Importance of Accounting and Financial Management

Success or failure of any organization relies not on the quantity and extent of the assets but rather on how these assets are managed within the organization. We have seen several organizations reaching peaks and pinnacles of success despite having insufficient resources or the assets. While some organizations, in spite of possessing enormous physical, financial, organizational and technological resources hardly take off the ground and ultimately reach their destiny of downfall like Enron Corporation and WorldCom. Organization’s fate is, therefore, decided not by the quantity and quality of its assets but rather by the hands in which the organization entrusts most precious assets.

To day management of accounting and finance is regarded as life-blood of the organization, once it clots organization dies. Right from the recording of financial transactions to the preparation of financial statements, organization has to make sure that proper procedures have been followed. This is because the organization has to ultimately depend on that information for future planning and forecasting. If people responsible for recording financial transactions, classifying, summarizing and interpreting financial information are not qualified accounting and finance professionals then grave errors and omissions are likely to be reflected in the basic informative and decision making financial statements. Then faulty information will result in the faulty decision making leaving organization to end in smoke.

Accounting and finance is, therefore, the crucial element of every business whether small or big. Professional accountants and finance managers record and manage each and every financial transaction that reflects how organization has grown; they conduct financial analysis and recommend the course of action for the future.

Management of finance is far more important than just accounting which primarily focuses on recording business transactions and every day activities. Making future decisions for the expansion and growth of organization are made by the finance managers who possess expertise in financial management. Through financial management organizations decide about the utilization and procurement of funds, cash flow management, liquidity management, risk mitigation, debt management, capital budgeting and optimum asset management to make organization lucrative. All of these decisions regarding these most important activities are taken by the people having expertise in finance management.

Thus accounting and finance management helps in managing every business activity, it helps in obtaining sufficient funds at minimum cost, effective utilization of funds to generate profits for operations financing, further expansion, and reinvestment.