Businesses have evolved and transformed the ways of handling systems and managing things. Accounting and financial analysis are the vitals among the most important organizational functions. Whether a small-scale or large-scale business, accounting is a vital role in making the business’s day-to-day operations happen.
Financial analysis and accounting are indispensable, from tracking income and estimating expenditures to providing financial information to interested parties In this blog, we’ll discuss what is financial analysis, financial analysis types, the right tool for financial analysis, and much more.
Let’s get one step ahead, accounting has become smart, and we’ve smart accounting solutions today. Studies show that around 65% of small businesses currently use smart accounting software to manage their accounts.
Traditional methods for financial analysis and accounting don’t work anymore. New techniques and smart solutions have made their way to businesses almost in every sector. Financial accounting with tally is one of the most popular examples of smart accounting solutions. So, heading forward, first understand what is smart accounting, its elements, and its significance.
What is Smart Accounting?
When we address accounting, it implies the process or mechanism of keeping and maintaining financial accounts. When we talk about smart accounting, it means having more control over the finances. It’s been proved that with smart accounting techniques, businesses can have a steady stream of more customers and clients and a better financial analysis process. Hence, getting the right financial analysis tool is a business necessity.
Managing finances is a big issue for every business, and sometimes for small business owners, it becomes a challenge. Thus, with smart accounting, financial management and analysis get easy, and business owners can focus on core functions, indirectly boosting productivity and bringing in more customers.
An advanced accounting system that makes the accounting methods more analytical eliminates traditional accounting framework, thereby better utilizing the collected financial data and facilitating easy financial analysis.
What are the Elements Involved in Smart Accounting?
In accounting, we have five fundamental elements considered integral in the entire smart accounting system. Below is a brief overview of each:
Assets are an integral and foundational part of the business and facilitate core activities. So, whatever resource you buy, acquire, and possess the right to use is marked as an asset. For instance, you own a factory with a certain number of machines, so they are your assets. Remember, assets serve as an economic accelerator for your business in cash or credit terms.
A group or set of obligations to business are marked as liabilities. Such obligations arise when you make any credit purchases or take a loan for business activities. To settle a liability, you need to settle an asset. For instance, raw material bought on credit from suppliers creates a liability for the business.
Of course, where there is any economic activity, expenses are unavoidable events for the business and are crucial for business operations. For example, in a factory where manufacturing takes place to convert raw materials into finished goods, expenses like electricity, raw materials, transportation, etc., are incurred as stated in financial analysis statements. Thus, it’s also part of smart accounting.
Revenue is the final destination of every business. All the activities conducted are tied to the ultimate objective of bringing revenue. It’s the output that a business gets by selling products or delivering services. It is the income of the business.
Revenue can come in two ways: cash and credit. Cash revenue increases the cash inflow that increases assets. In contrast, credit revenue adds to the debtors, who are again an asset, as, in the future, the business will receive cash inflow after a specific period.
In a nutshell, the business owner’s capital used to conduct the business’s core activities is referred to as owner’s equity.
Accounting formula for calculating Equity
|OWNER’S EQUITY = ASSETS – LIABILITIES
How to use Tally for Smart Accounting?
Every organization uses some accounting software In the current business environment, and the tally is the most popular financial management solution, especially for Indian businesses. TallyERP 9 enables business owners to interact with financial statements better, facilitates sound decision-making, and offers accurate financial analysis and reporting.
Tally is an easy-to-use and accelerated technology engine that simplifies day-to-day accounting activities and enables to the derivation of useful financial information for making relevant business decisions.
The most prominent use of tally accounting software is that it eliminates the old-school manual method of maintaining books of accounts. With the advent of information technology, these tasks can be done using smart accounting software, and the tally is one of the most powerful smart accounting solutions.
Importance of Smart Accounting for Business Growth
No business can ever be imagined without smart accounting in today’s time. Business growth is a much bigger thing; in fact, without accounting necessary for a business even to sustain itself.
Let’s discuss the significance of smart accounting and why it’s crucial for business growth:
Helps in evaluating the performance of business
In any business, attaining sustainability is a matter of concern, and smart accounting plays a catalytic role. Business performance can’t be measured well if its financial analysis of statements is not done properly. So, here smart accounting helps evaluate the business’s performance and facilitates comparative analysis.
Helps to create budgets and future projections
Budgeting and forecasting are the essential elements of smart accounting. To run a business smoothly, creating budgets, checking the previous and current expenditures, and figuring out future projections are vital. Thus, smart accounting provides more simplified and quick-to-analyze budget reports.
Helps in getting relevant financial information
Getting needed financial information is the most fundamental importance of smart accounting. It helps in framing the blueprint of financial analysis using financial data; thus, smart accounting can be marked as the finest financial analysis tool.
Clear picture of payables and receivables
Keeping an eye over what comes in and goes out of business is a must and smart accounting helps in creating a clear picture of payables and receivables. Hence, it enables you to meet payment obligations on time. Also, you can get complete information about cash inflows and outflows if your business is smart accounting enabled.
What is Financial Analysis?
Finance is the blood of business, so its analysis is important. Evaluating the business projects, various budgets, and finance-related determinants helps in estimating the business performance and thereby helps in getting a clearer picture of how well the business is going.
In a nutshell, evaluating the business performance and long-term profitability by interpreting and analyzing the financial statements (income statement, balance sheet, and cash flow statement) is referred to as financial analysis.
Types of Financial Analysis
Financial analysis can be of two types:
Fundamental analysis is done specifically to determine the business’s value. So, it uses the ratios calculated through gathered data, such as Earning per share (EPS), Current Ratio, Liquid Ratio, and so on, to evaluate the current business value. Therefore, fundamental analysis helps the analyst to evaluate the company’s intrinsic value.
Under this head, financial analysis is done by considering statistical trends. Technical analysis aims to understand the market algorithm regarding price trends and then make relevant price-related decisions.
Importance of Financial Analysis in making right business decisions
Financial statements mirror the business performance & position, and financial analysis is the interpretation of the statements to derive the related financial reports and the right decision-making.
Below is the financial analysis importance that explains how it helps in making the right business decisions:
Information about shares and holding
Financial statements, analysis, and reporting are considered important not only for directors but also for other interested parties like shareholders, creditors, government, and so on. They have the right to have information about financial reports and shares and their holding structure with EPS and other essential details.
Planning, decision-making, and managing altogether
Without analysis of financial statements, no accurate decision-making is possible, and thus, with financial analysis tools, you can create relevant reports. Such reporting can help plan finances and budgets, make proper decisions, and manage everything with better insights.
Investment-related decision making
Businesses keep on looking for profitable investment opportunities that could bring good returns. In this regard, financial analysis of businesses’ various reports helps make wise investment decisions.
Assessing the current financial position of the business
For creating future plans, a business has to evaluate and estimate the current financial position in terms of revenue, expenses, liabilities, etc. Analyzing all the reports lets us know the exact business picture and formulate the right future plans.
Facilitates comparative study
Comparisons are always good when analyzing the business’ previous and the current scale of profitability. The comparative analysis helps filter out the business’s strengths and weaknesses and improve it in future strategies.
How Does Tally Help in Financial Analysis?
In the context of smart accounting, the tally is the most widely used tool that enables the business to use a data-driven approach in making sound and effective financial decisions. Certain financial analysis advantages can help in sound decision-making.
Let’s discuss how tally helps in financial analysis:
Identifying and monitoring the financial state of business
Tally software helps identify and monitor the business’s financial state by providing analytical reports and statements. More than just data and records are required for better results, financial analysis is a must, and tally software performs this function very well.
Analysis of previous budgets and cash flow management
By using financial analysis tools like tally, you can efficiently analyze previous month/quarter/yearly budgets and also manage cash inflows and outflows with a complete track record of every single transaction.
Interpret the financial statements and prepare reports
Tally software like Tally ERP 9 syncs the complete financial data, and the user can access it, which can be used to interpret the statements and prepare analytical reports for various purposes.
Better decision-making about business operations
Business managers are proactively using the tally financial tools to analyze the various business operations in depth and, thus, make better decisions.
How to Use TallyDekho App for Smart Accounting and Financial Analysis?
TallyDekho App is super easy to use and the best in the market tool for financial analysis that can help in business in various ways. The app syncs data provided by Tally ERP 9 software and provides more enhanced and useful information with analytical reports. There are several added benefits that barely any other app could offer:
- Data sync in real-time
- User-Friendly Interface
- Compatible with Tally ERP9 software
- 24*7 Email and WhatsApp Support
- Analytical tools like graphs and reports
Get started with TallyDekho in 4 easy steps.
Step 1: Download the TallyDekho Mobile App
Step 2: Download the TallyDekho Desktop App
Step3: Sync Tally ERP 9 Data with TallyDekho Desktop App
Step 4: Scan the QR Code on your TallyDekho Mobile App
Get TallyDekho App and Upscale Your Business
In the bottom line, the tally is the turnkey solution for financial analysis and smart accounting that can help the business get more detailed data with analytical reporting.
TallyDekho is designed to tailor to every specific data and analytical need of the business, available on both desktop and mobile. Now get complete business data in real-time at your fingertips with pocket-friendly plans.
Benefits of the TallyDekho App
- Compatible with Tally ERP 9
- User-friendly interface
- Key business data and figures on your dashboard
- Access all the real-time updated reports of Tally ERP 9 on Mobile
- 256-bit encryption for secure data syncing
- Permissions-based access to the users
- Branded GST-compliant invoices
- Email and WhatsApp support
Access the updated tally data at your fingertips and make accurate business decisions using various analytical reports. The TallyDekho app makes it easy for you. Get started today!