23 Jun Importance of Money & Accounting for Startups
Money is the primary vehicle as to why a business exists. Companies are there to earn and generate a profit. That’s why communicating financial data is paramount in any given business. That is where the principle and use of accounting come in. Accounting is said to be the language of business. While a company carries out its day-to-day operations, accounting comes in to process, measure, and communicate financial information. In the next section, you will learn about accounting and why it is considered the primary language of business.
Accounting in a Nutshell
In a nutshell, accounting entails the recording of financial transactions. This financial recording includes storing, sorting, retrieving, summarizing, and presenting financial data and information in various reports for financial analyses. These financial reports and analyses are crucial in determining the financial health of a company. This, in turn, allows business executives to make sound business decisions.
For instance, financial information is presented in the form of general-purpose financial statements that are then distributed to people in authority within and outside of the company. People in power, such as business executives and decision makers, refer to the historical financial data to review, assess, and determine viable options for a compelling business operation.
Accounting: Creation of Language
The functions performed by the accounting team in any given company create the language of accounting itself. As the accounting team along with bookkeepers does its daily, weekly and monthly responsibilities, they speak the language of business, tossing around accounting terminologies such as accrual basis, diversification, a balance sheet, a trial balance, and general ledger.
The accounting team deals with the recording, tracking, and monitoring of vital financial data. These financial data and information are then reflected in the company’s books and are then translated into a form of financial reports. When business executives and decision makers come up with business decisions, they refer to these financial data and reports.
Speaking the Language of Finance
When dealing with business finances, it is then imperative to speak the language of accounting. When accountants track and record financial information reflected in financial documents or reports, the finance team interprets the data to make business decisions. It is worthy to note that while accounting takes historical data of the finances of the company, finance as a discipline takes and interprets these gathered data for future business decisions.
That is why those in finance careers understand and know how to interpret accounting language. They also ask relevant questions to assess what the numbers mean. They help predict the financial direction of the business through these recorded data and information.
Final Words: A Global Language
People say that love and music are a universal language. The same is true for accounting in the field of business. Accounting is, indeed, the language of the business. It has always been a number’s game for companies across the globe.
This language becomes a standard form of financial communication regardless of the kind of business or industry that you are in. It is then imperative that the parties involved in any given company should understand the financial aspects of any deal by looking at the financial reports or interpreting bookkeeping.
The only way for a business to thrive, compete in the market, and make a profit is to ensure that it knows the language of the business. A company should communicate well in terms of financial dealings, interpret financial data and information accurately, and come up with wise decisions based on the numbers. In the end, how well you speak the language of accounting can either make or break your company. Make sure you speak it well!