Why is accounting so important for business?

People standing in an office looking at tablet computers

 

It might seem like an odd question, as we know accountancy and business go hand in hand, but just how important is it?

What does an accountant do?

Accountants help businesses stay in full control of their finances, from tracking income and expenditure, to minimising business tax and other overheads. They allow organisations to make educated financial decisions about their future and how to mitigate loss.

A good accountant is able to give the decision makers an analysis of their financial health, and suggest areas of improvement.

What can accountants advise on?

There’s a huge amount of essential information that businesses need to know – and a lot of that comes from the accounting team, or individual accountant, depending on the size of the organisation.

This could include:

  • Tax – making sure the right amount is paid, and keeping up with tax law.
  • Cash flow – making sure that cash flow is sturgeon enough to guard against risk, and increase investor and stakeholder confidence.
  • Figures and forecasts – many small businesses fail because solid foundations aren’t in place. An accountant can provide great input for a business model – and a business plan signed off by an accountant is much more attractive to investors.
  • Regulations – accountants can advise when these change, and make sure the organisation is adhering to any laws.
  • Funding – if the organisation needs additional funding, an accountant will be vital in presenting a strong financial case to stakeholders and investors.
  • Audits – if the organisation is of a size that means it has to undergo audits, an accountant is vital. They will make sure all the finances are ready for scrutiny and accurate.
  • Business advice – accountants are often overlooked as business advisors, but they carry a lot of knowledge from working with a range of clients. They can advise on problems and challenges that a business may encounter, and alert you to opportunities that may not have been considered.

How much can an accountant earn?

There are many different types of roles within accountancy, but in the UK they could earn anywhere between £20,000 to £400,000 a year, depending on qualifications, experience, and industry.

Here’s a quick rundown of roles and UK average annual salaries*:

Accounting technician – £24,165
Accounting technicians carry out a wide range of tasks to assist accountants. They collate, check, and help analyse financial information. Typical tasks could include administering payroll, and entering financial data.

Bookkeeper – £26,024
Bookkeepers collate and enter financial data, track income and expenditure, maintain financial records, and can also complete payroll and file tax returns, depending on the size of the business. They don’t analyse financial data.

Chartered accountant – £34,876
Chartered accountants are fully qualified accountants that analyse and provide information about financial records, including financial reporting, taxation, corporate finance, business recovery, and insolvency.

Management accountant – £36,923
Management accountants are responsible for the preparation of management accounts and reports. They also oversee the accounting procedure and practices within a business. They combine financial, analytical, and management skills to help senior management make decisions to benefit the business.

Tax advisor – £38,949
Tax advisors give businesses advice about what taxes apply to them, how to pay tax, reducing tax, and adhering to tax law.

Financial advisor – £39,455
Financial advisors have a great knowledge of investments, savings, and money management. They advise both individuals and businesses about the best way to manage their money.

Investment analyst – £43,286
Investment analysts provide research and insight to help traders, fund managers, and stockbrokers make the right decisions about investments. They provide information to ensure that investment portfolios are well managed. They also highlight investment opportunities and risks.

Forensic accountant – £51,838
Forensic accountants put their experience and expertise to use to investigate fraud and other financial crimes. They analyse financial information to provide lawyers with information to prosecute criminals. They not only look at the numbers, but also the business realities of the situation they’ve been asked to investigate.

Chief financial officer – £111,475
The CFO holds the most senior financial position in an organisation. They are responsible for financial planning, and work at a more strategic level than an accountant. They analyse the company’s financial strengths and weaknesses, and propose solutions and plans going forward.

So are accountants essential for business?

Putting it simply, yes. Without an accountant a business could easily lose track of their finances, get in trouble with the tax authorities, and struggle to get finance and investment. Accountants take the burden of the numbers off business owners – and are there to help advise on the next business move.

Interested in accountancy?

If you think accounting could be the career for you, check out our courses. If you have no accounting experience we have AAT Level 2 Certificate in Accounting, ACCA Diploma in Accounting and Business, and CIMA Certificate in Business Accounting. All of these can lead to great accounting careers, no matter your end goal.

*2023 average salaries – indeed.com