even if you don’t currently plan to seek out investors or sell your company. The best way to accomplish it is to set up a reliable accounting system right away.
A CPA (Certified Public Accountant) will require accounting records that demonstrate your company is successful and expanding to be provided to potential investors, stakeholders, or buyers.
Accounting facilitates payment
Accounts Receivable (AR), which is created manually by you or your accountant or automatically by your accounting software, is what shows up on your balance sheet when a customer owes you money.
The balance sheet reveals how much of your accounts receivable you have already collected this month and how much is still owed.
You can monitor your ability to collect money by looking at your balance sheet. Then you may implement procedures to ensure that you have access to the money you’ve earned when you need it, such as stricter payment deadlines or improved client follow-up.
Accounting aids in managing your debts
If your company has debts from several different sources, such as credit cards, loans, and accounts payable, you’ll need to log into several accounts to see what’s still owed.
Your balance sheet includes a list of all of your debt.. You may refer to both at the same time because it also displays the balances of all of your bank accounts. It is the ideal report to examine in order to confirm that you have the funds accessible to take care of your debts and establish plans for future payments.
Avoiding arrest through accounting (or at least saves you from fines)
It can be challenging to stay on top of all your tax information reporting duties when your firm expands. Furthermore, you face the danger of understating your revenue if your financial reports contain errors. Either error could get you into trouble with the IRS and other authorities.
Giving you thorough, reliable financial records, good accounting lowers your risk of tax law violations and the likelihood of an audit. Additionally, you can be confident that your taxes will be completed precisely and on time when you hire an accountant to file them on your behalf. To hire an accountant contact bts & co. We are the accounting firm who provides solutions to your businesses in Pakistan.
Accounting aids in determining the appropriate tax payment
The IRS will punish you if you don’t pay your tax payment in full. However, they won’t award you a gold star for overpaying. If your firm routinely gets sizable tax returns, you may be paying too much in taxes. A tax refund is not free money from the IRS, keep that in mind. You overpaid the government with money that you could have invested in your company. Miscalculated quarterly anticipated tax payments can lead to refunds. You must project your income in order to appropriately calculate quarterly projected tax payments. Without trustworthy financial records created by precise accounting, it is practically difficult to do so.