What Are The Major Uses of Financial Reporting?
This reporting for small businesses should depict true and accurate financial information. Hence, these reports’ goal is to provide a precise and detailed account of the company’s dealings to the public. Such in-depth reports are then used for a number of purposes.
Industry standards and legal regulations
First and foremost, these reports’ primary objective is to ensure that the business follows all laws, regulations, and ethical standards. Suppose your financial statements don’t add up, or your figures look suspicious. In that case, external auditors can determine if your business is breaking the law and committing accounting fraud or other illegal offences.
Public knowledge for potential investors
The second objective is to provide this information for public dissemination. Investors must be allowed to know the inner finances of a business if they are to invest within the company in question. Therefore, another of the primary uses of financial statements is to illustrate the company’s standing within the market industry for potential growth and further investment opportunities.
Monitoring financial health
Thirdly, companies can use these reports as internal management tools for decision making. Small business owners can look at their assets, liabilities, and other pertinent information stored within their financial statements and reports to glean insight into their current market standing to determine how best to improve their services and processes. Such reports can help management monitor and improve their finances for the next accounting period.
Lastly, these reports demonstrate a company’s financial position in a given period, which can be used by management to secure bank loans or lines of credit when they are in need of money for debt management. As these documents illustrate all the information needed to acquire a loan and must be publicly available, creditors and lenders will look at a company’s reports to determine how reliable they would be in terms of paying the money back.
Financial Reporting and Your Small Business
As a small business owner, it will fall to you to track your business’s finances and create these reports for public and private consumption. If you need help in this endeavour, consider using accounting software to track your business’s cash flow automatically. Such software can generate financial statements and reports that you are required by law to make.
QuickBooks Online has helped millions of business owners across Canada accurately depict their companies’ financial health. With this quality software’s assistance, your business can benefit from professional accounting features that can create your financial statements and reports seamlessly. Try it free today!