It is truly incredible that in the current turbulent and volatile business environment I still see various businesses struggling to get their act in order to achieve consistent and timely financial reporting. Financial reporting is a key aspect of any business as it provides valuable insight, enabling businesses to make more efficient decisions about their income and expenditure. Without timely financial reporting, like monthly management accounts, management would be like a pilot flying a plane with his or her eyes closed and the GPS switched off.
Timely and accurate financial reporting will make it possible for companies to make pro-active decisions and changes in any area of their business, rather than a series of post-mortems when the situation becomes too tragic to do something about it.
Hence, timely and accurate financial reporting, like a complete set of monthly management accounts allow management to make informed decisions about their business e.g. which areas of their business to grow in. Moreover, timely financial reporting helps managers plan budgets and also have some guidance on what to base their decision making process. Timely financial reporting can also serve as the first alarm bell for potential fraud or misappropriation in the business, when certain parameters like Gross Profit Margins go haywire.
Financial reporting is an integral part of running a business. Financial reports show the financial success or failure of your business for a specific period and can be used to forecast future outcomes as well. Financial statements often provide valuable insight into how much money you have made in sales, where it has come from, and what are the expenses you are incurring. Among the various benefits one can have from regular and timely financial reporting, please find a few I have listed below:-
- Better Debt Management – Financial reports are crucial to a company’s ability to manage debt. Financial statements provide clarity about the past and present of your business for you to plan ahead.
- Exit Strategy – Financial statements can be extremely valuable when it comes time for an exit strategy or sale of the company.
- Accountability – Financial reports should be used as a way to hold employees and especially top management accountable for their actions and performance.
- Differentiation – Financial reporting can also help differentiate your company from competitors by showing what sets you apart from the rest of the pack.
- Identifying Trends – Financial reports can help identify trends in your company’s finances, helping you make better business decisions.
- Liabilities – Financial reporting can help identify potential liabilities before they happen. Financial reports often include a list of what is owed and how much has been paid, which helps you determine if any problems are coming up in the near future.
- Cashflow & Liquidity – Financial statements also provide insight into liquidity for your company; whether or not it will be able to pay its debts in the future. This means you would be able to better manage your cashflow, which in turn will help with overspending as the financial reports can tell you whether or not you have enough money coming from sales for payroll expenses.
- Financial Transparency – A significant benefit of accurate and timely financial reporting is that it should provide all managers an understanding of how the business operates. Moreover a heightened level of financial transparency will allow managers to increase their confidence and it will enable them to make more informed decisions.
So I hope the message is clear so far. Timely financial reporting is a key element in any business to gain specific and actionable insights and make it possible for management to run it the business efficiently. Accurate and timely financial reporting benefits businesses by providing the leadership of any business a snapshots of all of its activities. So the importance of accurate and timely financial reporting cannot be understated. Timely and accurate financial reporting is among the most crucial aspects of any business. Financial statements aid business owners determine how to best allocate their capital and helps managers make sound decisions about operations and provide a benchmark against which management can measure its performance.