Most of the time, small businesses are personal ventures into some occupation that generates extra cash for the entrepreneur. It’s usually a one-on-one endeavor that keeps the businessperson too occupied to even bother with the paperwork side of the business.
If your business just took off, you should have this guide in handy to help you with your financial reporting.
Know The Basics Of Financial Reporting
The paperwork that records daily cash activities in your business is your financial records. It’s the report on the financial status of your business. They’re called your business financial statement, and sometimes, these records cause a lot of stress for the business owner. Its preparation and consolidation need time and the expertise of experienced bookkeepers.
Your financial reporting may need the experts in bookkeeping Philadelphia if you’re from the locality. Otherwise, you can always refer to the nearest bookkeeping service provider closest to you for convenience.
Know Why You Need To Do Financial Reporting
Financial reports specify whether your business is earning enough to sustain its operations. It’ll also tell you if you must pack up because your endeavors aren’t doing well. Income is the primary consideration why people do business, aside from expressing ideas and other motives. It requires a lot of hard work, which is why you need to accomplish some financial figures because of the following:
- To show you how much your investment is
- To let you know how much money you have left
- To show you where your cash is coming from
- To let you know where your money is going
- To show you some areas where you can improve your income
You need to set up an accounting system to generate your financial reports if you’re a startup. Aside from showing the health status of your firm, financial reporting is needed and regulated by state agencies. It’s necessary regardless of how small your business may be.
The following are some reasons why you should do financial reporting:
Conformity To State Business Regulations
The preparation of your financial reports is in conformity with state business regulations. States require the registration of businesses, and financial records are necessary to ensure that your business is legitimate. It assures the government that you’re also doing business to help the national economy by paying the correct tax.
Your financial statement is the basis for the computation of the tax and regulatory fees that you owe the government for doing business.
Compliance With Accounting Standards
Compliance with accounting standards is mandated by law. Every business must comply with international accounting standards’ accounting policies and practices to ensure you’re doing business lawfully.
Supports Your Credit Score
Financial institutions will look at your financial position as a basis for assistance or investment. Your credit score depends on how well your financial standing is faring based on your financial reports. A good financial status reveals positive income and retained earnings; the business’s assets should be over its liabilities or at least a 2:1 ratio.
Shows Business Progress
Financial reporting will give you the status of your business’s progress from the start of business operations. It’ll tell you whether your business plan is working or not. You’ll know if your business activities generated income or brought loss. It’s also your guide on which part of your business needs improvement and which item in your financials must be cut off.
Know The Main Financial Statement Reports To Prepare
There are a lot of financial reports that may be required from you as you continue to do your business compliance and transactions. But these financial reports are the primary sources of all other reportorial requirements in the accounting field:
Your balance sheet records your company’s assets and liabilities. It enumerates what you have like cash, buildings, receivables, and other assets. It’s also your reference for those aspects you need to settle like business payables.
Your income statement is a record of your profits and losses. It tells you how much you earned from selling your product or rendering services. It’ll also show how much you spent operating the business.
Cash Flow Statements
Your cash flow statement informs you of your business’s cash activity throughout its operations. Some of the details reflected in your cash flow report are how much cash came in and its sources.
Know The Consequences For Non-Compliance
Inaccuracies in financial reporting or failure to comply with corporate transparency will bring more financial troubles than gain. The following are some of them:
- Legal sanctions
- Business closure
- Inaccurate business decisions
- Penalties and charges
It’ll also be one of your company’s nightmares if the IRS comes after you for failing to provide correct financial statements or failing to comply with corporate transparency rules.
To Sum It All Up
Financial report preparation may be too detailed and challenging for a newbie in the business. It’s ideal that you correctly submit your financial reports when your company is still in its early stages. It’ll prevent setbacks that may jeopardize your efforts as your business thrives.
You went into business in the hope of generating profits rather than losses. Make an effort to meticulously compile your financial reports using the advice and links provided in this material. You’ll eventually benefit from it and be in a better financial position.