Who makes the Tough Money Decisions ?

The people, who make decisions in accounting, make it based on three categories. First, people who manage a business, second, the external people of a business who have a direct financial interest to a business, and third the people and organizations that have an indirect effect on a business. This applies to non profit organizations as well. Management refers to the group of people who are in charge for operating a business and for measuring up to the profitability and liquidity goals. If a business is extremely large, then the management will most often require more than one person, and the people are hired to perform their job. Managers need to answer important questions such as what was the company’s net income, and if they have a substantial rate of return. Does the company have enough assets, and which products bring in the most money? When making a decision, managers usually follow a systematic approach. Even though larger businesses require a more concrete analysis, they follow a similar pattern to small businesses.



Financing a business: Financing for a company is critical, because they need that money to continue their operations. Here is a nice website to find out more information about financing a business. http://www.sba.gov/financing/
Investing in a business: Companies invest in their current assets so that it will make money for them in the future.
Producing goods or services: Operations and production management is responsible for developing and producing goods and services that the company can sell.
Marketing: Learning marketing and advertising skills so that they can distribute goods and services more efficiently.
Managing workers: Human resource management requires the hiring of qualified employees, and also paying them.
Providing information: The information management retrieves data about the company such as how much they made in the last month, and organize the information in a way so that it can be used. It also releases information to managers, and to important people outside the business.

Another group of individuals that needs knowledge in accounting is those you have a direct interest in the business, go figure. They use the information to analyze how a business is performing. Most businesses generally publish their financial report which shows how well they meet their profitability and liquidity goals. These statements display how well a company did in the past and probably most important, how well they will do in the future. However, many people outside the business also study the financial reports. They are the investors and the creditors. The investors are the individuals that invest in a business and will keep a part of the ownership. They are concerned with their past success and failures, and also will like to know the potential earnings. A concrete analysis of the financial statement will help prospective investors base their decisions. Once they finish investing they must continue to study a business financial statement. Next, the creditors are the companies that lease money to businesses for short or long term needs. Creditors are the people that deliver money or provide services for companies in advanced before getting paid. Their main concern is whether a business will have the money to repay the money with interest in an approximate time. Some of the things they study before they make their decisions are a company’s liquidity, cash flow, and profitability. Some examples of creditors are banks, mortgage companies, and insurance companies. Over the years the shift of people who used accounting information has varied drastically.

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