Business Management and Accounting Information
Business management is the organization and coordination of business activities like planning, monitoring and controlling of business resources with an aim of achieving the set objectives. It may include formulating business policies which direct the operations of a business to ensure maximum use of resources. Management can be done by one person in a small entity or a group of people in big organizations.
This refers to the data collected, stored and processed to be used by either internal or external business players in understanding the financial position of a business entity. It can be done by the use of modern information and technology resources like computers or by traditional accounting methods to provide the necessary financial information needed in making managerial decisions and record keeping.
Who uses accounting information?
Accounting information is useful to both internal and external business players. Externally, it can be used by investors to observe the profitability and net worthy of a business in order to compare which company have consistently posted positive profit margins and paid dividends to its shareholders. Lenders can also use the accounting information to assess the ability of the business to pay its debts and the amount of money moving in and out of the business before lending huge amount of money. Internally, the management can use the available accounting information to analyze the performance and position of the business so as to put in place appropriate measures to better the company results. Employees also need accounting information to predict issues of job security and future remunerations.
Why Accounting Information is Helpful
Accounting information is the available evidence of all business transactions made, it can be used as a summary, analysis or report of all transactions. It helps the business owner to determine the financial power of his business so as to make informed decisions on availability of capital to fund future projects. It helps banks to assess the ability of the business to pay loans in time to avoid losses. Accounting information also help lenders to find out if the business is a secure investment.
Problems of Not Using Accounting Information
Lacking accounting information in a business has severe effects on the profitability and development of a business enterprise. The owner will not be able to plan for the future of the entity neither will he make any important decision towards expanding the business. Banks will hesitate giving loans to the business because there is no financial evidence on the ability of the business to pay loans. Employees will be less motivated by not being able to determine their job security hence less commitment towards working resulting to poor business operations. Investors may end up withdrawing their capital because they lack the evidence of returns on their shares creating a capital crisis in the business operations.