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Importance of using a Financial Accounting Software in business

financial accounting

Starting a business is the decision that entrepreneurs take after a lot of pondering and analysis of multiple factors like business viability, current financial situation, competition, overall market size, etc.

Every day becomes learning for founders of SME (Small & Medium Enterprises) since they get a chance to interact with many people (including their customers) and they have to use their entrepreneurial skills to build a good team & expand their business.

One aspect of business which may sound trivial during the start is financial accounting since your business is at the initial stage and you manage everything in a simple excel sheet.

But as the business expands, you realize the complications involved with financial accounting.

You need support from your financial partner to file returns, pay Goods & Services Tax (GST) on time, and manage P&L (Profit & Loss) Statements. The CFO of your organization can lead the charge but as a founder/CEO, it is important to understand the nitty-gritty of financial transactions in business.

In simple terms, Financial Accounting is the process of making/preparing financial statements which the company uses to show their financial performance to people outside the organization i.e. shareholders of the company, investors, suppliers, customers, non-executive management, board members, etc.

The finance team of the organization should have deep-rooted expertise in finance to showcase the right financial data to the relevant stakeholders of the organization.

The core components of financial accounting are

  • Balance Sheet
  • P&L statements
  • Cash Flow statements
  • Statement of retained earnings

Irrespective of whether your organization is a startup with few employees & small turnover or an organization with employees at multiple locations & huge turnover, good accounting software is required that can help with all the aspects of financial accounting.

Tally.ERP 9 from Tally Solutions has several interesting features that can aid & simplify everything related to business finance.

In any kind of business, the top-line and bottom-line play a very important role in defining the long-term sustainability of the business.

Operating on negative margins can hurt the profit margins of the business.

Cash in hand or good amount in your business bank account gives your confidence in running the operations for your organization.

In some scenarios, there might be a difference between bank balance as per the passbook and bank balance as per cash book. This amount should tally and if does not, your finance team needs to come up with a bank reconciliation statement.

Nowadays, most of the organizations or businesses have a business bank account and for keeping a track of the overall health of the business, passbook and cash book are maintained.

Due to the advent of technologies like Artificial Intelligence (AI) and Machine Learning (ML), cash book and passbook are updated simultaneously. In certain cases, there may be discrepancies between the two of them and identification of the difference is critical.

It would be simple if financial software had options where you could enable the generation of bank reconciliation statement so that your finance team spends less effort in reconciling these two books.

Tally.ERP 9 could be used for easing that task as it has features through which you could enable auto bank reconciliation. Through a bank reconciliation statement, you can detect frauds,  errors, and track interest & fees.

Financial frauds can cause a huge dent to the overall brand of your organization and can hurt future business ties.

Hence, it is better to always have the option for the generation of bank reconciliation statement enabled in Tally.ERP 9.

How do you manage finances in your organization and what are some of the best practices followed in your department? Do leave your feedback in the comments section…

Team Bizztor

Bizztor is a Media Platform focused on Educating, Connecting and promoting startups.
Our vision is to help early-stage startups and be a part of their growth. we believe that startups have the potentials to create solutions for community problems and we see ourself as helping hand to such entrepreneurs.

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