How Accounting Practices Can Impact Your Financial Well-Being

There are many aspects of a business that a business owner has to be mindful. These elements include providing a quality product and excellent customer service. It includes collaborating with vendors and suppliers. It includes crafting marketing campaigns and managing employees. However, perhaps one of the most complex and challenging things that must be attended to is the accounting.

Accounting is very technical. If it is not completed correctly, it can lead to substantial threats to you and your company’s livelihood. Below is how accounting practices can impact your financial well-being.

Poor Accounting Can Lead to Theft and Financial Crimes

One of the most important reasons to ensure that your company has correct accounting processes is that it can help hedge against the risk of theft and financial crimes happening within your organization. If you want to stop employees from embezzling money from the company and outright stealing from you, you need to have access to thorough and accurate accounting records.

Statistics state that a whopping two-thirds of employees have stolen from an employer before and that $50 billion is stolen from employers every year. If you cannot look back over your books to find anomalies that could indicate crimes like theft and embezzlement, your company will most likely end up being defrauded out of a lot of money. In a competitive business environment, this loss in revenue could mean the difference between staying afloat and having to close your doors.

Inaccurate Accounting Affects Stakeholders

For big companies to succeed, especially corporations, accurate accounting practices are paramount. Without precise accounting, financial reporting by the company will also be inaccurate. This reporting can have a devastating effect on a company’s investors.

Investment is the lifeblood of large companies. If investors don’t find your financial reporting trustworthy, you may be unable to attract shareholders or even a board of directors. Overall, whether good or bad, the public needs to know the truth about the financial performance of a public company. Fortune reports that auditors aren’t accurate 25 percent of the time. Don’t solely rely on them.

Accurate Accounting Required for Short and Long Term Planning

Accounting is also significant because you won’t be able to strategize for the future in the short term as well as the long-term without it. Accounting is what helps you gather valuable intelligence regarding what products are creating a profit and which ones are a drain on revenues. You need that accounting information to make timely adjustments to ensure your company can stay in the black. You won’t be able to plan for future growth without it either.

Overall, knowing your accounting can help you become a more successful business owner. Thankfully, you don’t have to depend on outside parties to understand your company’s accounting yourself. Online accounting degrees are easily obtainable for those that don’t want to spend too much time attending an on-campus program. Obtaining such a degree can give you the tools you need to better understand your company’s finances and protect its financial well-being for the long term.

Bad Accounting Practices Often Break the Law

Another reason why you must ensure that you have accurate and efficient accounting processes is that doing so is often required to conform to the law. If you don’t, this can result in significant sanctions from governmental bodies like the IRS. Under certain circumstances, it could also result in prison time. When this occurs, the financial consequences for the company can be severe.

Accurate and efficient accounting is required for the survival of any company. It doesn’t matter how small or large your business is, if your accounting is not being adequately attended to, you’re on the path to financial disaster. Make sure you invest the proper amount of time and resources into your company’s accounting.