Let's face it - any small business is just a crisis away from the poor financial performance or worse. There is nothing more helpful than avoiding or minimizing a problem before you know what to expect. With proper financial reporting services, you can gain visibility in your current and future cash position, ensuring that you always have the lead time to avoid reactions and crises. Keep in mind from the report that one of the main reasons for the failure of startups is the depletion of cash required to continue the operation. Even if you can avoid a cash crunch, it can be a speed killer that crushes other opportunities. The cash crunch involves a lot of attention to keep the business viable, and there is often little time to seize the opportunities that arise during such a period.
It is not uncommon for a business or non-profit to be blinded by a lack of cash that threatens the organization's very existence due to insufficient financial reporting services statements. If you're dealing with obsolete or, worse, erroneous financial statements, you're making decisions that lead you to financial trouble. Meaning, even if you are currently generating cash flow estimates, they are meaningless if the data behind them is incorrect.
Once in crisis, financial reporting services are the key to your survival. Here is the story of a change, where reporting services helped an organization strengthen its confidence in its financial accuracy and lay the groundwork for new growth with a no-confidence vote from the board.
When an organization emerges from such a test, they urgently need to establish strict cash management practices and robust cash reporting to feel confident that such a crisis will never happen again. Would it not be better to be active and ensure that appropriate measures are in place before this situation becomes a reality? Imagine having a cash burn rate chart below to see your cash position and run each month. A financial reporting service can offer a view of your cash position, week after week, month after month (or just during the challenging cash period).
Avoid defects and fraud.
Accurate financial reporting is the foundation of sound decision-making. It is also a condition for building the confidence needed to take action. And it does not stop with you and your management team. Nothing will tarnish your reputation with stakeholders and potential sources of capital faster than reporting mistakes.
The best way to accurate reporting and deal with fraud
Regularly establish strict internal controls and review reports. It allows you to quickly identify irregularities and prevent the situation from spiraling out of control.
The cost of ignoring this advice is high. Even if you have not personally experienced fraud, most people understand this widespread problem. If we look further at the 2018 study on fraud by the Association of Certified Fraud Examiners, we will find:
Not only are small businesses disproportionately fraudulent, but they also suffer the most considerable intermediate losses ($ $ 200k) of business size.
Weaknesses in internal control were responsible for almost all frauds. And that financial statements fraud schemes are the most expensive.
Most of the fraudulent organizations did not achieve anything.
How to set up a tremendous financial report. Effects of financial reporting on your firm's health and profitability. But to get there, it must take active steps to build a solid accounting foundation. Here are some critical steps you can take to begin the process of preparation for mediation.
State your goals: Make sure you have clear, measurable short-term and long-term goals.
Direct your reporting: Identify financial insights or key performance indicators (KPIs) that you need to make informed decisions.
Straighten and equip your team: Make sure they have the ability, mindset, and availability. Or outsource your finance team management to avoid headaches.
Choose the right tools: Software packages help keep your information organized, secure, and accessible.
Ensure accuracy: Make sure there are internal controls.
Consistency of Demand: Establish and document standard operating procedures and maintain compliance.
Create timely, usable information: Create monthly reports that are easy to read and review.
Know your cash position: As mentioned above, cash available when needed will make or break your business.
Evolution: Opportunities and challenges change over time; use these financial insights to make informed decisions and stay ahead of your competition.
If you are not ready to deal with these steps yourself, now is probably the time to outsource your finance function. Allow the outsourced finance department to have a positive impact on your organization. And consider what your Growth Dashboard might look like; imagine how it would give your organization a competitive advantage.