Who are accounting users?
These are individuals and corporations that require the information provided via an entity's accounting information system for decision-making. There are mainly two main users. Internal and external users.
Internal users are those whose decisions are within the control and influence of the entity's management. External users' decisions can have a great impact on the entity and its management. Therefore, they cannot be controlled by the company.
Internal Users of financial information
Managers and supervisors
The managers and supervisors of a business make decisions daily. Such decisions can be adjusted easily within the management. For example, a manager may need to spend on an item that is above its budget. He or she cannot achieve this unless the managing director approves it. Therefore, we can say that the MD has an influence on the decision of the manager.
Shareholders
The decision of the shareholders can be influenced by the directors of the entity. However, no director can control the decision of a shareholder to sell their shares. Also, at the company's annual general meeting, shareholders have a right to vote. But in many cases, no single shareholder can influence the directors’ decision.
Employees
The decisions of employees can be controlled by the company. For example, if employees agitate for a salary increment, the company's management has the right to influence the incremental amount.
Directors
The board of directors has the right to make decisions on behalf of the entity and themselves. These include areas of remuneration, strategies, dividends, and so on. However, shareholders have the power to remove one or more directors who have policies that are not in the best interest of the company.
External users of financial information
“The actions of external users of financial information can make or break a company.”
Customers
These individuals can decide whether or not to patronize a company’s product. Their decision can make or break a business. When an entity's customers decide to buy a substitute product, this will impact revenue, profits, and cash flow.
Suppliers and creditors
These are individuals and institutions that serve as trading partners to the company. They supply the entity’s raw materials and consumables, including credit facilities. Their activities enable the business to work smoothly. The actions of these users can have certain negative impacts on the company such as the continuous provision of credit facilities as well as the price of the goods and services sold or rendered.
Government agencies
Government agencies, especially tax agencies and regulators can have a great impact on an entity's survival. Here, the entity's management does not have a say in it. Therefore, whatever actions and decisions of government agencies agree on are binding on the affected company. Failing to comply can be detrimental to the company.
Potential investor
Institutional and individual investors might be interested in investing in a company. Their actions cannot be controlled by the company. However, they can decide to invest or move their funds to other companies.
Lenders
Financial institutions remain a source of funding for small and large businesses. Banks will not provide loan funds to an entity unless they believe that the company can make payment when due.
Public
The general public, from time to time, may need financial information from companies to state their opinion of such entities. Communities might want to know the extent of the impact of the activities of a company that operates in their locality. Also, a specialist in various fields of study might give their public opinion of the entity based on their financial information.
