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Financial reporting can be an important step for a business. While it can provide many benefits, a lot of business owners fail to report their finances regularly. Here you’ll discover why financial reporting is important for your company.
Proper Financial Reporting Ensures You Meet Legal Requirements
One of the main reasons to maintain proper financial records is that it is often a legal requirement for businesses. While in-depth reporting isn’t necessarily required, businesses generally need to carry out a basic report annually for tax purposes.
It is important that you know what these legal requirements are. Otherwise, you could end up facing a large fine. However, while legal requirements provide a big reason to carry out financial reporting, they certainly aren’t the only reason.
It Helps You Secure Funding and Keep Investors Happy
In business there are lots of times when you might need funding. For example, if you’re just getting started with your business, you might need a financial boost to get it off the ground.
On the other hand, a business that is already moving forward could have a temporary cash flow problem. Alternatively, you might feel the need to expand your business. In any of these cases, you might want to turn to investors.
However, investors usually want to see your financial records. They want to establish the risks and potential benefits of investing in your company. If you don’t have proper financial records, you could find it difficult to attract the right investors.
Similarly, if you already have investors, they may want to see regular financial updates to ensure they aren’t losing out on their investment. So, if you want to keep your investors happy, financial reporting is something you’re going to need to stay on top of.
Generally speaking, investors want to see your net profit, sales, margins and cash flow in your financial reports.
Make Financial Reporting Easier
As important as it is, financial reporting isn’t always easy. This is especially true as a business grows beyond a certain size. Some business owners find the process overwhelming. If you do, you can outsource audits of your financial records to experts such as RSM. They can help alleviate the pressure.
Ideally, you’ll want to include previous year reports with your new one. This will show the reader how profits have changed over the past year or so, giving them a much clearer view of your financial situation. It is also important to ensure all the information you provide on the report is correct and error-free.
Putting together a financial report isn’t always easy. However, with the right help, you can ensure your investors are kept happy and you are meeting the legal requirements for your business. The above are just some of the reasons why financial reporting is important and how you can make it easier.