We know that accountants collect data and report taxes, but there’s also a world of opportunity when it comes to growing a business. As a result, qualified accountants are in huge demand across industries and continents!
In this article we will outline the key responsibilities of an accountant and the value they can provide for a business by using data to help grow and shape organisations for a profitable future.
What is the Role of an Accountant in a Business?
Accountants are known for providing financial data that businesses need to make decisions.
That information goes onto reports for both internal and external use.
Internal customers include management evaluating company-specific information, like overall sales or sales by region. Information used internally can help determine the best way to meet business goals.
Externally, accountants provide reports to lenders and revenue agencies. The reports determine company performance and help external customers evaluate the business. Banks may be looking to refinance loans while revenue agencies may be looking at what a business owes.
Here are some of the responsibilities that fall on accountants:
- Record Data
Accountants spend a lot of their time entering and checking data, such as revenues, expenses, and sales, to make sure it is recorded properly.
- Report and Communicate Financial Information
Those don’t require special formatting or rules. However, accountants are known for producing specific reports according to industry regulations and rules which include:
- Profit and Loss Statements: shows earning and expenses
- Balance Sheets: reports what a business owes versus what it owns
- Cash Flow Statements: tracks incoming and outgoing cash
The reports above are formatted in a specific way so any professional can easily read and understand the data. Standardised reporting has helped eliminate misreporting financial information and creates an easier, uniform way to interpret business performance.
Another way that accountants report data is by using financial ratios. Ratios are just metrics that help businesses understand their performance.
For example, liquidity can be measured using the quick ratio, which just compares current assets and current liabilities. It helps management see whether they will be able to meet short-term obligations.
Accountants are responsible for creating a budget that helps a company plan for the future.
The budget decides how much money the business is allowed to spend on different resources, like labour and equipment. It’s a key role to ensure business profitability.
Compliance and Legal
A business needs proper accounting procedures in place to stay legal. Accountants make sure that information is accurate and up-to-date.
Government agencies require that businesses report finances as truthfully as possible; not doing so can land you with a fine.
Plus, having accurate, error-free data can help prevent a tax audit while still minimising tax payments.
6 Key Accounting Tasks
Accountants offer a lot of value to businesses by keeping accurate and consistent records of business activity.
However, they’re equally known to help a business grow and become even more profitable. Here are several ways that an accountant helps take their organisations to the next level.
1. Save MoneyAny business looking to improve the bottom line will want to talk to an accountant! They can spot tax deductions, detect and prevent internal fraud, and avoid costly reporting mistakes.
The risk of filing incorrect taxes alone can justify bringing an accountant on board. Accountants help businesses avoid being audited, which can be time-consuming and end with penalties or fines.
2. Forecast the FutureAccountants help businesses better prepare for the future with accurate forecasting. In short, they analyse past data to identify patterns. Those patterns can help predict how the business will perform in the future.
Why is this important?
Businesses want to be prepared and adjust for shortcomings when possible. If a business is predicted to slow down soon, they can adjust their expenses and cash flow to help get through.
Accountants can even help decide when it’s best to open a new line of credit or invest extra cash.
3. Increase Profitability With AnalysisThere’s an entire segment of accounting dedicated to understanding the costs that go into keeping a business running.
Cost accounting analyses what it costs to make a product or sell a service. Additionally, cost accountants use that data to understand which products or services are the most profitable and easiest to sell.
Cost accountants take data to another dimension by setting ideal prices for each product or service in order to maximise profits. Plus, they can pinpoint waste and find ways to eliminate it. All of this adds up to improve the company’s bottom line.
4. Better Funding OptionsBanks and investors want to make wise choices when giving out their funds. One of the best ways to position yourself as a low-risk investment is to have a thorough understanding of your organisation’s financial health.
Accountants are the key to looking polished when approaching a lender or investor. They’re able to showcase financial well-being and also instil confidence in lenders. That confidence results in better opportunities for funding and a better business banking relationship.
5. Evaluate Changing Business StrategiesBusinesses often want to know the answer to the question:
“What happens if…”
What happens if we raise our price by 10%? What happens if we relocate a production facility to a new city? More specifically, management wants to know what happens to profitability.
Accountants can provide the answers to those questions by running “what-if scenarios” using and interpreting complex data.
6. Provide Useful Financial GuidanceBusinesses are always in need of financial guidance and accountants are ready to provide it.
Accountants advise their organisations on ways to drive profitability and cut expenses where possible. You’ll also be tracking cash flow against budgets and offering suggestions based on your organisation’s unique needs.
Becoming an accountant, either in-house or third-party, is a great way to drive a successful, profitable and interesting career.
If you’re thinking about a career change or looking to move up the ladder through professional exams, register for free today as a basic member and try out our ACCA and CIMA expert online tuition.