Managing costs

Accurate financial reporting: 12 must-dos

The importance of accurate, ethical financial reporting can't be underestimated. 

It is critical to your business for a range of important responsibilities, including preparing accounts, evaluating tax liabilities, decision making, planning, and forecasting.

The many financial reports that must be prepared for your business provide you with the information needed to establish your business strategy, make management decisions, and understand whether your business is facing a challenge or an opportunity.

Why is quality financial reporting so important? 

Accurate financial reports:

  • deliver invaluable insights and the information you need to drive top-line growth and bottom-line savings, and manage risk
  • reflect good financial governance
  • empower you to plan for the future
  • reassure and build trust amongst investors and stakeholders
  • support your budget-setting decisions
  • mitigate errors or discrepancies
  • allow you to establish good payment cycles.

What are the consequences of poor financial reporting?

If any aspect of your reporting is inaccurate, it can have serious consequences for your business, including financial loss, and loss of your corporate image. 

Aside from the ethical issues in financial reporting that is inaccurate, dishonest reports can also attract attention from the Australian Securities and Investment Commission (ASIC) and other regulatory bodies.

12 steps for ensuring quality financial reporting

  1. Schedule the necessary time required for financial reporting. Make it a priority.
  2. Undertake timely financial reporting. Focus on current issues and future plans. Examine and correct any weaknesses in your financial systems.
  3. Understand the key business drivers and the resulting impact on the numbers. If necessary, get your accountant or business advisor to walk you through all the numbers and what they actually mean.
  4. Ensure you have the best systems and processes in place, including the latest financial tech software, systems and updates.
  5. Develop benchmarks to empower everyone in the organisation.
  6. Seek expert advice. A strong relationship with your accountant or business advisor can help ensure better financial reporting and earlier awareness of opportunities and threats.
  7. Utilise cloud storage. This will allow people to easily share and access documents – as well as work on them concurrently from different locations. This minimises the risk of data loss and inaccuracies occurring because of different versions of documents.
  8. Enable appropriate collaboration between all departments who contribute financial data, and have security protocols in place to ensure data is always secure.
  9. Ensure you have a centralised end point for all data in the reporting chain.
  10. Ensure financial records and reporting is owned by someone with full accountability, who is responsible for checking the data and signing off on its accuracy.
  11. Utilise big data analytics, which can contribute to more insightful reports by analysing reports and highlight patterns and causes an employee may have missed.
  12. Develop benchmarks. This enables everyone in the business to understand what constitutes a strong performance, making it easier to identify underperformers and opportunities for improvement.

Above all, accurate financial reporting is key to understand your business’ true position and making informed decisions. On the flipside, the dangers of inaccurate financial reporting are extensive – so it pays to do the right thing.

Your 2020 EOFY checklist

There’s no denying the COVID-19 pandemic has caused major disruptions for businesses around the country. But with the end of the financial year approaching, it’s more important than ever to be prepared and understand your obligations.

Use this free checklist to help tick off your end of financial year tasks.

Already a member? Get started
 

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