The role of accounting in business growth

Every type of business, from small start-ups to large corporations, needs accounting. Accounting provides companies with a methodical way of tracking, examining and reporting financial transactions and helps in the decision-making process about operations, investments and expansion plans. With a focus on the situation in Croatia, we will examine the key role accounting plays in business growth and how it can help businesses achieve their goals.

Basics of accounting

It is crucial to understand the basics of accounting before diving into how accounting contributes to a company's growth. Accounting is the process of monitoring and evaluating financial transactions such as purchases, sales and expenses, as well as creating financial reports that show the financial situation of a company. Businesses use the balance sheet, income statement, and cash flow statement to assess their financial situation, decide on their course of action, and make long-term plans.

The role of accounting in business growth

Providing financial information

Accounting plays a key role in helping businesses grow by delivering accurate and timely financial information. Accounting allows businesses to keep track of their expenses, track their cash flow and evaluate their financial success. Making decisions about growth strategies, such as business expansion, investing in new technology or joining new markets, requires the use of key information.

Cash flow management

Accounting is critical to cash flow management, which is a key component of company growth. Businesses can improve their understanding of liquidity and financial health and make well-informed decisions about investments, expansions and acquisitions by monitoring and analyzing their cash flow. Accounting helps organizations control their liabilities and receivables, ensuring they have enough cash on hand to pay for expenditures and investments.

Identifying profitability

Accounting enables companies to determine their profitability and make informed decisions regarding pricing, cost control and revenue growth. Businesses can find areas where they can reduce costs, increase sales and increase profitability by examining financial reports and performance metrics. Key performance indicators, such as gross profit margin, net profit margin and return on investment (ROI), which offer important insights into a company's financial health and growth potential, are also calculated by companies with the help of accounting.

Ensuring compliance

Compliance with financial regulations is essential for the development and success of any company. Accounting is essential to ensure that companies comply with regulatory frameworks such as tax laws and financial reporting standards. Companies can avoid fines and ensure they are in compliance with all applicable laws by keeping timely, accurate financial records.

Providing strategic insights

Accounting offers strategic insights into a company's financial performance, helping companies make defensible choices regarding expansion and investment plans. Businesses can spot growth opportunities, assess risk, and make wise decisions about investments, acquisitions, and expansions by analyzing financial data and performance metrics. Accounting helps in business planning by identifying potential areas of growth and helping to predict future performance.

Statistics and sources

The latest statistical data from the National Bureau of Statistics show that in 2020, 167,032 commercial entities operated in Croatia. Of these, 95.8 percent were micro enterprises, 3.7 percent were small enterprises, and only 0.5 percent were medium and large enterprises. Micro enterprises employed 32.5% of all workers in the business sector, small enterprises employed 28.3%, and medium and large enterprises employed 39.2%.

90 percent of Croatian small and medium-sized entrepreneurs believe that accounting services are necessary for their business, and 63 percent use external accounting services, according to a survey by the Croatian Association of Employers. Furthermore, Deloitte research has shown that Croatian businesses are more likely to experience higher rates of growth and success if they use modern accounting tools and solutions, such as cloud-based accounting software.

The Croatian government has also launched a number of initiatives to help SMEs, including regulatory changes, financing programs and tax incentives. For example, the Croatian Ministry of Finance adopted tax relief measures, such as tax deferrals and lower tax rates for certain activities, to help small businesses during the COVID-19 pandemic.

Conclusion

In conclusion, accounting plays a key role in business growth by providing financial information, managing cash flow, identifying profitability, ensuring compliance and providing strategic insights. For companies in Croatia, accounting services are key to achieving growth and success, and the use of modern accounting tools and software can provide a competitive advantage. With the support of the Croatian government and a successful business sector, companies in Croatia have the resources and tools necessary to achieve their growth goals and stimulate economic development in the region.