Category: Financial Reporting

The importance of filing financial reports when running a business.

Here’s a piece of useful trivia. The abacus, called Suan-Pan in Chinese, as it appears today, was first chronicled circa 1200 C.E. in China. The device was made of wood with metal reinforcements. On each rod, the classic Chinese abacus has 2 beads on the upper deck and 5 on the lower deck. For those who don’t know yet, the word ABACUS is the short form for Abundant Beads, Addition and Calculation Utility System.

While the abacus is an ancient calculation tool used by many traders in their time, there is nothing ancient in the method of gathering data for financial reporting. It’s relevance to modern accounting and running businesses to this day and age is proof of the untapped power and potential of financial analysis.

In fact, financial analysis and reporting are one of the bedrocks of modern business. Financial analysis and reporting offer a level of insight that helps businesses remain compliant while streamlining their income or expenditure-centric initiatives across the board.

Financial reporting refers to standard practices to give stakeholders an accurate depiction of a company’s finances, including their revenues, expenses, profits, capital, and cash flow, as formal records that provide in-depth insights into financial information.

Each of these financial KPIs is incredibly important because they demonstrate the overall ‘health’ of a company – at least when it comes to the small matter of money. These types of KPI reports don’t offer much insight into a company’s culture or management structure, but they are vital to success, nonetheless.

The Benefits Of Financial Reporting

Financial reporting provides useful information that assists the company in a number of ways. A strong and reliable financial reporting system across sectors encourages healthy competition and allows capital inflows. It improves management in communicating the company’s previous accomplishments and future goals.

Here’s an in-depth look at real-world use cases that we at Tize want to share. The following points are what we consider to be the essence of financial reporting. Consider these as the key benefits of financially-based reporting and analytics.

Improved debt management

Debt can cripple the progress of any company, regardless of sector. While there may be many different types of financial reporting concerning purpose or software, almost all solutions will help you track your current assets divided by the current liabilities on your balance sheet to help gauge your liquidity and manage your debts accordingly.

Debt may stifle any company’s growth, regardless of industry. While there are many various forms of financial reporting depending on the purpose or software used, practically all solutions will let you track your current assets split by your current obligations on your balance sheet to assist you to measure your liquidity and manage your obligations appropriately.

Trend identification

Regardless of what area of financial activity you’re looking to track, this kind of reporting will help you identify trends, both past and present, which will empower you to tackle any potential weaknesses while helping you make improvements that will benefit the overall health of your business.

Real-time tracking

By gaining access to centralized, real-time insights, you will be able to make accurate, informed decisions swiftly, thereby avoiding any potential roadblocks while maintaining your financial fluidity at all times.

Liabilities

Managing your liabilities is a critical part of your company’s ongoing financial health. Business loans, credit lines, credit cards, and credit extended from vendors are all integral liabilities to manage. By using a financial report template, if you’re planning to apply for a business expansion loan, you can explore financial statement data and determine if you need to reduce existing liabilities before making an official application.

Progress and compliance

As the information served up by financial reporting software is both accurate and robust, not only does access to this level of analytical reporting offer an opportunity to improve your financial efficiency over time, but it will also ensure you remain 100% compliant – which is essential if you want your business to remain active.

Cash flow

Big or small, an organization’s cash flow is essential to its ongoing financial health. Working with a mix of detailed metrics and KPIs, it’s possible to drill down into cash flow in relation to anticipated profit and liabilities, keeping your monetary movements secure and fluent in the process.

The income statement reports a company’s profitability but provides no direct information on the company’s cash flow. Investors are paid back with cash from all sources, not revenue from activities. The cash flow statement depicts the flow of funds between the firm and outside contractors over a period of time. Investors can tell if a firm has adequate cash to cover expenditure and acquisitions by looking at this statement.

Communication & data access

Any modern financial analysis report worth its salt is accessible to and optimized for a multitude of devices. By gaining unlimited access to essential financial insights and data, you can respond to challenges swiftly while improving internal communication across the board. If everyone understands emerging trends and can share vital financial data, your organization will become more efficient, more innovative, and safeguarded against potential compliance issues or errors.

Simplify Your Taxes

The most convincing explanation to utilize financial reports is that you must and are obligated to do so by law. These reports are used by the Internal Revenue Service to ensure that you are paying your fair share of taxes. Financial reporting that is accurate reduces the chance of errors and saves a lot of time. It alleviates the overall strain of submitting your company’s taxes each year.

Make Better Financial Decisions

When a company has to make a decision, financial accounts must be examined. Managers can assess the worth of a company’s present assets to determine if it can afford to buy more. Managers can determine if assets need to be sold off when their value has declined significantly.

Importance to the Shareholders

Shareholders should be aware of the relevance of financial analysis and statements. If you own stock in a corporation or are an activist investor with a large stake in the company, having complete disclosure of all assets, liabilities, cash flow, revenues, and corresponding corporate costs is critical. You’ll also want to know whether the firm is doing something it shouldn’t be doing.

Crunching Figures, Hidden Numbers.

More than just a typical accounting procedure, financial reporting reveals a company’s financial information and performance over a specific time period. A financial report, in basic terms, is essential for understanding how much money you have, where it comes from, and where it needs to go.

Here at Tize, we get you past the goal of financial reporting.

We help you keep track of, analyze, and report your company’s earnings through cutting edge CRM that harnesses the power of financial information and data available. No hidden numbers to worry about, just crunching figures that matter for every single report.

Only Kung-Fu could do better in breaking the bank. Hi-yaah!

The Importance Of Financial Reports For Entrepreneurs

Why check and balance is essential in running a business

Many entrepreneurs get too overwhelmed with financial reports that they try to avoid it. When we are starting up, we tend to focus on everything– products, marketing, sales leads– except financial reports.

However, no matter how you want to avoid it, as an entrepreneur, it is your business to know where your money is coming from, how much money you have, and where your money needs to go. Well-prepared financial reports will help your business to the next level.

Our business is knowing how we run a business, and financial reports delineate where our financial position is.

Think of your financial reports as like a financial dashboard of your business. When your business is self-sustaining, it is imperative to get these financial reports set up. If you plan on getting a loan or financing options, your reports will be your profile for the banks or any financial institution for granting you a loan. Rather than underestimating their assertion, you can do your independent analysis and foster counter-offers as you negotiate.

No matter what size or industry your business is in, there are three financial reports that all entrepreneurs must know on the back of their hands: (1) Income Statement, (2) Balance Sheet, and (3) Statement of Cash Flows.

The Importance Of Financial Reports For Entrepreneurs

Income Statement

An Income Statement also called Profit and loss is one of the major and compulsory financial reports. It gives data that measures the profitability of your business from gross, operating, pretax to after tax.

This is the basic formula of an income statement. The end goal here is to get the Net Profit of your business for an accounting period– can be monthly, quarterly, or annually. It is the net profit that will tell you if your business is profitable or not.

Your business’ income statement will show the real strength and acquiring influence of your business throughout a time length. It gives a reasonable image of whether your business activities are bringing out a profit or a loss in the wake of considering every one of the connected consumptions. Thus, your organization can make restorative moves if there is a need to do as such.

Balance Sheet

While the income statement answers your question on how profitable your business is, the balance sheet will answer these main questions: 1.) What revenue is the certain business generating? 2.) What are the costs incurred in generating the revenue? and 3.) How much investment do you have for the future growth of your business?

A balance sheet is a financial statement that reports your business assets, liabilities, and shareholders’ equity at a specific period in time. Because it summarizes your business’s finances, the balance sheet is also sometimes called the statement of financial position. It reveals your business’s overall financial health. At a glance, you’ll know exactly how much money you’ve put in, or how much debt you’ve accumulated. Or you might compare current assets to current liabilities to make sure you’re able to meet upcoming payments.

All balance sheets are organized into three categories: assets, liabilities, and owner’s equity.

• Asset: pertains to anything the company owns that is of value; this description also extends to cash.
• Liabilities: anything a company owes, either to people or other businesses
• Owner’s Equity: represents funds that would be available to the collective owners if the company were to sell off all its assets and pay all of its liabilities.

Statement of Cash Flow

This statement indicates incoming and outgoing cash flows that affect the condition of your funds. Statement of cash flow is an analytical presentation of the data presented in your balance sheet, concerning the change in funds that have been made in the reporting period.

This statement answers the question of whether your business is liquid enough to cover short-term payments rather than relying on credits. The statement enables users of the financial report to determine how well your business’ income generates cash and to predict the potential of your business to generate cash in the future.

Cash flows should be indicated separately for particular areas of activity: operating, investing, and financing. Operating activities detail cash flow that’s generated once the company delivers its regular goods or services, and include both revenue and expenses. Investing activities include cash flow from purchasing or selling assets, physical property such as real estate or vehicles, and non-physical property, like patents—using free cash, not debt. Lastly, financing activities detail cash flow from both debt and equity financing.

Why are financial reports vital when running a business?

Every entrepreneur needs to know these reports since it gives you data that helps you in making business decisions and it also gives you data about the financial circumstance, financial execution, and changes in an element’s financial position that are usable by a wide scope of clients in settling on their financial choices.

When your business has to make a decision, financial reports must be examined. Managers can assess the worth of your business’s present assets to determine if it can afford to buy more. Managers can determine if assets need to be sold off when their value has declined significantly.

From the financial reports, you can determine your business financial condition and how it has worked during the periods for which the investigation is led, and what are future patterns around there.

The pitch of a cutting-edge business climate is described by the amazing dispatch of boundaries that leave an imprint on the organization that works in it. Hamilton, executive, and originator of Sageworks, a financial data organization says. “You don’t want to be worrying about paying the next bill. You want to be focused on growing the business.”

Tragically, regardless of how skilled and submitted you are to your products or services, if you don’t take care of the financial side of your business, it’s probably going to fizzle.

The importance of financial reports doesn’t stop on the internal management, it also applies to external stakeholders who should be aware of the relevance of your business’s financial reports. If someone owns stock or is an active investor with a large stake in your business, having complete disclosure of all assets, liabilities, cash flow, revenues, and corresponding business costs is critical. Stakeholders can tell if your business has adequate cash to cover expenditure and acquisitions by looking at your financial reports. It will also tell them whether your business is doing something it shouldn’t be doing (like in the case of Enron).

Financial reports, we may say, provide useful information that assists your business in several ways. Strong and reliable financial reports across sectors encourage healthy competition and allow capital inflows. It improves generally in communicating the business’ previous accomplishments and future goals.

It may be too intimidating to emerge yourself in the accounting side of your business but knowing and understanding these reports will help you, your management, and your stakeholders.

Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2008). Managerial accounting. Boston: McGraw-Hill/IrwinBondarenko, P. (2019, October 7). Enron scandal. Encyclopedia Britannica. https://www.britannica.com/event/Enron-scandal

Cashing Out!

The Important Role of Financial Management in Business.

When running a startup or any business enterprise, understanding this simple thought helps to  keep things in the proper perspective. Cash is King.

Scratch. Wampum. Dough. Sugar. Clams. Loot. Bills. Bones. Bread. Bucks. Money. 

That which separates the haves from the have-nots. Most people, commonly entrepreneurs, possess a fundamentally flawed view of money. Especially the role of financial management in business. 

But what is money? How large is the role played by finances when running any type and scale of business? Simple. Money is everything if you don’t have it, right? Here’s something to ponder on; Half of all American adults have more credit card debt than savings. 25% have no savings at all, and only 15% of the population is on track to fund even one year of retirement.

Cash Is King.

There isn’t any other way to wrestle this fact. For most people, money is more than just an agreed-upon unit of exchange for goods and services. Some believe it to be intangible in ways. Believing it can buy security or happiness, even peace of mind.

In business, whatever the scale or size, money comes often as a measuring device. Finance managers face the hard reality of forecasting how much money a business enterprise can actually accumulate in its projected run. They do analytics day in and day out. You see, economic factors affect how money functions regardless of who’s president, the economic bubbles bursting, bad breaks, or bosses.

Financial management in business is essential. It’s about your company work ethic. Specifically the one that will make or will have made your startup, the greatest on Earth. It’s much like bucking the neighborhood tea party’s opinion as to what constitutes a good parent. It’s deciding to miss the ball game, the play, the concert, because you’ve resolved to work and invest in your family’s future and take responsibility for the consequences of those actions.

Patience. Frugality. Sacrifice.

When you boil it down, what do those three things have in common? Those are choices. Money is not peace of mind. Money’s not happiness. Money is, at its essence, that measure of an entrepreneur’s choices.

Today, let us begin to educate ourselves with the measure of our obvious choices when it comes to financial management. Let’s read about habits that help boost our financial IQ, and address all the pain points that come with lack of finances.

Financial Stability.

There is no question about cash flow being important in running a business. The risk of losing control over finances will often leave the entrepreneur running a business to the ground, or leaving it financially challenged. What are businesses, especially startups, financial pain points likely to face? Are you prepared to tackle them and survive any financial instability?

Because we care about your pain, here’s our list of possible financial concerns that a business can encounter and solutions should you ever face any of these challenges.

‍Insufficient working capital

For any business, working capital is the lifeblood that flows through its veins. A responsible entrepreneur must, at any point, have working capital worth at least six months of expenses. Without this money in hand, you won’t have the breathing space required to acquire new customers or build more products.

Solution:
The easiest way to improve your financial situation is to try and cut your expenses by 20% and put that amount aside every month to build your working capital. If you’re just starting out, ensure that you are adequately financed.

Underestimating startup costs

Most entrepreneurs tend to underestimate how much starting a business will cost them. Higher figures might scare you, and you might be tempted to underestimate your needs, worrying that investors may not be willing to finance your startup. The reality is quite different. Banks look for realistic plans when approving investments. If you borrow less money than required, you could run out too soon and will need to borrow again later.

Solution:
Factor in all worst-case scenarios and estimate startup costs accordingly. You will only be delighted when half your fears are not realized. By borrowing the amount you know you really need, you are more likely to survive and grow.

‍Sales good, Profit low

This could indicate overspending or some hidden costs eating away at your bottom line. Are your expenses out of control? How can you get out of this setback?

Solution:
Make sure you are buying the right materials at competitive prices from vendors who bring value. If need be, revisit vendor selection and old contracts to renegotiate prices. If you make a lot of online purchases, use free apps and tools, such as HDFC Bank SmartUp, to track your spends and streamline purchases.

Late client payments

A large percentage of small businesses suffer from delayed payments. If it happens too often, it can eventually kill the business. You need to create policies and processes to circumvent this situation.

Solution:
Avoid offering business credit to new customers. Make sure everyone is clear about payment policies. Incentivize early payments, offer multiple avenues for payment, and enforce late payment penalties. And do all this with a smile.

Bad cash flow management

Unorganized bookkeeping habits are a business’ bane. Managing books of finance is critical to run a successful business. Unfortunately, most small business owners are bad record keepers. Monitoring cash flow regularly can let you know in advance when you might need money. Do you find it difficult staying on top of your cash flow?

Solution:
There are several free tools, templates, cash flow calculators, and paid apps that you can use to gain better control over your cash flow management. Give us a call, drop us a note, we’re here to help you out, because that’s what we do here at Tize. We care a lot!

Cash Is King.

Finances are what make a business run, thus it is more than critical to be financially prudent from the onset. Tracking your cash flow efficiently helps you not only to stay competitive, but it helps you as an entrepreneur grow hairs on your chest. The mastery of money in business, the vital role it plays in running a business, is, has, and will always be, top priority. 

Here at Tize, we help the budding business entrepreneur, YOU, to do just that.