Requirements for Financial Statements
- Corporate tax filing purposes
-Stakeholders or investors requiring an audit or review of the company's financial statements.
-Banks requiring financial statements by an accounting firm as part of their decision making process to approve a business loan.
Having Financial statements for your business is important to analyze the numbers and see how certain aspects of your business are performing. The process of generating financial statements will begin by obtaining a summarized statement of accounts or trail balance from your bookkeeping software. Most bookkeeping software such as sage simply accounting, quickbooks, or jd edwards, etc. will have a function to generate financial statements for the month, quarter, or year end. These may or may not be sufficient for tax purposes as many adjustments will need to be considered for filing a corporate tax return. If your financial statements are required for financing requirements, the lender will want to see financial statements generated by a 3rd party accounting firm.
If financial statements from an accounting firm are required you have 3 options:
- Notice to Reader Financials: These are financial statements compiled by an accounting firm that makes them appropriate for tax filing purposes, or lower financing requirements.
- Review Report: This offers a moderate degree of assurance that the financial statements are not materially misstated and are in accordance with accounting standards ( ASPE, IFRS, or NPOs)
- Audit Report: This offers the highest degree of assurance that the financial statements are not materially misstated and are in accordance with accounting standards ( ASPE, IFRS, or NPOs)
Be sure to speak with your accountant, business advisor and banker to get an understanding of what type of financial statements your business requires.
Once you financial statements for your business, it a good idea to have these generated and reviewed on a monthly basis to ensure management is analyzing the performance of the business and review key areas for improvement.
You want to asses how each aspect of your business is performing, and develop key performance indicators ( KPIs) to review the sales and operations closely.
Some of the key performance indicators are noted below:
- Number of new customers retained in the month vs last month.
-Cost to acquire new customers
-Timing of the sales cycle
-Inventory turnover ratio if applicable.
-Gross margin analysis per product/service or division.
- Expenses incurred to date, compare month to month and assess whether there are cost overages on certain products/services or customers.
Should you have any questions, please contact a MP Group Partner below.