When driving to an unknown destination, it’s always a good idea to use your GPS. It helps you get to your destination with ease, directs you to the best possible route and adjusts accordingly should there be any hurdle on the road.
Like a GPS, financial reporting guides you as you navigate through your business journey. These reports will help you see forthcoming issues and adjust where needed to stay on the course towards growth.
Financial reports can include:
Profit and Loss
Balance Sheet
Cash Flow Statement
Benefits of Financial Reporting
More than being compliant with regulatory requirements, financial statements provide you and your leadership team with critical insights that could change the game for your business.
The top three (of the many) significant benefits of financial reporting are:
1. Make Strategic Decisions
Financial statements are good tools in business decision-making.
When you look closely and compare your previous Profit & Loss (P&L) statements, you can identify trends and take action where necessary.
For example, by digging deeper into your P&L, you can see which products have increased sales and which ones have declined. By monitoring the trend, you can pinpoint the drivers behind the improvement in your sales. Alternatively, you can decide to discontinue underperforming products so you could allocate your resources to another product that is performing better.
2. Get Credit
Whether your business needs funding for growth or to stay afloat, investors and banks will need to know your company’s financial position before investing their money.
Financial statements provide accurate information about what your business owes and the business’s current cash flow state.
(Also Read: 7 Reasons Why Your Startup May Be Unattractive to Investors)
3. Improve Cash Flow
According to the ABS, 50% of SMEs go out of business in their first three years. 40% of those were due to poor cash flow.
If you don’t know where your money is going, financial statements give you a clear picture of where your cash goes. They help you keep a close track of your money, giving you better control of your cash flow.
The insights that you get from your financial statements are critical to monitoring your company’s performance and current financial state. More importantly, it allows you to track where you are and what hurdles you may face towards achieving your business goals.
Cloud CFO can be your partner to help you better understand your numbers and provide you with valuable financial insights to help you make informed decisions. Get in touch with us.