Corporate governance directs the manner in which businesses achieve their goals relating to their legal, ethical and social obligations as well as the market conditions in which they exist. Within a necessary system of rules, accounting performs a vital function of monitoring and reporting on how a business performs financially. This tracking of expenditures and income is important for helping to establish an accurate picture of the overall financial health of a business and its overall corporate governance.
Here are 3 important ways accounting enforces good corporate governance:
The Important Role Accounting Plays In Corporate Governance
It establishes a foundation for ongoing success and growth
Accounting is a beneficial tool that can help managers of corporations make sound business and financial decisions for ongoing success and growth. Based on honest accounting reporting, decision-makers can adjust plans, establish new directions for growth and be proactive in taking the correct action for when things aren’t going according to plan.
It ensures accountability in shareholders
Corporate companies have a responsibility to look after the interests of their shareholders which is mainly to perform financially well. In this function, transparent accounting provides shareholders with relevant information on the financial performance of the corporation and empowers them to make informed decisions regarding its governance policies.
It influences cash flow management
Managers of companies can make strategic decisions on their cash flow based on accounting activities. Utilising financial statements, they can see the channels that draw in money and where other funds are being spent. Being able to manage money more effectively helps managers keep the company from running into avoidable debt. By providing an overview of revenue sources and when revenue is to be expected, managers can also make vital decisions regarding hiring new staff or purchasing more equipment, or deciding whether it’s time to invest in different or extended product lines.
A taxation accountant can provide expert guidance and advice on the policies and procedures of good corporate governance as well as your business’s compliance obligations. Let Stones Sharp help you create a better framework for your company using the power of accounting and advisory. Contact our team of experienced accountants and advisors to discuss your corporate governance needs.