Bookkeeping, financial reporting a prerequisite
Dr Keen Mhlanga
The financial system is made up of several financing options, which gives companies a wide range of preferences for maintaining liquidity. Investors are showing keen interest in companies with expected future earnings growth rate. Fundamentals of qualification include low risk, good record keeping and financial reporting standards.
According to a survey conducted by FinKing Financial Advisory in August 2021 on funding requests, only 23% were considered for further investigation by investors, with 45% of companies not having proper accounting and 32% with poor financial reporting standards. The reasons for these results lie in poor corporate governance, faulty financial accounting or reporting, and lack of financial literacy. Bad financial reporting is one of the main reasons businesses fail, without bookkeeping, business will run in total darkness and survival will be in luck.
Accounting is very essential as it guides a business in preparing a budget which creates a financial roadmap for a business with clear and realistic numbers. When income and expenditure are properly organized, categorized, accurate, and readily available, it makes it easier to review financial resources and expenditure. This will also ensure that a business can plan for its future expenses and the planned resources that would cover those expenses.
Businesses are required to file an income tax return annually under the Income Tax Act [Chapter 23:06], with an accounting process in place, all financial information will always be ready for tax season and in most cases there will be no reason to worry about scrambling receipts and invoices, tax returns. incomes are also facilitated. A statement of financial position, statement of cash flows, statement of comprehensive income, and statement of changes in organized equity mean that a financial advisor will spend time giving you sound tax advice instead of correcting the entries. in the financial statements. This makes it easier for a company to report the financial situation to investors, with a perfect presentation including the necessary graphs, tables and list of dates. Accounting paints a clear picture of how money is spent, pending or unpaid invoices can be viewed. A business will benefit from paying its bills on time and receiving payments for products or services on time as well.
It is a bad culture for companies to react the reverse of financial reporting, especially when a tax clearance is required by suppliers, rushed and questionable accounting is guaranteed. Many companies tend to make incomplete estimates and financial statements when they apply for a loan from a bank, the other party when they want to merge or find an investor, they prepare the books. That last minute stress of trying to find a crucial deal will always lead to missed deadlines and a few small mistakes that creep in. Businesses of all sizes cannot afford to make mistakes or rough estimates and regular bookkeeping can help with this.
In addition to giving shareholders peace of mind when the books are complete, they give business owners the opportunity to focus on other parts of the business. If the books are in shambles it can take a heavy toll on the minds of business owners, leading to severe penalties and fines for not meeting deadlines. Fluid and systematic recording makes it easier to manage cash flow and helps businesses take the right steps to effectively record financial data through bookkeeping.
It describes the sources from which the cash flow comes and uses where the money is spent, to avoid the cash flow crunch.
It is nice for businesses to use accounting software in the digital age, that save time, continuously monitor finances, track and manage cash flow, have a short learning curve, minimize errors, and provide scalable solutions. QuickBooks, Zoho, Sage 50cloud, Intuit, and Odoo. Electronic filling is also important because it is faster to retrieve information than manual search and physical filling, it promotes a clean and tidy workspace with computerized invoicing.
Financial reports allow businesses to keep track of current assets, liabilities and cash. This information can be used by a business to manage its debts, which can be of great benefit to the business. How financial reporting and analysis can improve debt management is one of the reasons companies choose financial reporting and statutory reporting services.
As important as debt management is, so is managing a company’s liabilities – which includes lines of credit, business loans, and supplier credits. Financial reports and analysis will give businesses a better idea of ââtheir liabilities and how they can best manage them. When making critical decisions when liabilities are under consideration, it is best to consult a trusted financial advisor. A financial advisor offers more than bookkeeping and corporate secretarial services, and a trusted advisor will use financial reports and analysis to detail what’s best for a business at any given time. Accurate and proactive financial reporting and analysis can make a big difference in a company’s financial performance.
And by understanding their importance and investing in the digital tools that can help you execute them with maximum efficiency, companies can extract the insights that will help you make better business decisions.
It’s obvious how essential good financial reporting can be, but a lot of tips are needed for flawless execution. Whether a business chooses to outsource or tackle it in-house, it always makes sense to be aligned with International Financial Reporting Standards (IFRS).
Foreign investors or financial institutions often request recent and accurate financial data for analysis before making an investment or loan. Some business owners may never have prepared financial statements in their career. This can be a daunting task and being able to bring someone with high level experience can be of great benefit.
Founder and Chairman
FinKing FinKing Consulting