In this article, we will learn the following;
- The roles of professional accountants
- Some challenges that accountants face
- The importance of keeping financial records
Accounting has played an indispensable role in the business world through the centuries. It has helped to keep things orderly and bring about regulations with money affairs. Accounting as a concept started about a thousand years ago, as a solution to issues arising from the trade of goods and services. The earliest evidence of accounting dates back to the Mesopotamian civilizations by keeping records of merchandise traded and received. Ancient Egyptians and Babylonians also track their livestock and crops.
Over the years, development in Information Technology has modified this concept. When IBM released their first computer in 1952, the first users were accountants. Although it is now very convenient for anyone to keep the financial records of their business, we cannot overstate the importance of professional accountants because accounting is more than listing debits and credits. It is a language of business and the language of all financial things. Their significant roles include:
Record Keeping and Investment Analysis
Accountants keep financial records in a bid to understand how the company is doing. This provides insight and helps the business owners to stay proactive.
Any company that intends to make and maximize profit must have a top-notch record-keeping system. Well-kept financial records help organizations and investors recognize profitable ideas and methods. The data obtained from records is crucial to the decision-making process of organizations because it helps them make sound and logical resolutions that may be beneficial for their business. Companies have been forced to shut down or scale down as a result of bad investment decisions. Other times, bad accounting sequels debt instead of profit. When companies keep documents properly, then it is easy to understand how each part of the business is doing and make decisions accordingly, all the while keeping your business financial position in check.
The story of Forever 21 is a great example of how companies need to measure customer behavior from accounting data. The clothing brand failed to recognize the shift from retail to online shopping. Instead of transitioning to digital marketing, the company focused on opening more stores. This eventually cost them a fortune as competitors leveraged delivery services and online stores. This way, their competitors made more money while spending significantly less. If financial advisers such as accountants were able to keep tabs of their capital investment on opening more stores versus the profit they were generating, their business hurdle may be reversed.
Curbs Fraudulent Practices
When financial records are kept properly, it makes it easy to refer to them. This is how accounting helps in reducing (and in some cases eliminating) fraudulent practices in organizations. This is achieved through the accurate tracking of all financial procedures within the company. Although fiscal laws and regulation varies from state to state, proper accounting helps you with statutory compliance in your business. Hiring the right team ensures proper bookkeeping of sales tax, VAT, income tax and regulating funds which all helps in combating possible fraud activities.
Integrity and Reputation
Transparency is crucial to business dealings, and it is the reason why the proper documentation of financial records is vital. General and precise facts of accounting preserve the reputation of business. An honest representation of all financial proceedings in an organization depicts a trustworthy company. Investment capital from outside sources are not as beneficial as in house funds. Accurate and transparent financial reviews of the company’s financial operation makes their stakeholders trust them more. In business, the right name is better than silver and gold.
All the aforementioned are parts of the benefits of accounting. However, every profession has its challenges, and accounting is not spared from this axe swing.
Below are some operational challenges faced by the accounting business:
Skills Update and Training
The world has reached an age where every profession is evolving due to development in information/communication technology. This causes modifications to the training process and core skills and tools that you require. These skills and tools make business processes more manageable because they simplify and speed up accounting processes
The challenge with the accounting profession is keeping up with ever-evolving trends. For example, accounting procedures such as auditing have improved to achieve better results.
Technological advancements have made it possible to automate accounting processes and maximize data for insights. Accounting professionals need to focus on keeping up with these tools. Partnering with accountants who are constantly progressing with the current training and tools in accounting such as Quickbooks, Xero, Tallie, Kashoo, QuickFile and others furnishes their intuitive making them do their jobs quicker, more accurately and in ease. This is the only way to keep the company running.
Accounting remains one of the most sought after professions in the world. Although there are a lot of new blooming accounts out there, in a rapidly growing business, the need for experts in this profession is vital, and passable skills cannot be tolerated. Unfortunately, accountants with the needed expertise are scarce, and this has proven to be one operational challenge of the accounting business. Professionals need to ensure that they stay updated with the latest skills and tools. This is a great way to ensure the proficiency of your accounting processes. There is a need to have professionals managing every aspect of the business. The accounting sector is one that requires a highly experienced and proficient workforce. The constant use of technology in the accounting profession is a critical factor for companies to consider. This factor has significantly influenced the competition among accounting firms.
In the last point, we talked about the importance of experienced personnel. However, even with qualified staff, you may still be faced with fraud. One of the challenges facing the accounting profession is the accuracy of accounting and complying with financial laws and regulations and internal procedures of your company. This issue stems from either inadequate accounting systems or poor organizational skills needed for the job. Subsequently, this leads to the inability to detect or prevent fraudulent activities because of inefficient bookkeeping.
In many cases, this happens because professionals with the technical know-how on detecting issues regarding treachery are few. Eventually, this leads to successful manipulation of data. As we mentioned earlier, the primary role of accountants is to ensure transparency.
Economic Laws and Regulations
You can control the challenges mentioned above internally. Although, constant look out for other uncontrollable challenges is as crucial.
The economic laws and regulations cannot be excluded as one the challenges in the accounting profession. The decisions the government make plays a significant role in the accounting business in specific ways. For example, government policies such as tax rates and interest rates may affect the economy and subsequently, the accounting profession. These factors influence the accounting industry and transform the way it compares to global accounting standards. New government policies come out as often as how the economy moves. Albeit how updated rules help stabilize what’s happening in the market, this requires accountants to adjust and shift their bookkeeping according to the new law. The need to update their clients on what has changed may cause lag time on keeping records resulting in a halt on incoming profits.
Changes in Practice Globally
Apart from the activities in the market that affects economic laws and regulations, global trends in accounting also affect the way accounting is done. With the popularity of the internet, accounting firms can compete on a worldwide scale. This particular challenge affects firms that only utilize local accounting processes. The constant change in accounting standards globally can, at times, stunt the growth of the local accounting process. For example, advancements in record keeping and data optimization are improving globally at a fast pace. This often leads to a backdrop in the economic progress of companies that operate with local standards (when compared to their competitors that use international standards). This where partnering with a company that operates their quality in a global standpoint comes in handy.
"The introduction of data analytics and innovative technologies, such as artificial intelligence, bots, and drones, provides the opportunity for the greatest change in the accounting profession since the passage of the Securities Act of 1933 and the Securities Exchange Act of 1934,"- George Scott, chair of the Federal Accounting Standards Advisory Board."
Several challenges permeate the accounting business. Although these factors can be controlled, conscious and consistent effort to keep up with these changes are required. Every company needs a dedicated accounting team that will provide monthly, quarterly, and annual reports. It is best if you also streamlined financial accounting functions while focusing on other crucial aspects of business operation.
Here at Infinit-O, we understand the value of keeping your financial records secured. We build great teams best fit for your business that includes finance professionals performing internal auditing and bookkeeping services among others. Through this, we can ensure your company’s financial growth and continued profitability.
At Infinit-O, our goal is to create long lasting partnerships with our clients; rendering a strong combination of business consultancy, process optimization, and outsourced services; all utilizing the latest technology to provide excellent value for our clients. We are ISO-certified, GDPR and Sarbanes-Oxley compliant, so your company and data are safe with us.
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