The Advantages of Using Accounting in Business

by Sheila Shanker; Updated September 26, 2017

Accounting gives businesses many advantages such as timely and practical information on financial transactions. When a business owner notices that his sales are decreasing or that expenses are increasing, he can make decisions about it that will benefit the firm. Without accounting information, this information is not available and the owner can make bad decisions for the business based on gut feelings alone.

Objectivity

An advantage of accounting information is that the data is objective and unbiased. It doesn't matter how a sales person is loved or hated--sales numbers speak for themselves with no emotional component. Financial reports are based on accounting principles, not office politics or hear-say. This level of objectivity is valuable for management as a tool to make wise choices for a business. Financial reports gives management information that is based on accounting principles that are impartial and do not involve personal biases or gut feelings.

Reliability

Business owners rely on accounting information to provide information to investors, bankers and tax authorities. Before recognizing transactions, accountants generally require back-up documentation, making the numbers in the report verifiable and believable. Many firms have internal controls with policies and procedures to standardize processes and increase the reliability of accounting operations. Errors are common in accounting, but with the proper checks and balances, errors can be identified and corrected before financial information is released.

Consistency

Consistency is the cornerstone of accounting. If there is no consistency in recognizing transactions in the books, then in reality, there is no accounting, only numbers thrown together in a random fashion. Accounting follows certain set principles and concepts that cannot be changed. To be meaningful and comparable, accounting information must be recognized and compiled the same way. For example, if you want to look at sales of a certain product over time, sales information must have been booked and compiled the same way throughout the period or you will get data that is useless. If for the first three months, sales of this product were booked as part of a group and then separated, then you cannot do trend analysis, decreasing the value of the accounting information.

Organization

Another advantage of accounting is that it organizes complex data. Accounting not only processes a high volume of data, but also classifies and summarizes it in reports and queries which is valuable to management. Nobody wants to look at pages and pages of data and get lost in them. In accounting, data is organized in such a way that if you're looking for certain information, you can usually find it easily. For example, if you want to know how much is your office supply expense this year, you go to the account that accumulates this information and you get the information that you need.

About the Author

Sheila Shanker is a certified public accountant based in California. She writes online courses for professionals seeking CPE hours and has also published the book "Guide to Non-profits: From the Trenches." Her articles have been published in national magazines such as the "Journal of Accountancy," "Architecture Business and Economics" and "Veterinary Economics." Shanker holds a Master of Business Administration.