Financial reporting is a requirement for every business, no matter how small or large. The reason – it’s a peak at the financial health of your company. Without financial reporting, it’s like driving to a location with no directions. You’re wandering.
Smart financial reporting informs decision-making in your business, provides accurate information to potential lenders and grant organizations, and makes tax preparation easier. Keep reading for tips to effective financial reporting.
1. Know the key financial statements that make for strong financial reporting.
For informed decision-making, certain financial statements prove most helpful. Also, if you’re not sure where to start with financial reporting, the statements listed below are a good place.
The must-have financial statements – the balance sheet, income statement and cash flow statement.
Of course, there are more statements, and we address this below in tip #4. But, these suggestions lay a strong foundation for any financial report.
(Are you new to business and financial reporting? See this article.)
2. Schedule time for financial reporting.
If it’s on the calendar, then it happens. That is true for financial reporting as well. Place on the companywide calendar when financial statements are due and when financial meetings are to take place. Set expectations for weekly and monthly reconciliations.
This tip may seem simple, but it is profound. When businesses make financial reporting a priority – and not an afterthought or a “hoop to jump through” – they make quicker decisions and are more innovative when difficulties arise.
3. Set benchmarks.
To move financial reporting to the next level (from reporting to forecasting), set benchmarks. Over time, these benchmarks help to identify underperforming areas, and even over-performing parts, of your business. This clarification leads to better decision-making.
4. Create financial reports for specific audiences.
What a management team wants and needs to see is a bit different than what an investor will want in your financial report. Recognizing the differences between audiences from the start helps you and your team create a financial report useful to the viewer.
Inquire with the audience before preparing reports. What do the viewers need to see in order to answer their questions? Do research on what’s expected. For example, it’s typical to give a board of directors a presentation quarterly with an income statement, balance sheet, cash flow statement, and a budget versus an actual statement. Yet, the same may not be required when meeting with management teams.
Morgan & Associates Know Financial Reporting
We’ve been in business for over 10 years and now have 3 locations (Muskegon, Grand Rapids and Livonia, Michigan). We’ve helped many businesses prepare financial reports and create processes for rendering financial statements easily.