If your business doesn’t have an effective accounting system in place, you run the risk of making serious errors in your finances. Furthermore, a good accounting system simply makes life easier and allows you to focus more on growing your business.
- It helps you evaluate the performance of your business: A good accounting system gives you a thorough overview of the financial performance of your business. If you don’t have an accounting record, how will you know if your business is growing or shrinking? So, your account records help you know if your business is growing, stagnant or slowing down.
- It helps you manage cash flow and meet deadlines: Cash flow management means knowing what you do with the cash that comes into the organisation. Your accounting system helps you know areas that need cash. For instance, cash may be needed to finance your debts, or make major renovations or order for new stocks, and it is your accounting system that will help you know this. In short, no business will growth further without a good cash management system. Also, your accounting books help you know when bills like your rent needs to be paid.
- It’s needed for business goal setting: Your accounting system will help when setting new business goals for the week, month or year, as seeing the business performance for the last financial year will help you project and set goals for the New Year and plan ahead for the business.
- It’s needed for tax compliance: Your accounting system will provide the necessary information to be able to comply to the relevant tax legislation, such as VAT, PAYE and income tax. As a SARS requirement, a business must maintain a proper accounting system to enable the verification of information relating to the business’ tax affairs.
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)