Importance of financial reporting; how it benefits your business?

Whether you have a small business or large, financial reporting is one of the key aspects of a successful accounting venture. In addition, it is a critical part of the finance organization and management of any business. In-depth financial analysis and reporting not only provide valuable insight but also enables the company with compliance. Likewise, it helps the management to make a wise and efficient decision for a lucrative future.

 

Financial reporting offers a lot of benefits for SaaS companies to protect business owners and potential stakeholders. The benefits are many. This blog points out the importance of financial reporting and how it can benefit your business?

 

Let’s get straight to the topic!

 

What is all about financial reporting?

It is a strategic and structural system to provide financial information about the organizations and show their economic performance. Based on the following pillars financial report is developed:

 

·         Assets

·         Liabilities

·         Equity

 

Based on their primary factors, it shows multiple financial activities like profit or earning of the company. Hence, businesses can set a goal for the next financial year and manage their operation process.

 

In fact, a business can also get a clear picture of their profit and how they can improve it. Moreover, with potential financial statements like balance sheets, cash flow analysis, and income statements, businesses can track their financial activities.

 

Four types of financial reporting:

Among the most important financial documents, the following four types play a pivotal role to determine a better business decision.

 

·         Income statement: income statement or profit and loss statement shows the revenue, expenses, and profits of a company.

·         Balance sheet: it features the assets, liabilities, and equity in a single period.

·         Retained earnings statement: it shows the change of equity during standard accounting periods.

·         Cash flow statement: CFS or cash flow statement features the liquid cash coming in and out. It provides the stakeholders a clear idea of business operates and manages the financial activities.

 

Undoubtedly, the success of a SaaS company heavily depends on the accuracy of financial reporting. Even though financial reporting has nothing to do with its management, however, it is an integral part of the company’s success.

 

Importance of financial reporting

According to a recent statistic, businesses that leverage data can take a better business decision and increase marketing productivity by 15% to 20%.

 

Let’s dive deeper into the importance of financial reporting.

 

Financial transparency

An accurate financial reporting provides the stakeholders, executive, and finance team a clear understanding of how the business operates. In order o gain financial transparency you need the following metrics:

 

·         Operating expenses and income ratio

·         The ratio of the executive compensation and average employee pay

·         Financial statement to categorize multiple expenses

 

Financial transparency automatically boosts stakeholder confidence. It also helps them to gain the better business decision. With a clear understanding of the stakeholders, profitability is likely to increase hand in hand.

 

Evaluation of tax liabilities

Another crucial benefit of timely financial reporting is that it helps organizations to evaluate their tax liabilities. The financial statement provides the data in two different ways:

 

·         A structural balance sheet with liabilities, assets, equity holdings, and net worth on a precise date.

·         A financial statement that potentially highlights different types of expenses to evaluate the breakages of money in certain areas is in turn associated with tax liabilities.

Trust building

For any organization financial statements can be used for verification and accuracy of all accounting discrepancies. In fact, also assist to mitigate error and provide a better understanding of expenses. Similarly, financial transparency can alleviate skepticism from investing perspective. Overall, it helps the stakeholders to understand the different financial standpoints.

Error mitigation

A tiny mistake in financial reporting can lead to a serious blunder. Similarly, businesses are often loaded with tiny financial loopholes that can lead to catastrophic falls. A timely and accurate financial report helps to mitigate the potential error in accounting. In fact, it also helps manage the expenditure in a better sense. Finally, it also boosts the confidence of the stakeholders and develops a better understanding source.

Key takeaways

Undoubtedly financial reporting is one of the crucial aspects of any business. Irrespective of their size and industry type, it is one of the imperative organs of your business. Financial statements help investors to determine how to allocate their capital and expect the best return. Similarly, it helps the managers to take wise decisions for future investments and expenses.

 

Reputed accounting services offer a clear benchmark to measure economic performance. In addition, the reports also serve as an audit, that the company executives can match and identify the source. In a nutshell, businesses with a vision of profit must acquire accurate and timely financial reporting services. If want to start with credible and efficient financial reporting services, please get in touch with us.