When preparing financial statements for your business using a third party Chartered Accountant firm you want to determine the following: 1) What type of financials do you require? , 2) Who are the users of the financial statements?, and 3) What other consulting or advisory services can you service provider offer in conjunction with your financial statements and reports?
Financial statement reporting requirements:
When determining the type of reporting required you want to factor in whether you require year end, quarterly, or monthly financial statements to assess the performance of your business. You also need to assess whether these reports are going to be distributed to 3rd parties such as investors, financial institutions, or vendors. This is usually the first step in determining the reporting requirements, and finding the right partner to help you manage these requirements/deadlines.
The users of the financial statements:
If you are a private business that has a line of credit or borrowing facilities for new equipment or working capital needs then your bank will require 3rd party financial statements from a public accounting firm. This is a requirement since they want an independent party to report on the financial performance of the business when they are assessing the debt service ratios and repayment ability. Depending on the amount of financing obtained by the bank they may want to see a review or audit of the financial statements, since this is a higher level of assurance report.
For investors that have provided seed capital or private lending for the business, they will also want a review or audit by an accounting firm, this provides comfort over the numbers. Investors want to assess the performance of the business, see where their investment stands and whether certain covenants and rates of return are consistent with their expectations.
Having audited or reviewed financial statements will also help when targeting new investment in your business. New investors will likely request this, and if you have a track record of audited/reviewed financials before hand this helps smooth the process when working with new investors.
Additional consulting services:
When working with an accounting firm, you want to ensure they can offer additional services with respect to your financial statements reporting, such as tax compliance, consulting, and advisory support with respect to improving your financial statement process and controls. This will ensure that future assurance engagements are easier to execute and completed in a timely manner. It also helps if the firm has experience with specified procedures or due diligence engagements as part of the value added assurance & advisory offerings. Thus when your business comes across additional reporting requirements they can support you as your business grows.
For more information on the financial statements, reporting process and assistance to determine which assurance report best suites your needs contact us at 416-214-0527, or visit www.mpgroupcpa.com.