6 ways a limited company's accounting fosters business development

The Accounting of a Limited Company as a Financial Roadmap

Imagine driving on dimly lit backcountry roads. You know where you’ve come from, and your destination is clearly in mind. However, the route between the two points is unknown. Luckily, you’ve prepared for the journey by studying the road system, refueling or charging your car, and keeping your phone charged in case of emergency. You also know where you are at all times because you regularly track your location.

The accounting of a limited company acts like a navigation device and a roadmap, providing a comprehensive view of the current state of the business and helping plan the route toward your goals. It is a crucial pillar for the business that can significantly impact the company’s growth.

Here are some key ways in which accounting supports business growth:

1. Understanding Financial Status

The accounting of a limited company provides a real-time and accurate picture of the company's financial situation. With up-to-date accounting, management stays on top of receivables and expenses, allowing for much faster responses to changing circumstances.

2. Supporting Decision-Making

Unlike sole proprietors, the accounting of a limited company is always double-entry. This means that every entry is made to at least two different accounts. Planning for the future with single-entry accounting is challenging, as the available funds are not clearly known, even for the upcoming month. With double-entry accounting, decision-making becomes easier, as the accounting directly shows realized sales, what receivables are still outstanding, or whether any invoices are unpaid. This information helps assess the profitability of new investments, expansion, or entering new markets.

3. Securing Financing

Well-maintained accounting increases a company's credibility in the eyes of financiers. For example, when seeking additional funding, banks and investors often require clear and accurate financial data to assess the company's financial viability. Accounting reveals the company’s true financial situation, how it has developed, and what the company’s future prospects look like.

4. Budgeting and Forecasting 

The accounting of a limited company is closely linked to budgeting. While the budget shows where the company wants to go, the accounting shows where it actually stands. Based on accounting data, realistic budgets and financial forecasts are created, helping to plan the growth strategy.

5. Increasing Value and Competitiveness

In a customer acquisition bidding process, well-prepared accounting can be a real asset for a limited company. Accounting provides potential clients with a clear message of reliability and financial stability. This is particularly important when looking for a long-term partner.

6. Compliance with Laws and Regulations

Accounting ensures that the company meets all legal obligations, such as tax and financial statement reporting. This reduces the risk of running into problems with authorities.

Should a limited company's accounting be outsourced?

A well-prepared and up-to-date accounting system helps track income and expenses, prevents fraud, and supports the securing of financing. It increases the company’s value, for example, in customer acquisition, and provides a reliable picture of the financial situation for financiers. Up-to-date accounting also enables quick responses to changing circumstances and creates a positive impression with partners by smoothly generating reports.

If accounting for a limited company is unfamiliar to you, it’s wise to outsource the work to an expert to avoid wasting your time (and money) managing it yourself.

When you're ready to turn your limited company's accounting into a growth tool, contact us! Let’s discuss and see how we can support your company’s journey to the next level.