Importance of Financial Reporting

Created On: November 3, 2021

What is Financial Reporting

Keeping accurate financial records and drafting a financial report is an essential aspect of running a successful business. Financial reporting is an accounting practice that analyzes the financial statements to disclose financial data and give you a clear idea about the financial health of your company over a given period. This is usually done on a quarterly or yearly basis. In simple terms, it gives you an idea about how much money you have, where the money is coming from, and where it needs to go. The different types of financial reporting include Balance Sheets, Cash flow statements, Financial Performance Dashboards, CFO dashboards, etc.

Financial Reporting helps the company to evaluate its performance which will help to enable business growth. Accurate records of both income and expenses should be maintained for accurate financial reporting. This helps the company to derive actionable insights and make sound decisions. Also, Potential investors and bankers need your company’s financial reports to scale the performance and profitability before investing in your company or loaning you money.

Importance of Financial Reporting

• Reduce Tax burden

All companies must draft a financial report. The IRS uses these reports to make sure you are paying your taxes accordingly. Accurate financial reports help to reduce the tax burden, unnecessary penalties and, IRS audits. It helps the business owner to worry less and concentrate more on business operations.

• Financial Transparency

Potential investors want to know the financial health of your business before investing. These investors and creditors use the financial reports to analyze your performance and scale the profitability of your company that will provide complete information about the assets, debts, and equities of your company

• Examining Cash flow

Cashflow statements can help the investors and stockholders to understand if a company has enough cash to pay the expenses and purchases. It includes all the cash inflows a company receives from its operations. You can carefully monitor the trends in your income stream and liabilities to forecast future cash flows and be prepared for your upcoming payments.

• Better Decision Making

Analyzing financial statements is a crucial part for businesses to make vital decisions. It will provide actionable insights that will help you make sound and economic decisions. This improves the performance of your company and generates more revenue.

• Compliance

Proper financial reporting helps you to keep up with the IRS and SEC laws and regulation otherwise cost you valuable time and money.

• Mitigate errors

Accurate financial reporting can help you avoid costly mistakes. Proper reconciliation of their books will help to detect illegal financial activities in the business before it’s too late. It can save you from a lot of trouble like IRS audits and huge penalties.

Our expert accounting services will provide timely financial reports that cover all the financial aspects of your company that will help you run your business a lot easier.

Contact us to know more.