What Is Accounting?

When you think of accounting, what comes to mind? Usually, the people pay and send out the bills that keep the business running. A good accounting team does a lot more than that. A top-notch team will keep its eye on profits, costs, and business operations. Even if you’re running your own business and acting as your accountant, you’d have no way of knowing just how profitable – or not – your business is without some form of accounting.

In real estate, knowing your numbers is critical. Accounting is everywhere – even if all you do is balance a checkbook, that’s still accounting. In our business, we often use leverage – or loans – to increase our return and purchase more significant properties than we could afford with cash. The proper accounting and forecasting of cash flow and tax planning can mean the difference between prosperity and the poorhouse.

Every business and individual needs to have some accounting system in their lives. Without an effective accounting system, your finances can get away from you. You don’t know what you’ve spent or whether you can expect a profit or a loss from your business. Measuring key performance indicators (KPIs) like return on ad spend (ROAS) and marginal tax rates are critically important.

Whether for a multi-billion dollar business or a personal checking account, staying on top of accounting is a necessary daily activity if you’re serious about growing your business. Not doing so can mean anything from a bounced check or causing a loss for your investors. Both situations can ruin a company and a reputation.

At its simplest, accounting is financial information. This information is published periodically in business as a profit and loss statement or an income statement.

Does your business have the basics covered?