In modern business, financial reporting serves as the core of a company. Because of it, you are able to track your losses and gains in every aspect of your business. It provides an accurate snapshot of all your expenses, thus allowing you to leverage and maximize your finances. In summary, financial reporting is the standard practice that gives business owners insights into the company’s finances that include capital, profit, revenue, and cash flow.
What Makes Financial Reporting Important?
There are different key performance indicators (KPIs) in financial reporting. And each data must be accurate, as a single mistake can mess up and affect the company’s health. For that reason, many financial reporting councils and accountants prefer financial reporting and analysis consulting services, as they provide advanced technologies for real-time, reliable, and accurate financial information. Soon, the conventional way of analyzing business data, not to mention using spreadsheets, might be a thing of the past.
If done correctly, here are the five advantages of accurate financial reporting:
- Improved debt management. With financial reporting, you can keep track of your assets, divided by your current liabilities, allowing you to balance and gauge your liquidity. Therefore, you can pay your debt obligations accordingly. And in time, you might be able to get out of your debts.
- Trend identification. Financial reporting allows you to see both the past and present trends, as it tackles every aspect of your business. This helps you identify the company’s weaknesses so that you can develop strategies to improve your company’s health.
- Real-time tracking. This is perhaps one of the most important benefits of financial reporting. When you need the company’s finances overview immediately—an inevitable circumstance requires you to do so, for instance—you do not need the copies of all your bank statements. If the financial report is up to date and polished, tracking cash flow is just one click away.
- Liabilities. Without managing your liabilities—business loans, taxes, and credit card expenses—your company’s progress is at risk of declining. Keeping track of your liabilities is important. You will know if you have to fulfill an existing obligation before having a new one. After all, having more liabilities than you can handle is hard.
- Progress and compliance. With financial reports giving you accurate data over your finances, you will have the opportunity to improve your financial efficiency. It also ensures that you remain compliant. Being compliant means that you are responsible enough to stay in business.
How to Level up Your Financial Reporting Abilities?
Here are some of the best ways to ensure and maintain the accuracy of financial reports more quickly and easily:
1. Use accounting software or a business analysis tool
Still using spreadsheets to analyze your financial reports? Here is why you should ditch the old way of analyzing data.
Grenville Croll a spreadsheet risk expert, said, “Spreadsheets have been shown to be fallible, yet they underpin the operation of the financial system. If the uncontrolled use of spreadsheets continues to occur in highly leveraged markets and companies, it is only a matter of time before another ‘Black Swan’ event occurs causing catastrophic loss.”
Studies show that spreadsheets are prone to errors, are time-consuming, and require expert skills to use advanced options. Who wants a tool that is risky and unreliable anyway?
If you want to maximize your time and prevent the risk of losing data, it is best to have reliable accounting software with the ability to produce multiple reports to view your business finances from different angles. Just find the right accounting software or business analysis tool for your company.
2. Gather information
Collecting and gathering of information can be tedious. So identify which documents and statements are crucial to your report. Narrowing down the information can save you and your fellow employees a lot of time as you have already eliminated irrelevant information.
3. Organize your information
Label the datasets through tags, filters, and meta controls. This will make it easier for you to find information. Do not forget to identify the people who can have access to the report and manage their permission to maintain integrity.
4. Review, approve, and finalize
Collaborate with auditors, authors, and editors to review the documents. You can make the necessary amendments based on their feedback. Once the errors have been identified and revised, finalize the documents and hand them out to your team.
Financial reporting can be tough and time-consuming, but it is crucial to your business. Always remember that doing the best practices can make it simpler and less complicated.