Why do Reporting Cycles Matter to Businesses?
All financial documents and business information provided in accounting periods must be up to date and reliable. Accurate, current records are paramount to understanding the state of a company for both internal purposes and external scrutiny by governing bodies.
Owners or managers of a company use these records, created using the accounting cycle, to discover the overall standing within the market, measuring performance, working capital, net income, and business output. Dividend accounts, ledger accounts, journal entries and adjustments, and financial statements must therefore be error free.
Financers, investors, and stockholders need to be informed of these reports as the company’s state directly impacts them. That’s why it’s so important to ensure that all financial statements, including your business’s income statement, balance sheet, cash flow statement and statement of retained earnings are correct.
External entities, like governing and licensing bodies, must have access to these reports to ensure that companies follow proper protocol and regulations. Strict regulations keep businesses transparent in their working relationships with others.