What business decisions depend on accounting?
Any business will have to make many decisions when they run the business—maybe starting from employing staff and changing marketing strategies and production methods, which again depends on accounting.
First, let me show you how they use accounting information and in what format. The bookkeeper will prepare the accounts and pass that on to the accountant to prepare the financial statements that help make decisions.
The decision that you will make with start-ups.
If you are a start-up, you will need a budget and a cash flow to decide how to meet the expenses to set up the business. So, when setting up the budget, you must make assumptions about the turnover you expect from your company. Then you will do a forecast of your business expenses.
The expenses will be related to as follows:
- Administration expenses
- Wages
- Costs of product creation that you plan to sell
- Advertising costs.
Everything depends on the type of business you plan to do, you could sell products or services, so if you are selling services, you will not have any expenses in product purchases.
The decisions that you have to make to grow your business.
To make financial decisions to grow the business, you will need the following records: a monthly profit and loss account to ensure the company is making a profit and an updated budget. To compare your sales with your budget and the competitor’s performance, you need to have detailed sales records that say you are selling a few types of products; you have to know which one is doing well and then the product is not doing well.
So, to grow the business, you need to make some financial decisions regarding marketing, whether to employ more staff or outsource the work, what to do with the product that is not doing well, and pricing your product or services. You have to be careful in setting the price; if the price is high, you will not have enough sales, or if the price is low, your production cost might be higher, and you end up at a loss.
The decision when Your business is growing, you will plan more.
Suppose you want to expand your business because you see steady progress in the growth of your business. In that case, you need yearend financial statements, audit reports, budget reports, and cash flow statements to make business decisions.
You might decide to make changes to the following.
- Acquiring another business
- Employing more staff and managers
- Enhance your advertising strategy
- Developing business strategy
- Dividend payments
- Going into partnership
- New Business plan & business model
- Research & development
- How to maintain customer relationships.
- Expand your marketing efforts.
- Set up a contingency plan.
For any business, the owner should consider implementing an accounting strategy. If there is no proper accounting and internal control in business, any decision made might fail, as that is the roadmap to making the decisions I mentioned in this article.