Why to Use Accounting in Your Business

Accounting information is a tool used by management to make sound decisions. It is also required by investors, bankers and government entities that do not get a fuzzy feeling by hearing business owners brag about their businesses and show them nothing to back-up their claims. "Business is great" is not as effective as "Business has had sales of $10,000 per month" and then showing a financial report to show it.
Without accounting, you really don't know if your business is making money and you cannot answer simple questions, such as how much you paid in office supplies this year. If you're small, you may get away in using your checkbook as an accounting system, but as you grow, you will see how hard it can be to control expenses and to analyze sales without a more formalized system. These days accounting software is so affordable and easy to use that it makes little sense to be operating in the dark -- without accounting information.
Below are some compelling reasons to employ some form of accounting for your business:

1. Accounting is objective, rational, unbiased with no feelings attached to it. This is important to managers who want to use data that is real and not based on gossips. Usually accounting information is based on reality with documentation to substantiate it. Of course there is accounting fraud and bad accountants that make up numbers, but overall, if you have a well-run accounting department with proper controls and checks and balances, the information is good and objective.
2. Accuracy. It may not be 100%, but usually financial reports can be relied upon to make decisions and to plan for the future. Some business owners have good intuition and can make decisions based on that, but having something to validate someone's intuition doesn't hurt. For example, if you think you had a great month and made about $100,000, but the accounting system tells you that you made only $30,000, then you may need to re-think your estimation or look for reasons why the accounting system shows such a low number -- it could be because of fraud or losses you may not be aware of.
3. Business owners can use accounting to look for information. Accounting organizes data, so that it can be found easily. For example, if you want to find how much you spent in food, you can go to a food account and see all food expenses there, organized. Without an accounting system, you will need to look for receipts, add them up and maybe miss a couple of those, making this methodology clumsy and ineffective.