Five Reasons You Need Accounting Skills to be Successful in Business

Many small businesses fail within the first five years. Factors like mismanagement, employee theft, and bad investments can contribute to a business’s downfall.

However, poor cash flow management is one major contributing factor that causes about 82% of small businesses to fail.

Cash flow is the lifeblood of any business, but it is an understatement to only account for the revenue generated and expenses incurred.

Cash flow management is an essential part of accounting principles. It caters to the recording, classifying, and summarizing of financial transactions to help business owners make informed decisions. Cash flow is a predictor of business success.

But there are other essential pieces to the accounting puzzle too. If you’re interested in taking your business to new heights of success, you can’t afford to skimp on any of them.

How to Acquire Accounting Skills?

You don’t need to be a certified public accountant (CPA) to have excellent accounting skills. However, you can start by taking some introductory accounting courses in most colleges and universities.

You can also find many online lessons that will teach you the basics of double-entry bookkeeping, accrual basis accounting, and more.

Another excellent way to acquire accounting skills is by working with a certified public accountant or an accounting firm. You can also consult with a business attorney to better understand the legal aspects of running a business.

The most important thing is to have a strong desire to learn and be willing to put in the time and effort required to become an expert.

If you’re looking for specific programs, an online masters in accounting no GMAT required degree is widely available and can be completed in as little as two years.

What Parts of Business Does Accounting Cover?

Accounting is essential in all aspects of business, from start to finish. The accounting process starts with recording transactions, which are then classified and sorted into ledgers.

The next step is to generate financial statements, including the balance sheet, income statement, cash flow statement, and statement of changes in equity.

These statements assess a business’s financial health and make informed decisions about allocating resources.

Finally, the accounting process ends with the preparation of tax returns. It is a critical step, ensuring businesses pay the correct taxes.

Benefits of Accounting Skills:

A business relies on the flow of money to keep it running. Understanding where the money is coming from and where it is going is essential.

Here are some of the benefits of having accounting skills:

1.    Assess Your Business Growth:

Over time a business takes loans, invests in different areas, and generates revenue. Understanding all these financial aspects is important to making sound decisions.

If a business’s debts are increasing faster than its revenue, it is a warning sign that the company is not doing well.

Studying financial statements can give you an insight into the financial health of your business. It can help you identify areas that need improvement and take corrective measures.

Paying off debts, for example, can improve your business’s cash flow and make it more attractive to lenders.

2.    Making Informed Decisions:

Every decision made in a business has financial implications. Whether buying a new office space or expanding into a new market, understanding the economic impact of your choices is crucial.

Without accounting skills, you will be flying blind and making decisions based on gut feeling rather than actual numbers.

These decisions can lead to disastrous consequences. What if the market you expand into is not as profitable as you thought? What if the new office space costs more to maintain than you can afford?

You can avoid such problems by understanding and analyzing financial data before making decisions.

3.    Save on Taxes:

Taxes can take a big chunk of your profits if you’re not careful. You can minimize your tax liability and maximize profits with proper accounting skills.

There are many deductions and tax breaks available for businesses. But you can only take advantage of them if you know about them.

An accountant can help you identify all the deductions. Deductions for office supplies, travel, and entertainment expenses can add up quickly.

Taking advantage of deductions and tax breaks can save a lot on taxes. It can be done by keeping accurate records and filing the tax returns on time.

4.    Improved Negotiations:

Whether you’re negotiating with suppliers or customers, having accounting skills can give you an advantage. If you know the numbers, you can negotiate better deals.

You can negotiate lower prices and better payment terms when dealing with suppliers. Maybe you’d like to pay in 60 days instead of 30.

When negotiating with customers, you can offer discounts or extended payment terms. If a customer asks for a deal, you can quickly calculate how much you can afford to give without affecting your bottom line.

You can also use accounting skills to improve your salary negotiations. Knowing how much profit your company makes, you can negotiate a higher salary for yourself.

5.    In Sync with Accounting Team:

Running a business isn’t a one-man show; it takes a team of dedicated individuals. And each member of the team has their area of expertise.

The accounting team keeps track of the business’s financial health. You must be in sync with your accounting team as a business owner.

You need to understand what they’re doing and why they’re doing it to make informed decisions about the financial future of your business.

If your accountant recommends investing in new equipment, you must know why. Is it because it will save money in the long run? Or is it because it will generate more revenue?

Additionally, your accounting team relies on you to provide accurate information. If you don’t understand the numbers, you won’t be able to provide them with the necessary information. It can lead to problems down the road.

Conclusion:

Businesses flourish when they are well-managed and understand their finances well. You need to have strong accounting skills to succeed as a business owner. There’s a reason why so many successful business owners have a background in accounting.

Reputable organizations hire qualified accountants to manage their finances. You can be your accountant if you’re running a small business. But it’s still essential to have a good understanding of accounting principles.