Importance of Business Accounting


All businesses spend a lot of time and resources on the recording of financial transactions. But many new entrepreneurs do not understand the importance of business accounting. They may fail to dedicate sufficient resources to accounting. In this piece, we will look at the importance of accounting in business.

What is Accounting?

Accounting is the process of recording the financial transactions undertaken by an organisation or company. The process involves the analysis and summary of transactions. The data is presented over accounting periods as a way of summarizing the operations of a firm. Accounting usually generates three major statements: Income statement, balance sheet, and cash flow statement. This is generally an expensive practice, but it is essential. Small business accounting can be done with affordable apps like Quickbooks and Zoho Books.

Why You Need to Invest in Business Accounting 

Here are some reasons why you should maintain financial records in your business:

Helps to Evaluate the Performance of Your Business 

With accounting, you will be able to determine whether or not you are making profits, and how much you are making in every accounting period. There are other figures that can be calculated to evaluate the performance of a business. These include the debt-equity ratio, the current ration, and the turnover ratio. The figures can be compared to those of previous periods to determine whether the company is making any progress.

Helps a Business be Statutory Compliant

Businesses have to cover their liabilities within given periods in order to remain statutory compliant. These liabilities include pension funds and taxes. By paying the required amounts on time, you will be able to avoid legal issues.

Helps You Access Loans

Small businesses usually need loans and grants to finance their projects. If the business has been running for some time, it is important to show how it has been performing over the period. Otherwise, lenders will not be confident that you will be able to pay back the amount lent. The bank will have to go through your records on book profits, assets and liabilities, and the amount paid in taxes. 

Helps to Attract Investors 

Small businesses might struggle to find investors, and that can slow down the growth of a business. In order to attract and convince investors, you will have to show them how the company has been performing over the years. This is only possible with concrete financial data from the business accounting records. 


Business accounting is an essential practice in all companies and organizations. Good accountants might be costly, but you will find their service important for many aspects of your business. Business accounting will help you see how profitable your business is, and these records can attract more investors to the company. The records will also help you stay statutory compliant. You will know when you need to pay your taxes and the amounts payable. You will also need these records when applying for business loans and grants. Your lender needs to know how big the company’s finances are and the profits expected.


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