Accounting Blog for Business
Using research from various finance and accounting services as well as the summary of the 2014 State of SME Finance in the United States as basis, it would seem that small and medium enterprises in America are indeed the driving forces of the US economy.
According to the white paper published in January 2014, SMEs account for over half of U.S. non-farm GDP and represent 98% of all U.S. exporters and 34% of U.S. export revenue. With the current size and impact of various entrepreneurial endeavors in the country, it is important to make sure that these businesses follow a semblance of order and standardized process where finance and accounting is concerned.Thankfully, we have GAAP or Generally Accepted Accounting Principles.
GAAP is a set of accounting rules and norms ruled by the Financial Standards Accounting Board (FASB) and the American Institute of Certified Public Accountants. By conforming to the GAAP standards, small business owners and financial management services providers allay the fears that potential investors may have over the current status of the company’s finances. Since GAAP ensures transparency and accuracy in a company’s financial statements, conforming to GAAP standards is basically a seal of guarantee not only for potential investors but also for business partners and other stakeholders as well.
The Benefits of GAAP Compliance
One of the major benefits that your company can get from GAAP compliance is business tracking. By conforming to the requirements set in the GAAP, it will be easier to understand the inner workings of your business finances. More specifically, the generation of financial statements will be more standardized, and as such, it will also be easier to tell if the current business financial strategies you are implementing are effective or not.
Secondary to this benefit is the reliability of the financial statements generated by your company. The use of GAAP sets a standard for most SMEs. On the other hand, if GAAP is not used, the reliability level of your company’s financial documents will not be at par with the modern standards set in contemporary businesses.
Finally, being GAAP-compliant is also a telltale sign that you are serious about doing business. Your potential investors, business partners and other stakeholders will not accuse you of cutting corners if you follow GAAP standards - and this will certainly do your business a lot of good.
Following GAAP standards elevates the professional level of your business - that is an understatement. Be sure your financial statements follow GAAP norms to keep a close lid on your business finances.
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Topics: Audit and Compliance