Updated: Dec 17, 2021
Most successful business managers use financial statements and other special reports to generate higher profits. If you haven't been using all the financial tools available to you, here are some ideas to get you started.
There is no need to feel intimidated by financial statements. If your company's record system is properly designed, you should be getting regular financial reports that are easy to understand. In addition to the traditional balance sheet and income statement, you should get special reports and ratios specific to your industry. You will be able to use this past performance information to help you create higher profits for your company.
Accurate financial reports compared with industry standards and with your company's past performance will also serve as an early warning system of problems or opportunities which need your attention.
How do you get the best financial information at the least cost? To begin with, there are three basic levels of financial statements: compiled statements, reviewed statements, and audited statements. The type of report you need may be specified by your banker or by an absentee owner. An owner who lives out of the area may require a higher level of report than one who works closely with the business.
Compiled statements Compiled statements are management's information put in the form of financial statements. The accountant is making no assurances as to the accuracy of the information in those statements. Because of the limited involvement by the accountant, this is the least expensive level of statements.
Reviewed statements Reviewed statements require more involvement by the accountant than is required for compilations, but less than is required for audited financial statements. The accountant needs to obtain a general understanding of the business's organization. There will be little or no verification of specific figures on the financial statements. Reviewed statements are often required by lenders and owners who do not require a full audit.
Audited statements Audited statements are the highest level of financial statements. Accountants must spend whatever time is necessary to allow them to express an opinion as to the accuracy of the numbers on those statements. Because of the time involved, audited statements are the most expensive financial statements. Unless an audit is required by outsiders, reviewed or compiled statements should do nicely for your company.
Do not hesitate to ask for assistance to leverage your financial information to enhance the profitability of your business.