Business accounting is a means of organising the financial situation of any company, entrepreneur, or small to medium enterprise (SME). For this, it is necessary to pay attention to the collections, balances, loans, and day-to-day debts of the business. Any action carried out by the company must be recorded in the accounts. This allows you to be able to know at all times the history of the company, and to improve decision-making. Managing accounts also allows us to account for every penny of the company’s money, and experience potential benefits that professional money-handlers are/can be privy to.
As the name suggests – business accounting is responsible for all the economic and financial movements that occur within an organisation. It involves recording all of the company’s movements, and classifying them in order to analyse and interpret the results. Nordens’ accuracy and insight means you can always get an accurate estimate on the state or health of your company, and note whether it is moving in a positive or negative direction. This often helps advise those in management and directorial roles in how to best strategize for growth and profit, for example: is the company hitting its targets? Is the distribution of the company’s budget working well? etc.
Every company will require some kind of accounting protocol and/or accounting department – whether large or small, self-employed or multinational. Any body or organisation that deals with money is required to keep these kinds of financial records for many possible reasons – most importantly, to comply with government guidelines and regulations. Failure to manage your accounts correctly, can – unfortunately – lead to swift and significant charges from HMRC. With Nordens, you’ll never run the risk of unnecessary fines and red tape, as you won’t just have one business accounting expert on hand – you’ll have an entire team!.
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Here at Nordens, we know that accounting can seem confusing. We receive questions almost everyday from business owners unsure of the very same things, so here is a little more on the matter…
Business accountancy is global and applicable to all businesses, no matter their size, industry, or sector. Thus, among the uses of accounting, we find:
Recording economic-financial movements: One of the main functions of accounting and, perhaps, the most basic, is to make a record of absolutely all economic movements that occur in the day-to-day running of the company.
Reporting: Because accounting serves to inform – in a clear and truthful way – about the financial situation in which the company is located. Thanks to accounting, we will know if a company has sufficient liquidity and solvency or, on the contrary, is on the verge of bankruptcy.
Decision-making: Accounting in a company also serves to make correct decisions, and make them quick. In addition, it provides the necessary information to plan, evaluate, and control these actions. Because the accounts will not only interest the owner at that moment, it is also convenient to keep these records. You may present them to a third party, such as a financial entity, in the future.
Providing for the long term: What will happen in the future? Do you have enough assets to face a crisis? Accounting allows for forecasts of sales, expenses, and other calculations necessary for the proper management of the company.
The main advantage of business accounting is, perhaps, that it helps the company to obtain financial and non-financial information. It also facilitates its classification, order and presentation, thus improving the decision-making and the general management of the company. Likewise, accounting – since it details all movements in a historical and detailed manner – allows us to optimise cost management, learn from past mistakes, detect duplicate processes and implement a much more effective and efficient management strategy.
As you know, accounting is a very broad science, and its main objective is to collect, structure, and give meaning to all the movements that occur in a company. Therefore, transferring all this into economic terms in the accounting of a company becomes very complicated and abstract.
Therefore, there are many accounting classes that exist. Choosing and basing ourselves on any of the varieties of accounting depends on many factors. These include: the origin of the resources, the activity of the company, or the type of information that is worked on.
• According to its origin
• According to the activity
• According to the information
• Public accounting
• Industrial accounting
• Financial accounting
• Private accounting
• Commercial accounting
• Administrative accounting
• Extractive company accounting
• Tax accounting
• Service accounting
• Cost accounting
• Management accounting
Get all the accounting documentation: It is essential that you collect all the income, expenses, and other operations concerning the activity of your company. Demonstrating any operation with a document of proof is recommended in order to maintain control of your accounting. Without documents that prove what is recorded in the registry, its truth may not be justified.
Keep track of income and expenses: Remember that all the movements and economic operations of the company, as well as their payments and collections, must be accounted for.
Take taxes into account: It is very important to have a record of the different taxes for companies that you will have to present in the terms and dates indicated by HMRC. Annually, you must present all accounting books and returns.
Check the different minutes, accounts, and balances: In this way, you will have the certainty that the collections and payments (as well as the supporting documents) are not wrong or duplicated.
Keep the accounting up to date: Do not leave for tomorrow what you can do today. Having your accounts and records up to date will save you time and hassle. Set aside some of your time for paperwork, and do not leave it until the end of the year.
Regarding the main characteristics of accounting, we find the following:
Business accounting uses both quantitative and qualitative information. Quantitative information is easy to measure since it refers to the calculation of financial transactions (usually through simple formulas); Qualitative information refers more to the importance given by each company to certain data and information in order to make decisions. Both types of information are necessary to direct and manage the business.
Another feature of accounting is that it covers all business operations in a systematic, historical, and chronological manner. That is, a protocol is established on how to proceed and collect each economic movement that occurs. Likewise, a record of all this is kept and allows you to establish comparisons between different periods, thus studying the progress of the company.
The accounting of a company focuses on the decision-making process and helps reduce the degree of uncertainty throughout the process. It is a science that helps – thanks to the comparison between periods and the calculation of forecasts – you have a focus on the future, the past, and also on the present.
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In November 2002, having sold our other business interests off earlier in the year, I decided to set up Nordens Chartered Accountants. The easy part was knowing how to do it, as I had established and built a smaller practice a few years earlier. The difficult part, for me, was not following the traditional accountancy path. Having run businesses, both successfully and unsuccessfully, I wanted to help business owners resolve their short term problems and work with them to achieve their longer term goals. Business has always been my interest and I love that I can help business owners achieve what seems like the impossible every single working day.
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