Business and Investment Center

Accounting is a very important part of a business. As an entrepreneur, you either do it yourself or get someone else to do it for you. I have included this article for freelancers to have a very broad outline of the accounting profession. With this you can at least appreciate the discipline as well as its role in your business. As your business grows, the distinctions between the different types of accounting will become increasingly important.

When you are first starting, the only form of accounting you’ll ever meet would probably be record-keeping and bookkeeping. This is the part where you record the sales you’ve received and the expenses you have made using receipts, invoices, cheques and other transactions source documents.

Firstly, what is accounting?

For most people, accounting does not concern them because they think of it as a laborious activity performed by people who are ‘good with numbers’. Accounting is often confused with the narrow concepts of record-keeping and bookkeeping.

Accounting of course is much broader than that. “Accounting is the system that measures business activities, processes that information into reports and communicates these findings to decision-makers”. The accounting system produces financial statements that report on an individual’s or an organization’s business in monetary amounts.

Who Uses Accounting Information?

1. Individuals, 2. Businesses, 3. Investors and Creditors, 4. Government Agencies, 5. Taxing Authorities, 6. Non-Profit Organizations and 7. Other Users including employees, consumer groups, labour unions and the general public.

The Types of Accountants and The Specialized Services Performed By Them:

1. Private accountants – These work for single organizations. They may perform cost accounting, budgeting, information systems design, internal auditing, financial accounting and management accounting;

2. Public accountants – These serve the general public. They may perform specialized services such as auditing, tax accounting and management consulting.

For small business owners, the areas that would occupy most of your time is financial and management accounting. Financial accounting provides information to people outside the business including creditors and the government for tax purposes. Management accounting generates information for you, the person who manages the operations of the business. This will produce how much you are spending on manufacturing your products or providing your services in a way that you can see where you are lacking and where your are doing well on.

There is no question that the internet has revolutionized business.  Many people are not only paying their bills online, but also ordering products and services at an ever expanding rate as well.  Businesses with a web presence have opened themselves up to new market where many consumers take advantage of the ease of shopping from pages visually no different from a catalog.  Despite all that has changed in the last ten years, most companies that do business over distance and do not rely on local storefronts still see a large majority of their business come from the telephone.  Several years ago, many business forecasters were predicting that the internet would have eclipsed the phone as the marketplace of choice by now.  So why hasn’t that been the case?

There are two primary reasons why the telephone will always be necessary to consumer sales oriented businesses.  The first is that while it is getting harder and harder to find a person who does not have a personal computer at their disposal, either at work or at home; it is practically impossible to find a person without a telephone.  The second is about human interaction.  Many people prefer to order from a person over the telephone.  That issue in itself may have to do with perceived notions of security and fraud risk, personalized and efficient customer service, or simply the desire for human confirmation that a transaction has taken place.  In any case, some businesses have gone to great lengths in recent years to become a major presence in their industry on the world wide web while neglecting to update their antiquated phone systems.  What companies need to realize is that while web based business will result in an overall sales increase as a result of consumers who use the internet as their primary marketplace, it will not do so at the loss of phone business if a capable phone system is in place.  Keeping a phone system up to date and ready to handle customer volume should be a top priority for any business.