The core objective of any commercial organization involves making sure of its maximum profit prospects, while properly allocating its revenues. Scott Tominaga mentions that is important to note that while the key function of any business is to make money, their functions also involve allocating and investing those revenues in a systematic fashion. It is here that accounting becomes highly crucial for businesses, as it involves the recording and comprehensive analysis of any financial transaction that might be related to a business.
Scott Tominaga marks a few points underlining the importance of accounting
No matter the scale and size of a business organization, it would require a systematic accounting system. In addition to recording various types of financial transactions, accounting details are quite often required by tax collecting officials and other types of supervising agencies. Scott Tominaga says that accounting is often referred to as an ongoing system that accurately indicates the overall financial standing of any company. To run smoothly it is vital for all businesses to have a certain level of awareness about its liabilities, debts, profits, and assets, and the system of accounting provides them with accurate information regarding that.
There are multiple factors that make accounting extremely important for a business organization. Here are a few of them:
- Systematic planning: Planning is important to smoothly conduct any task of life. No kind of management function can actually be fully successful without the involvement of proper and systematic planning. Subsequently, no plan for a business organization can be made without taking into consideration distinguished types of important financial information relevant to it. Various types of business plans, whether it involves matters related to procuring any asset or is about forming certain long term development partnerships, it is crucial to have a good understanding of the financial position of a business prior to making any one of them.
- Financial motivation: It becomes extremely difficult for any business organization to properly understand its incurring profits or loss without having a proper accounting system. The outcomes identified in the accounting books play a major role in enabling the management of a firm to take a definite step towards finding their own ways to grow optimal profits, while making sure that no kind of further losses is suffered by the company in question.
- Facilitates co-ordination: Good coordination us crucial between the diverse departments that are present in an organization. This coordination goes a long way in making sure that the company runs in a smooth and efficient manner. The accounting department of a company is regarded to be among the core elements that systematically facilitates coordination in an organization. Accounting helps in adjusting the purchases along with sales, and also expenditures long with income, thereby ensuring the highest profitability of a business.
Scott Tominaga mentions that without a proper accounting process no company would be able to gauge its overall profits or loss, and hence fail to function in the long term.