What Accounting and Finance Means to Business Owners and Managers
Communication Tool for Stakeholders
When you are running your business, you need to show your business performance as financial statements to the shareholders, obligee, obligor and employees. Business owners are responsible to gain profit and stabilise your business to satisfy these parties. How do we provide the evidence that the company is performing well? Accounting is a communication tool for companies to disclose their business performance quantitatively and collect, summarise and report the financial conditions to stakeholders.
Measure Business Performance
As a business owner, you will need to describe required financial ratios and indicators to relevant entities. Although you may not in a position to present the financial conditions to your company’s shareholders, there will always be financial figures to evaluate your organisation’s performance.
For example, Sales Managers will be responsible for reporting monthly revenue and gross profit. Procurement Managers will manage annual cost down ratio of the total purchase materials and parts compared to previous year.
When you acknowledge these financial KPIs, you may also want to have a clear image of why it is important for the company to manage, track and control these performance indicators.
Why is accounting difficult?
We have heard from many executives, entrepreneurs, and managers struggle to learn accounting and finance. Some entrepreneurs totally dislike this area that they will just try to hire an accountant to prepare financial statements.
1.Accounting Courses Target Accountants
Majority of the available training course or books focus on accounting for Accountants and does not focus on teaching for non-accountants.The approach and the purpose of accounts and non-accountants are entirely different. Accountants are who will record financial transactions as journal entries. They will need to understand how to book these journal entries for all the business activities. They also need to understand how to appropriately calculate tax and disclose financial statements to meet statutory requirements in each countries. Non-accountants are people who are going to use financial information to validate business performance of the company and health from financial perspective.
2. Lack of Understanding of Accounting Fundamental Concept
When you start learning Accounting, you will feel that you have to learn a lot of concept and rules. There are many areas to learn in Accounting. Starting from funding capitals, purchase fixed assets, paying salaries for employees to post revenues, valuation of assets and creating financial statements. There is a fundamental concept you need to take some time and learn before going into the details. Most of the teachers who are teaching Accounting are accountants, so they already have the tremendous amount of experience in accounting that they may not take much time for students to learn fundamentals. As similar to any area of learning, fundamentals are the muscles that make your understanding stronger and stronger. The more you take the time to understand the basic concept the more you will be flexible you can learn.
3. Unclear Purpose and Objective of Learning Accounting
We often start learning Accounting without having clear purpose, objective and goal of what you want to learn at the end.
Depending on your purpose of learning Accounting, some part you may want to take more time and some part may want to skip. You have to think about what are the key topics you need to learn in accounting? Also ask your self what is it that you want to accomplish after you learn about accounting. Be more specifc on your goals. Then you can focus on the topic and take more time to learn. Accounting has many areas to cover. There are certain topics which are not relavant to your business. Set a clear goal for yourself before you take any course and start learning.