An accurate financial statement is important for any business. Financial data includes cash flow statement, income statement and shareholders equity statement. All are essential in developing strategies that impact either the success or failure of any business. The smallest digits in a balance sheet have a huge impact on any business. When assets depreciate in value the percentage has to get deducted from the revenues earned In order to make a report, businesses have to know how much the business is making. Investors and developers get to know how much the business is making by numbers such as profits before and after tax.
The tax rates of corporate are usually on the higher side. Higher profits means higher taxes. If you don’t have a financial statement, it can be devastating how much you make after paying for taxes. Having the most accurate financial data helps companies avoid depletion of resources. Many companies fudge their financial records to avoid paying taxes to the government which can lead to imprisonment or paying heavy fines.
Financial statements enable companies to discover errors and avoid costly mistakes. Illegal activities are detected by investors and developers when the number don’t add up. Reconciliation talks helps in solving financial errors. This is why companies spend a lot of time checking their records of account by confirming each entry to avoid accounting errors.
Additionally, the only way a company can build trust for investors and developers is through an accurate financial record.
It is a sign that their investment is well taken care of. It can be devastating to find out that the balance sheet shows profits and later to find out that a company is hiding losses. Fudging of financial data can lead to closure of business, as it happened to large companies such as Enron and WorldChateau. This is why governments have become more strict rules concerning compliance and accounting. Cash from every source of the business is what pays back investors and developers. Financial data is used by investors and developers to know if there are enough funds to sustain the business and how much cash is used in purchasing of assets.
In order to improve payment cycles, financial data plays a major role. Outgoing payment such as daily wages and salaries has to be paid. Also, inventory has to be properly managed and stakeholder need to get their dividends. Mathematical calculations cannot be done with incorrect figures. To increase sales and boost finances, a company needs financial data to know how much a company makes. The only way investors and developers can know if their investment is safe and bringing in profits is by use of financial data. The want to know how their money is spent and what it is being used for currently.