To effectively manage an organization, leaders should manage accounting information effectively. Although Vincenzo Vasta has been successful in his restaurant business, much success and ease in management can be attained with effective accounts management practices.
Accounting information is crucial for decision making to both internal and external users of accounts. When up-to-date and accurate accounts records are maintained, managers are able to make informed decisions (Barry and Jermakowicz, 2010). This report discusses the gains that Vincenzo Vasta would get by maintaining an effective accounting system in his restaurant business.
With well-maintained accounting records, Vincenzo Vasta will be able to make informed decisions; informed decisions lead to competitiveness in an organization. Leaders are accountable to external users of accounts who include the government for taxation purposes, shareholders, bankers, and creditors; they are willing to know the financial strength of an organization so that when making decisions whether to transact with the company or not, they are informed of the strength or financial base of the company.
Accounting is guided by international accounting standards, this creates some set of uniformity that players in the industry should conform to; when some set of discipline and integrity are maintained, then an organization can compare its operations with others in the same industry, having the same operating risks, and size.
Comparison of companies assists in knowing whether a certain company is using its resources in the most effective manner or else it is able to mitigate and manage operating risks in the most effective method at its disposure.
For example when gauging the price to charge certain meals, accounting information is likely to offer insight information on the right approach to use when pricing the foods. With the information Vincenzo Vasta can know whether to charge extra for lunch specials or dinner, the information that he will get from the accounting department include sales trend analysis.
Marginal cost/price analysis will be another benefit that the company will get from the accountant; the directors will know whether it is beneficial to open an hour earlier in the evening (this will be attained through cost benefit analysis tools of managerial accounting).
Transactions in an organization can be managed effectively if appropriate accounting data and records are maintained; for instance to determine the price of a commodity, management should consider all the operating costs that have gone into the production of the said commodity. Other than the costs associated, there should be an analysis/consideration of the operating profit margin that the company would like to get from the said commodity.
The above information is accounting information that companies need to manage and hold effectively. A company is considered different and independent of its directors; the above legal requirement has been one of the challenges that non accountants have had when accounting for their companies.
The differences are recognized by the law to the point that transactions between the director and the company are considered as transactions with third parties. For taxation purposes, there has always been some controversy when drawings from the company by a director are considered as income to the director that should be considered for individual tax purposes.
Another area that has brought issues is how to treat services offered by directors in their own company; non accountants fail to understand that the services should be considered as a service offered by employees to the company thus payments should be received by the director. It happens that directors offer their services to the company without considering that they are supposed to earn some salary/income from the company and be in subjected to individual taxes like any other income (Anthony, Hawkins and Merchant, 1999).
Accounting information is crucial for planning and setting operating standards for the company; with an effective accountant, the company will have an operating base of minimum expected revenue and costs. The annual and monthly budgets are made in light with the potential that the company has, in the event there are some difference s at the end of the year/accounting period, the manager will be advised and solution sort for to avoid the same mistake in the future.
When an accountant has been involved in the business, professionalism will get into the system creating some room of integrity and effectiveness in doing business. For example with an account, Vincenzo Vasta will be able to differentiate what assets the company owns and which ones should be treated as personal and individual assets.
According to company law, a company is considered a legal entity/person with the capacity of accruing and keeping assets. When Vincenzo Vasta hires the service of an accounts, the business with be able to be operated with the differences required by the law of the state.
Laws relating to finance, accounting, and business regulations keeps changing, with the changes may be on technical basis or areas that a non-management may fail to understand the effect they will have on his business thus break the law without knowing. With a qualified accountant, such mistakes and misinformation will be unheard of to the benefit of the company.
When changes occur, accountants have the capability of interpolating them and seeing if there is an effect that they will create to the business.
Different situations calls for different decisions; to make the right decisions in light of the operating environment, accounting information is crucial; for example Vincenzo Vasta might not fully understand the effect that global financial crisis had on his business and the kind of decisions he should make to ensure that the company get in track fast. With an account such information will be offered.
Other than the benefits that Vincenzo Vasta will get from hiring the services of an accountant, the service comes at a cost to the company (Horngren, 2007).
When meeting with manager Vincenzo Vasta should have a clear picture and perspective of the nature system that he would like his business to take. With the right business picture he will be able to set the agenda of the meeting which should revolve around improving his business efficiency (Langfield-Smith, Thorne, and Hilton, 2009). The following are the main agendas that he should have when meeting the manager:
- What can be done to improve the company’s efficiency?
- What are the key performance indicators that the company should be looking at?
- How can the business diversify its business as it mitigates operating risks associated?
- How can the company benefit from globalization?
The frequency of Vincenzo Vasta and his company’s manager meetings should be determined by two main parameters that is how the business is doing (financially, socially, and politically) and changes in business/industry. However Vincenzo Vasta should ensure he has met with the manager at-least once a month to discuss the how the business is fairing.
References
Anthony, R., Hawkins, D. and Merchant, K.,1999. Accounting: text and cases. Boston: McGraw Hill.
Barry, J. and Jermakowicz, K. ,2010. Wiley IFRS 2010: Interpretation and Application of International Financial Reporting Standards. New York: John Wiley and Sons.
Horngren, H. ,2007. Accounting Edition 7e. New Jersey Prentice Hall.
Langfield-Smith, K., Thorne, H. and Hilton, R. ,2009. Management accounting: information for creating and managing value. Sydney: McGraw Hill.