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Post By: admin April 27 2020

Accounting the Backbone of Business

Accounting must be called the ‘key to Social Change’. History says so. In history every country has a story of trade. Trade was/is considered as one of the most influential weapons by many countries. If trade is there accounting will be there. Before reaching the now, developed and technologically improved accounting, it had been through several forms like ‘the scribes of Mesopotamia’, ‘Roman Bookkeepers’, ’manorial accountants of medieval Britain’, ‘Venetian accountants’ etc. But the stewardship role of accountancy remained the same. 

Luca Pacioli who later renowned as “ Father of Accounting '' re-invented the revolutionary double entry method in accounting in 1494. The double entry method is as simple as “the manager should not go to sleep until the debits equaled the credits'', but the method is unchanged largely for over 500 years! Because that simple system is able to keep track of internal operations and thereby attain greater efficiency and profitability.Accounting & Bookkeeping always give added value to the business and hence the investor can move with the right decision with the help of Accounting reports. So a Professional experienced Accountant always will be an Asset for the business organization.That is the power of accounting and that is why accounting became the backbone of Business. 

Let us go through the important roles that played by accountants in an organization or a company to call it the ‘backbone’

  • Cost Cutting 

Either you are an Entrepreneur or a Corporate CEO, your grave concern is to maintain operational cost at a minimum level so as to attain a larger profit margin. And here comes accounting ‘to help a business to lower its variables as well as fixed costs, hence enabling the business to break even and to have a wider margin of safety’. Accountants achieve this objective through various techniques such as 

  • Cost Benefit Analysis
  • Job Evaluation and Merit Rating
  • Budgetary Control
  • Standard Costing 
  • Planning and Control of Finance
  • Value Analysis
  • Contribution Analysis
  • Stock Level Management
  • Material, labor and overhead control to increase productivity
  • Market research to grab onto lowest interest rates and best sources of funds, surpass competitors and attract the right investors 

Applying these techniques will enable the Accountant to negotiate the best deals with suppliers, discard unnecessary activities to reduce error costs and assist in business to claim cash discounts to achieve economies of scale.

  • Forecasting Costs and Revenues

To generate maximum profit from the available resources, it is crucial to anticipate future costs and certain revenues. This will be taken care of by the accounting team. They communicate with all other departments, observe previous transactions, conduct accurate research and draw the best value estimate (budgeting). Other than individual budgets like cash flow, Operating or Sales Budget etc., the overall financial plan of the business in detail is known as a Master Budget. This allows the firms to allocate enough funds for the upcoming events and constitute an optimum production plan that could escalate profitability. 

  • Cash flow Management

Cash is the primary source of injection for any business activity. So it is advised to maintain a safe amount of cash in the business. Cash flow which is prepared by accountants will clearly explain the cash position in the business and resolve cash shortages. The management of cash flow is done by delaying payments, offering incentives to debtors, assuring overdraft facilities etc..

A stable cash flow and thorough cash flow management can bring the following benefits to the business:

  • Grasp on to favorable deals or opportunities in the market during a certain time period
  • Pay off debts to avoid overdue fees or interest charges
  • Allow purchase of new assets to optimize business performance
  • Assess business performance and set goals

Accounting allows an exhaustive assessment of business performance by setting long and short-term targets and comparing them to the actual with budgeted outcomes. For precision, accurate and complex calculations such as Ratio Analysis, preparation of Financial Statements are used in which Balance Sheet, Statement of Profit and Loss and Cash flow Statements are also included. The detailed and accurate analysis allows the company to set targets to improve their own performance and to succeed over their competitors. Setting goals will create more financial benefits for employees and the enthusiasm and hard work will boost up labor productivity.

CDA Accounting and Bookkeeping Services LLC

Business improves the living standard of the people which directly and indirectly reflect the economic status of a country. So we, the CDA believe that ‘Accounting is not just calculations’. Our devoted team of accounting professionals help you to excel in your business. We provide high quality and cost-effective accounting services to any business sector in UAE. Our specialists have hands-on experience with the Big 4 and are well occupied with nonpareil accounting techniques. We assure supreme efficiency and profitability in your business.

CDA Accounting & Bookkeeping Services LLC also handles CFO Services,Accounting & Bookkeeping Services, Accounting Software services, Due Diligence Services, and Tax Filing & VAT Consultancy services and Auditing Services in Dubai on time according to the convenience of our good clients. 

Feel free to contact us. Our experts offer you one-hour Free Consultation to drive away your doubts!