accounting

Good basis of accounting, key to professional success

MNA Career & Education Desk: “You have to understand accounting, and you have to understand the nuances of accounting. It’s the language of business, and its imperfect, but unless you are willing to put in the effort to learn accounting – how to read and interpret financial statements – you really shouldn’t select stocks yourself, ” said Warren Buffett.

Anyone from a business background can attest to the importance of accounting in managing any organisation, be it SME, non-profits, or corporations etc. However, many new business owners fail to realise the extent to which a good accounting system can keep everything in balance for their businesses.

There are several challenges that companies face when it comes to accounting. For example, cash flow management becomes a difficulty, especially for small and medium businesses. An approximate 82 per cent of new businesses fail due to a lack of proper cash flow management, as stated in a US Bank Study. “If I had to run a company on three measures, those measures would be customer satisfaction, employee satisfaction, and cash flow,” said Jack Welch, former General Electric CEO, author and chemical engineer. It becomes difficult for companies to maintain recurring expenses, and they are uniquely unprepared for unforeseen expenses. Managing payroll for HR also becomes an issue with poor cash flow management. “Never take your eyes off the cash flow because it is the lifeblood of business,” said Sir Richard Branson, business magnate, investor, author and founder of Virgin Records.

Businesses face decision-making challenges too, when they do not pay enough heed to accounting. Decisions involving inventory restocking, new investments, returns and other matters are hampered when the people in charge are not informed about accounting. Without sufficient information on a company’s current financial situation, it becomes difficult for it to grow.

In 2018, Amazon’s accounting system for sellers crashed that resulted in chaos for thousands of third party sellers listed on Amazon. They could not keep track of their fast-moving inventory, the sellers could not know which product in what quantity they needed to reorder. “If we are even a day or two late in reordering product, we can go out of stock and kill a top-selling product,” said a seller on Amazon. This incident caused an unaccountable loss for sellers on Amazon.

Proper accounting knowledge helps in preventing fraud and scandal as well. In the Tyco scandal of 2002, a New Jersey-based blue-chip security systems company, the CEO and CFO stole US$ 150 million and inflated the company earnings by US$ 500 million. They siphoned money through fraudulent stock sales and unapproved loans. The SEC got suspicious, and an investigation uncovered the embezzlement.

In the Satyam scandal of 2009, an Indian IT services company, the founder Ramalinga Raju falsified cash balances, revenues and margins of about US$ 1.47 billion. He admitted the fraud himself in a letter to the board of directors, but the damage to the company was challenging to come back from.

Accounting is indispensable to business owners and managers, irrespective of whether one is a business graduate or a tech graduate. Online courses on accounting are of great help in this regard.

Introduction to Financial Accounting by University of Pennsylvania (Coursera)

This course has a duration of four weeks, five to six hours a week. It teaches all that is required about financial analysis, introduces debit-credit bookkeeping, touches base on accrual accounting and works on case studies. It has flexible deadlines with a final exam required for certification.

Accounting Courses (EdX)

Conducted by top institutions such as New York, Maryland and Columbia Institutes of Finance, this course is excellent for learners to have well rounded idea on the essentials. The duration is variable, and it is a self-paced course. It covers topics such as management, communications, bookkeeping, personal finance, marketing and leadership. It is made for different skill levels– beginners, intermediate and advanced learners.

Financial Accounting Fundamentals (Harvard Business School)

This is an extensive accounting programme for mid-level professionals. World-renowned Harvard faculty conducts the course covering International Financial reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP). It can be attended at one’s own pace, and it is an excellent course for sensitivity analysis and for understanding how to use financial statements to analyse the financial health of a business. This course grants financial assistance for those who need it.

Finance and Accounting Courses and Training (LinkedIn Learning)

This course covers the basics, and it includes essential accounting software such as QuickBooks, Quicken, and Excel. It is useful for learning Microsoft Dynamics GP, for understanding due diligence and audit foundations. It can be accessed free for one month from LinkedIn, and it is an excellent base for entrepreneurship learning.

The above courses can establish a good basis of accounting in any business professional regardless of their background. “It has been my experience that competency in mathematics, both in numerical manipulations and in understanding its conceptual foundations (accounting), enhances a person’s ability to handle the more ambiguous and qualitative relationships that dominate our day-to-day financial decision-making,” said Alan Greenspan, an American economist, and the former chair of the Federal Reserve of United States.

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