Do you know what your company’s financial health looks like? Well, you might not be able to tell if you don’t have a solid handle on your company’s financial reports.
Financial reports are key in providing an objective, accurate picture of a company’s financial state.
In this guide, we discuss in detail the role of financial reporting in telling the financial well-being of your company. We also show you how to easily and quickly generate accurate financial reports in real-time.
What is Financial Reporting?
Financial reporting is the widespread practice of using accounting standards to review and report on a company’s financial position.
It provides insight into how profitable or unprofitable a company is; it also determines whether the company will succeed or fail, and whether or not it’s a reliable investment for investors, creditors, and other stakeholders.
Financial reporting provides a history of your operation over specific periods of time, highlighting both positive and negative trends in performance that can indicate problems with management, products, or processes.
How Financial Reporting is Important to the Health of Your Business
Financial reports by themselves do not improve nor damage a company’s financial performance. Rather, they provide an insight into your company’s performance.
However, the insights you get equip you to make informed, data-driven decisions that can potentially improve your company’s performance and financial standing.
This makes financial reporting a tool, which if used correctly, can help you build a strong strategy for business growth as well as manage day-to-day operations that boost profitability.
These reports also give you the ability to offer stakeholders confidence in your company’s performance and reliability, which ultimately helps you achieve key business objectives.
Financial reporting helps stakeholders such as investors and creditors to analyse a company’s past performance and future viability, as well as provide them with a more complete picture of how the company is doing.
In other words, stakeholders can use timely financial reports to get a sense of your company’s creditworthiness and financial soundness. This allows them to make rational decisions on lending to or investing in your business.
When you think about it, business is all about money. The success or failure of a business often comes down to whether it has enough money to continue operating, invest in its workforce, develop new products or services, and expand its operations.
An understanding of key business drivers such as revenues, expenses, assets, and liabilities is essential to the success of any business. And financial reporting gives you a look into these key business drivers so you can improve your company’s performance.
Why Should You Be Creating Financial Reports?
By generating financial reports, you get the opportunity to perform the following tasks:
- Have a holistic view of your company’s performance, both how it has performed in the past and where it’s headed.
- Better manage your company’s performance by pinpointing weak areas that will help you take the necessary steps to strengthen them.
- Understand how your company has performed and its key operating metrics, which would enable you to make informed business decisions.
- Gauge the performance of your company in comparison to industry benchmarks, allowing you to see how strong or weak your operation is compared to others.
- Build better business strategies because you have the necessary data and insight.
- Offer transparency to stakeholders (including regulators and auditors) by showing them how well (or not so well) a company is performing from a financial perspective.
- Increase credibility by being able to show the degree of detail and objectivity you employ in your financial reporting.
- Make effective business decisions by being able to measure how profitable your different products, divisions, and departments are.
- Project future performance by having a complete picture of your company’s financial state.
- Show investors and creditors the quality of a potential investment.
How to Create Accurate Financial Reports in Real-Time
So how can you easily generate accurate financial reports without spending too much time?
Well, traditional financial reporting is considered time-consuming, expensive, and error-prone.
But thankfully, new approaches have been introduced that can help you achieve accurate financial reporting in real-time at a fraction of the cost.
For instance, there are now modern accounting software applications that can help you develop financial reports that are easy to understand and have a high level of accuracy.
When reports are generated quickly, you’re able to view and act on important financial information in real-time rather than being forced to wait for days or even weeks.
This enables you to better manage your business on a day-to-day basis and make more timely and accurate business decisions fast.
Conclusion
Financial reporting can be a great tool to help you run your business more efficiently. It helps you gain key insights into how your business is performing and what areas need improvement.
By generating financial reports in real-time, you also get the freedom to make better and more informed business decisions. And as a result, you can improve your company’s performance and profitability.
It is also great for stakeholders, as they are able to quickly see how well you are performing.
However, to generate accurate real-time reports, you need to use modern financial reporting software such as Query & Analysis that offers advanced data analytics capabilities.