Why accounting is important in business

Apologies if you think we are stating the obvious and you know accounting is big business. But the main point we want to make is the changing nature of the accounting function. Financial management has always been necessary in a business to oversee the income, expenditures and cashflow but now the accounting function is the hero or the main influencer of a business.

The reason accounting is so important is because finance teams are the custodians of the data and business performance information. Your finance people also have the expertise and experience to dissect the trends, advise on financial planning and analysis (FP&A) and help people understand how the numbers affect their next move. When finance provides access to the financial data as well as operational information and shares its expertise – other business partners soon learn how to drive faster outcomes and make stronger business decisions.

Greater desire and benefit for connection across a business

Gone are the days of working in silos across a business. For companies to work effectively, planning needs to take place across the business and data needs to be consolidated, automated and accessible. Financial Statements can also be customized and shared so that all branches and divisions have a handle on their own income statements, balance sheets and cashflow statements.

Data is the key to connecting your business and the finance team know this only too well. Now with the accessibility of data analysis tools, other teams are also learning the power of accounting information. To ensure customers are serviced properly, working on the same inventory and pricing information helps delivery times and margins to be consistent. When department managers budget for new staff with finance for the whole fiscal year, the new recruits can be assured of a place and agreed conditions and the department managers can plan ahead knowing when more resources are expected. And when everyone is on track with their individual performance it has a positive implication for a company to reach its overall business goals.  Connecting all parts of the business is a priority for many companies and that's why CFOs with operational experience are in high demand. The finance team are working beyond finance to increase the performance of the entire organization.

FP&A technology is helping accountants to influence financial and operational performance

Consolidated data has always delivered the strongest results but for many finance teams they lose hours each month on manual data handling and manipulation to get the data they need to give clear advice.  Poor data quality as well data disparity continues to plague finance teams - in a recent Chartered Accountants Australia and New Zealand technology survey, 69% of organizations stated they had concerns around human errors when maintaining data accuracy and consistency and 43% are troubled by data silos.

While only 3% of respondents said they were not data-driven at all, many are now experiencing the benefits of using financial technology and data analytics. Finance teams using accounting software are saving time and allowing the team to be more productive elsewhere plus other teams are pulling their own reports. Reducing this manual work helps the finance team advise on cashflow forecasts and support demand planning and other high value tasks across a business. Companywide BI and FP&A like Phocas also help.

Platforms like Phocas help finance teams to access consolidated data which allows them to build fast and accurate budgets and forecasts and automate monthly financial statements or regular management reports. As the platform takes care of the data management and is constantly integrating, validating and updating reports, the finance team can approach accounting practices in a more streamlined way. There are also shortcuts to carry out cash forecasting, headcount planning and demand planning so these complex but important planning sub-tasks are more easily done because finance has the time to collaborate with the people they directly affect and the right tools and data to perform and update this important work.

Interpreting the data and connecting the whole business helps finance to build the strategic play as well as understand the key drivers of the business across finance and operations. Good accounting is the glue that binds an organization and the finance team then needs to coordinate across the business and get people to collaborate on the numbers as well as with one another.

FP&A is about driving better decision-making and faster outcomes

Financial planning and analysis has traditionally been underwritten with sophisticated models, and only the most highly trained CPA or CA can operate and understand them. So, the great outcome of self-service FP&A tools with intuitive built-in models means planning is accessible and doable. While finance continues to be in charge, the tools help many people in a company to contribute and be beneficiaries of the ongoing results. And when you dissect the benefits of people being able to compare actuals with budget and know immediately whether targets have been reached, the overall gain is the whole team can drive better decisions and faster outcomes.

When the finance team communicates your strategy and shares linked management accounting reports with the broader team they are building relationships and gaining respect and trust. When finance explains the story behind the numbers, is when everyone gets excited as people relate to others,  knowing and caring about their day-to-day work.  In this type of transparent environment where the importance of accounting is prioritized and shared in a clear, understandable way - people work together.

With the increasing complexity in business and more data volumes there is a a need for sophisticated planning. The finance office is the voice of reason providing the financial records and know-how to keep everyone on track. Soon everyone will understand the business of accounting and the power of informed decisions.