In today’s dynamic business world, entrepreneurs have a plethora of responsibilities on their shoulders. Some are trying to keep up with ever-changing technology, while others have to make challenging decisions every day. Between signing deals with new clients and purchasing equipment – many entrepreneurs forget to maintain records. Here, the role of accountants kicks in as these professionals are responsible for crunching numbers.
An accountant records every business transaction – income, expenses, sales, profits to assess the company’s financial performance. Is that all an accountant does? In addition to bookkeeping, accountants comprehensively assess finances and create forecasts to avoid financial setbacks. Similarly, they closely monitor bank statements and reconcile them with ledger entries to close doors for frauds and theft.
If your company is leveraging tech-savvy tools, accountants can collect big data to evaluate financial health. They will also examine the proficiency of accounting software to ensure there are no loopholes or errors. However, if you don’t want to share financial information with a third person, consider learning the ropes yourself. Here we are unfolding the responsibilities of an accountant that are beyond crunching numbers.
1. Performs Statutory & Internal Audits
With complex business infrastructures, maintaining records is not enough. Companies have to ensure compliance with federal, state, and accounting standards to close doors for discrepancies. Therefore, a Chartered Accountant performs a statutory audit for the company. They dig into books of entities – limited companies, public firms, and understand the legal regulations. After all, they have to ensure companies prepare financial statements as per accounting standards and legal considerations.
Moreover, an internal audit is also one of the many types of accounting jobs that accountants have to perform. It ensures all accounting transactions are of the current year. For instance, if the organization incurred a loss in 2015, they can’t treat it as an expense in 2020’s income statement. It is not only against the accounting policies but also unethical since it artificially reduces annual profits.
2. Prepares budgets
Today, we live in a VUCA world – a place that is volatile, uncertain, complex, and ambiguous. Thus, it has become essential for businesses to prepare and plan for the future. Budgeting refers to the planning of business activities and transactions before their occurrence. It enlists all targets and expenses, helping you stay one step ahead. But do you know how to prepare budgets?
An accountant is well-versed with all budgeting protocols. They prepare forecasted financial statements by utilizing the past year’s stats and figures. If the sales are increasing by 20% every year, they will follow the same pattern. Simultaneously, suppose actual results are not the same as the budgeted figures. In that case, they inform the upper management to take relevant initiatives. Moreover, accountants also identify potential bottlenecks that are limiting the company’s capacity to increase profits. It could be a hefty insurance premium, utility bills, or high excise duties.
3. Plans Tax Liabilities
Unfortunately, taxes take up a significant chunk from profits that no company is willing to lose. Although you can’t skip tax obligations, an accountant can help plan for tax liabilities. They will assist with tax calculations, filing returns, and making representations in front of the tax authorities. Most importantly, they know how to settle tax liabilities to close doors for potential legal penalties. After all, a small mistake can land your business into hot water while putting your business reputation at stake.
Besides tax planning, accountants can lower taxable income to minimize tax expense. Have you heard of tax deductibles? These are expenses that can significantly lower corporate taxable profits. It includes depreciation, charities, donations, and import duties. However, accountants ensure these deductibles don’t impact business profitability as low profits can reduce investment prospects.
4. Manages Business Cashflow
Unsurprisingly, managing cashflow is every business’s utmost priority. At times, the company reports sufficient sales but still doesn’t have any cash available due to excessive credit sales. Annual cashflows display how much money is available in your business and whether it is sufficient to incur day-to-day business expenses. An accountant reports all inflows and outflows of the company to identify any shortfall of working capital.
Simultaneously, they negotiate payment terms with customers and vendors to ensure cash flows positively. If any customer is delaying payments, they offer cash discounts to reduce the chances of bad debts and losses. Similarly, accountants give early-bird discounts if debtors make payments within 30 days or less. These practices make sure companies are liquid enough to foot their bills for another six months. After all, liquidity issues can drown businesses into loans that can result in bankruptcy.
5. Assists in Decision-Making
Every business owner wants to calculate the potential consequences and implications of making significant business decisions. Fortunately, having an accountant by your side can you help with all financial decisions. If you are thinking of purchasing a new plant, they will conduct a thorough cost-benefit analysis. They will calculate whether returns are higher than the investment costs. Similarly, when it comes to taking a loan, accountants calculate the potential risks and returns.
Firstly, they evaluate market conditions to understand interest rate movements. If the market seems volatile, they will ask the management to reconsider their financing decision, protecting the company from default. Accountants also leverage the latest data, facts, and figures to make business decisions and navigate real-time hurdles. Therefore, every company should take a collaborative approach with accountants to make the right decisions.
6. Appraise & Evaluate Assets
At one glance, financial statements seem relatively straightforward. You record sales, deduct costs, and expenses to get annual profits. Likewise, balance sheets seem like a comparison of assets and liabilities. Honestly, calculating these figures is quite challenging, especially for a business that owns many fixed assets. Every year accountant has to evaluate and appraise the asset’s value to record gains and losses on revaluation.
If you own a property or land, the asset’s value is likely to increase over time instead of depreciating. Therefore, accountants don’t charge depreciation on such assets and use the statement of equity changes to record the changes on such investments. Alongside this, accountants have to appraise the value of inventory regularly to account for any potential damage.
Believe it or not but having an accountant has become inevitable. These professionals ensure the company’s optimal financial health while handling all money-related matters. In addition to maintaining records, they oversee operations to ensure regulatory compliance. Likewise, they perform an audit, evaluate assets, and plan tax liabilities to maximize profits. Whether it is financing a plant, opening credit of line, or acquiring a business loan – they assist companies in every crucial decision.