More than a function for just filing paperwork and keeping businesses in line with regulations, accounting is an integral information system within any organisation, responsible for providing financial information with which business decisions are made and planning based.
Businesses of all kinds produce large amounts of this information on a daily basis and every transaction, investment or financial action leaves data behind which can be used.
The difficulty for the most part is making use of the information to hand, and this is where accounting automation technology and data analytics can make a real difference to the work of any accounting firm or in-house team.
In this blog we look at how accounting data can be used and the tools which can help make sense of the data available.
One of the most common uses of business or accounting data is for business planning through the creation and analysis of budgets and forecasts.
By understanding a business' current financial position, identifying areas of concern or understanding where areas might be performing better than expected - businesses can start to put plans in place based on reliable data.
As well as being able to forecast and plan ahead, accounting data can be used to understand current performance against projected results in real time.
Having access to this data in real time and in a usable and easily understandable format allows businesses to implement changes to strategies and allow them to avert problems down the line.
The more often accounting data is reviewed in this way means businesses will have more chance to act on problems earlier - key to averting big problems.
Accounting data also gives businesses the chance to benchmark their own performance against competitors or industry standards, helping to understand how they are performing in comparison to the rest of the market.
All the information which can help with these crucial business decisions is readily available, the difficulty is presenting the information in a way which is decipherable and can be used to actually understand the overall financial position of a company.
This is when accounting software and automation is key.
By using software to compile and display data in a usable and easy to understand format, businesses can quickly identify potential problem areas in the business and take action before they escalate.
This is particularly useful when inaction or taking action later can impact a business' bottom line.
Of course, trying to prevent this kind of information via tables or spreadsheets can make it much harder to take away actionable insights, which is why accounting software that allows for the creation of visual dashboards is far more beneficial.
For instance, being able to physically identify areas of risk via a reporting dashboard is far easier than trying to decipher numbers in a spreadsheet.
Accounting software also needs to promote collaboration for modern businesses where multiple employees will likely be working on the same document from separate locations.
Providing the ability to share and collaborate on work via the cloud enables accounting teams to spend more time in the field making connections, rather than working on documents one at a time.
Being able to extract, import and transport data into a usable format to guide financial decisions and show accurate pictures of a business' position is essential today when so many businesses rely heavily on data when planning.
Using accounting software to make sense of data to increase efficiency, reduce risk and interpret information can give a business a competitive edge and get them on the right foot to remain financially viable in the immediate and long term.
For more information on how accounting software can help improve your practice and provide better insights to clients, download our "How to digitally future-proof your accounting practice" eBook here