A lot of Venture Capital firms, Investment Banks and Private Equity investors have been in the news due to the Billion Dollar valuations and investments that some companies have received. The reasons for the staggering amount of funds being raised can be multiple, such as a good product, good sales, good management, market scenario looking up, etc. but one reason that cannot be overlooked is the accounting.
Accounting is basically the entries that are made for every financial transaction that is made. This will also include the movement of goods from one place to another as that also has monetary value. Accounting will help anyone understand the operations of a company. It will tell them about the functioning of an organization. The spending habits, the speed at which funds are spent, the exact expenditures, etc. Without information of this sort, it is impossible for any investor to understand the operations and the financial health of a company. Any investor who invests Millions of Dollars in a business that he will have no control over, will emphasize on getting every possible detail in order to have a very clear picture.
Another hurdle that entrepreneurs and company CFOs face is the accounting standards that are to be followed. Some companies follow the Indian accounting standards and are comfortable continuing with it as they realize that their investors & banks are comfortable with the details that they share. However, with major global investors descending in India to invest in new companies, they expect the founders and CFOs to share their books of accounts in the global accounting standards. Not just while they are seeking an investment, but also when they ask for the accounts post investment.
In India, the IFRS (International Financial Reporting Standards) is compulsory for any company with a net worth of over Rs 500 crores. This is in line with the Government’s commitment to make India an attractive market for global investors. These guidelines are compulsory for all types of companies including holding companies, subsidiaries, joint ventures, etc.
Having a team of trained accountants is not enough. Having adequate knowledge has become important and mandatory. Just knowing about your company’s financial health is no longer sufficient, you need to be able to answer questions that may come to you at any time in a meeting. Staying up to date with the latest global developments is extremely important and many senior leaders keep attending training and refresher sessions to keep themselves in sync with the industry. BSE Institute Ltd is a 100% subsidiary of the Bombay Stock Exchange. It offers multiple courses to help students and executives grow in their respective careers.
Due to the Government’s insistence on having large companies follow the international standards of accounting and finance, India is attracting a lot of interest from global investors and governments. This is allowing many companies and entrepreneurs to raise capital cheaply and easily, thus allowing us to further the Indian growth story. An average CEO is said to read 60 books each year to stay up to date with the changing times. Are you willing to make an effort to go the extra mile?