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The importance of accurate financial reporting: 4 tips for small business owners
Posted by Grace Townsley
June 13, 2023
Financial reporting is the navigational tool that guides small business owners towards stronger decisions, better profits and greater outcomes. It provides owners with the data needed to monitor performance and plot their future course with as much accuracy as possible. And accurate financial reporting can even protect your business from financial penalties and failed audits.
Unfortunately, many business owners are so caught up in the day-to-day activities that they neglect preparing financial reports — or fail to thoroughly review and analyze the reports given to them.
If you find yourself struggling to maintain accurate financial reporting standards or conduct regular financial analysis, read on. We have four simple tips you can use to improve your financial reports — and strengthen your next decision.
4 financial reporting tips for busy business owners
When it comes to preparing accurate financial reports, proper bookkeeping is essential. Your business’ books are the basic foundation for your financial stability. And without organized and up-to-date financial records, it’s nearly impossible to make well-informed decisions.
One way to improve the accuracy of your bookkeeping is to use accounting software or an outsourced bookkeeper. Tools and dedicated experts can help streamline tedious bookkeeping tasks and tighten up your processes, reducing the chance of errors and providing you and your team with a clearer picture of your financial standing.
With accurate and updated bookkeeping serving as your business’s financial compass, you can move forward with clarity, accuracy and data-backed decisions.
Tip #2: Leverage internal controls
Your internal controls are like the walls that protect your business from threats, both external and inside your own company. They safeguard your finances by reducing the risk of fraud, errors and mismanagement. And they prevent any single person from having the power to disrupt your financial reporting and financial analysis processes.
One critical internal control every small business should implement is periodic audits. Whether you conduct your audits internally or with the help of an outside professional, these double-checks can ensure every dollar and data point is as it should be. They can even reveal areas of inefficiency and potential improvement, saving your business even more time and money in the future.
Tip #3: Reconcile regularly
Do you have an automated reconciliation process in place, or does your team handle month-end close manually? If you’re still reconciling by hand, or with a low level of automation, you aren’t alone. Over 40% of companies don’t have an effective automated process in place — and waste hours every month balancing their books.
Account reconciliation is a complicated, time-consuming and repetitive task. It’s also highly time-sensitive. To improve the accuracy of your financial reporting and strengthen your financial analysis, look for ways to introduce technology into this sub-accounting activity. Both cloud-based and software-based solutions exist — and both types of automation can reduce your team’s labor and improve your end result.
Tip #4: Partner with a professional
Accurate financial reporting and effective financial analysis require deep expertise and specialized knowledge of accounting, bookkeeping, tax law and compliance. That’s why as a small business owner, you may find it helpful to work with a dedicated team of professional finance and tax experts. Just as a seasoned captain can lead their crew through storms, your team of accountants, bookkeepers, CFOs and FP&A professionals can help you navigate the complexities of analysis and financial reporting, saving you time, effort and serious missteps.
Outsourcing your financial reporting tasks comes with a host of benefits, like:
Faster bookkeeping. With a team dedicated to your small business’s monthly bookkeeping tasks, you can get the cash flow, revenue and expense reporting you need to make faster decisions.
Accessible expertise. Outsourcing agencies give you access to financial professionals with specialized knowledge and expertise beyond that of your internal team. Their insights and experience can ensure your finances are always accurate and aligned with industry standards and regulations.
Proactive strategies. Your outsourced financial reporting team can provide you with future-focused guidance based on your current financial situation and forecasted results.
Cost-effective services. While you may not be able to afford a full-time, in-house CEO, FP&A professional or bookkeeping team, by outsourcing these services, you can access the support you need, when you need it.
No matter your small business’s size, industry or end goal, working with an experienced finance professional can help you improve your decisions, navigate challenges and capitalize on every growth opportunity available.
Financial reporting doesn’t have to be complicated
While financial reporting may not be the most exciting part of running a business, it is one of the most critical. Because the best decisions, the ones that propel your business forward and strengthen your bottom line, are built on accurate financial data.
By following these simple tips, and leveraging the benefits of outsourcing, you can make sound decisions, manage your risk and unlock the full potential of your business.
Want more? In addition to taxes, accounting, bookkeeping and CFO services through its FinOps, Escalon’s Essential Business Services include PeopleOps (HR, benefits, recruiting and payroll) and Risk (business insurance). Talk to an expert today.
This material has been prepared for informational purposes only. Escalon and its affiliates are not providing tax, legal or accounting advice in this article. If you would like to engage with Escalon, please contact ushere.
As a professional copywriter in the finance and B2B space, Grace Townsley offers small business leaders big insights—one precisely chosen word at a time. Let's connect!