A Business Accountant’s Guide to Analyze and Interpret FINANCIAL STATEMENTS!
A business accountant not only helps to keep track of all the expenses but also provides a snapshot of your business’s financial health by appropriately managing financial statements. “Keep in mind that a good financial expert will save the business money over and above his/her fees�
WHAT ARE FINANCIAL STATEMENTS?
Financial statements are the basic and formal annual reports of a business, which helps to convey information about its financial health, cash flow, and recent results.
In short, financial statements tell business owners where their business is heading.
INSPIRING WORDS
Why are Financial Statements Crucial? The general-purpose of financial statements is to check the financial position & cash flow of an organization. It helps a business to identify when they’re running out of money and the right time to conserve resources & prepare strategies to remain in the game.
Why do Businesses Fail to Manage? A report taken from Jessie Hagen of U.S. Bank shows the percentage of businesses who failed to manage their finances because of the following reasons: 82% of businesses face cash flow management issues due to poor understanding of cash flow statements.
78% of businesses lack a well-developed business plan, including insufficient research on business & finance management issues
77% of businesses fail because they don’t price properly
70% of businesses ignore the areas where they don’t do well and don’t seek help from the experts.
Financial Statements Consist of the following Key Features:
Cash Flow Statement A cash flow statement is considered as the backbone of any business, which gives an idea of the business's income and expenditure source.
Balance Sheet Assets: (resources that help to generate profit for your business) Liabilities: (an amount a business owes) A balance sheet statement shows how much cash you have in your hand, which includes:
Income Statements An income statement of a business describes the company’s revenues and expenses during a particular period of time.
Shareholders’ Equity This is one of the required financial statements, which summarizes all the changes that occurred in the stockholders' equity accounts during the accounting year.
Reporting on Operating Results This type of statement shows a business’s expenses & revenues and calculates net profit or loss in a specific period of time.
HOW DO FINANCIAL STATEMENTS HELP BUSINESSES GROW? Having accurate cash flow reports, balance sheet and income statements, give businesses up-to-date data, which helps them to meet their various needs.
Commom Mistakes Businesses Commit in their
Financial Statements
BALANCE SHEET MISTAKES Not able to classify assets and liabilities
Data entry errors
Errors of omission
ERRORS IN INCOME STATEMENTS Misclassifying expenses
Not saving receipts
Failing to schedule backups
OTHER COMMON ERRORS ARE Transposition errors, when the numbers are reversed, i.e., 52 is written as 25.
How do we keep up?
Calculation errors, when the amount is deducted rather than adding.
Reversed entries, when the accounts used are correct, but the amount is debited rather than being credited, and vice versa.
Compensating errors, these types of errors can be tough to determine when they occur in the same account & the same reporting period since the net effect is zero.
CONSTANT EVOLUTION! Incorrect presentation of current and non-current liabilities.
HOW TO OVERCOME THE BURDEN OF A FINANCIAL STATEMENT PREPARATION? For any organization & for the people who run it, the importance of accurate financial statements cannot be underrated.
HIRE A BUSINESS ACCOUNTANT Hire an accountant for your business. Not seeking help when needed & a non-training staff can lead your business towards losses.
So, to avoid common financial reporting mistakes, you can hire an expert to prepare statements.
your financial
USE ACCOUNTING SOFTWARE Try
to
make
financial
statements
more
efficient
&
transparent by managing them in one place. You will find various cloud systems with strong reporting tools that can generate variance reports, graphs, key metrics, etc.
QuickBooks, Wave or Xero are some ofthe leading cloud accounting software.
With the right and on-time reporting, you can make better decisions and stay on top of the game. Key benefits of outsourcing are:
Accurate and timely reporting is guaranteed at low cost as compared to an in-house accountant
Builds a reliable reporting system for accurate analysis
It keeps you aware of your cash position, profit/loss & other lifelines
Understand the financial foundations of your organization
Build a strategy for your future growth
We, at Cogneesol, will help you to evaluate your business’s strengths and weaknesses & unlock the potential for financial analysis & reporting to achieve your business goals.
Talk to us! Address: 30 Wall Street, 8th Floor, NY
Contact No: +1646 688 2821
Email Address: info@cogneesol.com
www.cogneesol.com