Financial reporting is important for small businesses because it gives investors the idea about the current financial standing. At the same time the report becomes a marketing tool to communicate with media, customers, suppliers and the company’s investors.
Like most financial documents, financial reporting are riddled with datum, concise but accurate and direct to the point. It includes a balance sheet, an independent auditor’s report, an income statement and notes regarding company operations. Financial reporting regularly starts with:
- Letter to shareholders – is an introduction to the report, it gives the overview of the Company’s performance and future thrusts. It also include major achievements, particularly market success, the launch of new products, achievement, credit issues, economic conditions relevant to the Company’s projections.
- Review of operations – includes information on production output, productivity initiatives, research and development, and investment priorities. The real purpose of the review is to project the health of the company – to be well managed and enjoys sustained growth and projects stability.
- Statements on finances – it is a comparative account of financial performance against the backdrop of previous accounting fiscal years. It is an indicator of how the business progressed as reckoned against previous performances. This report typically includes statements about cash flow, a balance sheet, income, and equity.
- Marketing strategy – develops as an important indicator of the Company’s achievements and future designs. It also details the Company’s participation in expanding market sectors that highlights future development opportunities. At the same time concreting customer relationship, reduced number of account setbacks, factors that signify the business’ stability.
- Online versions – or those digitized documents posted in the Internet are also encouraged for the shareholders as read on instead of receiving printed financial reporting. Since preparation alone is so taxing to the workforce and printing is a big drain to the office finances.
That’s about it, the basic minimum requirement that financial reporting contain. The purpose really is it must be able to show the financial health of the business entity. Complying with the basic minimum requirement fulfills the intent of a tangible report. Any other information added to the report are considered extra and is the prerogative of the Company.
Remember, financial reporting describes the Company’s direction and must therefore reflect the true business stature. Similarly, the report must satisfy the shareholders quest for continued patronage to the company.