Running any type of business smoothly requires good execution skills along with the usage of the best tools that can supplement the execution. Whether you are a solo-preneur or founder of a large organization, tracking financial information on a timely basis is important. Good financial track record can help in avoiding scenarios like bankruptcy or negative cash-flow.
Financial statements give in-depth clarity of the health of the organization. Irrespective of the size of the business; balance sheets, income statements, and P&L (Profit & Loss) statements can be considered one of the important financial statements. What if the finance team and key stakeholders of the organization require a birds-eye view of the organization’s financial status? This is where Financial Accounting comes into the picture; let’s look at what is Financial Accounting.
Insights into Financial Accounting
Whether a company is privately held or is publicly listed, the management team (with support & inputs from the board members) is responsible for showcasing the financial performance or the organization.
The audience to which the statement of final accounts is shown varies from external investors, suppliers, customers, as well as employees. If a company is planning to raise external funding, an excellent financial track record will help raise funding at a good valuation.
Key components of Financial Statements
The composition of financial statements depends on whether the company is publicly listed or not. In any case, the preparation of financial statements means the summarizing phase of accounting.
The key components of any type of Financial Statements are:
- Profit & Loss (P&L) statements,
- Balance sheet,
- Statements of cash flow, and
There are different types of accounting software but you should choose scalable accounting software, provides accurate information, gives useful insights with few clicks, and that takes into account specific standards related to a particular market e.g. GST (Goods & Services Tax) in India.
Benefits of Financial Accounting
In your wildest dreams, just imagine that your team provided the wrong financial records to key stakeholders of the organization. This will not only result in tarnishing the company’s brand but will also dampen future business expansion plans.
This is where good financial accounting software can be instrumental as it is used by Chartered Accountants (CA’s), company auditors, and finance teams within the organization.
The primary objectives/benefits of financial accounting are:
- To exhibit the financial status of the organization.
- To let the key stakeholders know that a robust financial system is in place.
- To ensure the key stakeholders that there is control over the operations and other vital resources of the business.
The usage of financial accounting software can vary from one business to another. For example, if a business is into e-commerce; their team will need accounting software or Enterprise Resource Planning (ERP) software that also has vendor and inventory management integrated into the software.
Types of Financial Accounting Software
Irrespective of the financial software being used, it should be capable of generating important reports that give a representation of the financial status/health of the organization.
Tally.ERP 9 from Tally Solutions is a widely used financial accounting software that is trusted by businesses, ranging from Small & Medium Enterprises (SME’s) as well as multi-national organizations.
As far as choosing financial accounting software is concerned, it largely depends on the scale, size, and primary domain of your business. Below are different types of accounting software:
- Payroll Management System – As the name indicates, this category of accounting software is used for managing the payroll related activity within the organization. It is used for calculating salaries of employees, deducting taxes, generating pay slips, , depositing salary in employee’s bank accounts, etc.
- Billing Software – This category of accounting software is used for generating invoices, managing accounts payable & receivable and any other activity related to billing & invoicing.
- ERP Systems – ERP (Enterprise Resource Planning) software is used for making informed business decisions based on inputs from important blocks in the ERP system – Human Resources, Vendor Management, Inventory Management, Financial Accounting, Marketing, Finance, etc.
The majority of the organizations make use of ERP systems as it helps them in the decision-making process which is important for the smooth running of any organization.
Accounting software is used by organizations, whether it is a startup or an MNC. Tally.ERP 9 is a useful accounting & ERP system integrated into one package that can be used by financial experts and accountants alike.