Business success is determined by a variety of elements, particularly since each company defines success differently. Nonprofits, for example, need income to operate, but they often measure success in terms of progress toward their goals.
Your finances are important, regardless of how you measure success. Even if profit isn’t your main aim, your financial situation is inextricably linked to your degree of achievement.
Nonprofits, for example, may only donate to their cause to the extent that their income allows. When they run out of money, they frequently put their projects on hold.
Even if your objectives aren’t monetary, you should always keep an eye on your money. When you know where your company is financially, you can modify your tactics to keep it on track to meet your objectives.
You should run financial reports on a daily, weekly, and monthly basis to see where you are financially. To run such reports, though, you don’t require an in-house accountant.
Datapine, for example, makes it simple to automate financial reporting using dynamic tools that provide user-friendly comprehensive information. You’ll utilize your financial reporting tools more often if they’re simple.
Your funds have a crucial role in your success
Your marketing activities are fueled by money, and your whole organization is driven by it. You must pay your employees, landlords, utility providers, shareholders, and other stakeholders. Your company would ultimately shut down if you stopped paying your payments.
Financial reporting, on the other hand, is the only method to see where all of your money is going. You won’t know whether you’re in the red today or if you’ll be in the red next month if you don’t have financial reporting. It’s difficult to make proper business judgments when you don’t know where you stand.
Here are nine methods to get started with automatic financial reporting if you’re just getting started with it.
1. Make use of automated software from a trusted source
You’ll never be able to crunch your financials manually enough to provide useful reports. Even if you spent every waking moment crunching figures, your results would pale in contrast to those produced by automatic software.
So, if you’ve been using Excel or handwritten reports, it’s time to upgrade to automated reporting software.
One thing that automated software can’t do is provide a visual representation of your data. Sure, you could make hand-drawn graphs or input the data in Excel, but that’s inefficient and time-consuming.
Automated software crunches statistics nearly instantaneously, presenting you with current data on an easy-to-understand business intelligence dashboard. The greatest aspect is that you can share your data with others by quickly creating bespoke reports.
Predictive analysis is a feature of advanced financial reporting solutions that helps you develop business projections.
2. Be prepared to account for changes in the SEC
The accuracy of financial reports is only as good as the data you supply. Your money will change as SEC requirements change. Your reports may not be truthful if they are based on outdated SEC requirements.
The Financial Accounting Requirements Board (FASB), for example, has published new revenue recognition standards. There are also new rules for credit losses and COVID-19 deferrals for specific businesses.
Companies will be compelled to include every lease on their balance sheet, according to Forbes. Any business having a trade receivables or investment portfolio will also be obliged to assess and disclose any credit loss.
3. Be honest with yourself
Has the COVID-19 epidemic had an impact on your company? Is there a danger that your company may fail in today’s volatile economy? Is your cash flow sufficient to get you through another year?
It’s critical to be realistic about your capacity to keep your company functioning. If your financial reports reveal any issues, now is the time to address them.
If you are unable to resolve the issues, you may choose to see a financial specialist for advice on cost-cutting measures, such as downsizing.
Downsizing might potentially be beneficial to you. You’d save thousands of dollars in rent, internet, and energy expenses if you got rid of your actual workplace, for example. Working remotely with workers may save you a lot of money, time, and resources.
4. Switching to a new system is worthwhile
Nobody enjoys switching from one operating system to another. Even changing email providers is inconvenient. Switching to an automated financial reporting system, on the other hand, is well worth the time it takes to complete the task.
You’ll spend a lot of time going through old files to retrieve past data if you’re switching from Excel spreadsheets. Furthermore, because of the predictive algorithms used to produce future estimates, you’ll want to import your previous data.
5. Be willing to learn
When you use an automated system, you’ll undoubtedly learn a lot more about financial reporting than you did previously. Of course, your financial statement will still inform you how well your company is doing, but you’ll have a better understanding of the specifics.
You’ll also get a crash course in financial terms you may not be familiar with. Jargon isn’t always bad; it’s just a language peculiar to a given industry or area.
You may start learning financial jargon by visiting Investopedia’s financial jargon glossary at any time. Although you are unlikely to come across all of these phrases in your automatic reporting system, you may come across some that are unusual.
6. Be prepared to account to investors for non-financial facts
External elements such as the economy, the status of your sector, competition, market pressures, and new technologies are not taken into account by your financial reporting system.
These aspects will not be reflected in any financial statements you make for investors, but investors will be aware of them. This might have an impact on your investment discussions.
7. Use Bitcoin with caution
Bitcoin may wreak havoc on your financial statements. That isn’t to say you should avoid it totally, but you should proceed with caution. Bitcoin, for example, is considered as an asset, and since its value changes, any Bitcoin you own will be subject to capital gains taxes.
If your customers or clients pay you with Bitcoin, you’ll need an accountant to assist you manage your money. There are severe tax restrictions that apply to storing and utilizing Bitcoin, and after reading them, you may decide to discontinue taking cryptocurrencies entirely.
Another consideration is whether or not to pay personnel in Bitcoin or other cryptocurrencies. Are you considering using Bitcoin to pay your employees? That is something you should avoid. It is not lawful to pay workers in bitcoin, even if they desire it.
The Fair Labor Standards Act (FLSA) in the United States mandates companies to pay employees “in cash or a negotiable instrument payable at par.” Unfortunately, Bitcoin does not meet this criterion.
Employees in several states are required to be paid in US dollars. California, Washington, Georgia, Maryland, Delaware, Pennsylvania, Michigan, New Jersey, Texas, and Illinois, according to JD Supra, are among these states.
Texas may be the only state where receiving Bitcoin wages is permitted. This is because workers may consent in writing to be paid in “another form” under state law. The FLSA, however, would still apply, rendering Bitcoin unlawful as a form of payment.
This is genuinely beneficial to everyone. If you paid your workers in Bitcoin and the value of the currency plummeted by 30% before they could cash out, they could be able to sue you. Because the legislation isn’t clear, it’s difficult to tell for sure.
8. Make sure the data is correct
You’ll draw inferences based on the figures and percentages you see in your financial reports. Is the result accurate? Make sure the data you’re supplying the system is correct.
Accurate data is required for accurate financial reporting. If you’re going to make important business choices based on the information in your reports, you need to be sure the raw data is correct.
There are several causes that might cause your data to be skewed, including both human and system faults. As a result, only utilize a renowned automatic reporting system that has been shown to be accurate and dependable.
9. Be willing to make adjustments when they are required
Be ready and eager to make adjustments if you notice figures in your reports that you don’t like. If performance is low, for example, you may want to double-check your KPIs to make sure you’ve allocated them to the proper individuals.
Managers often assign the incorrect KPIs to staff who have little to no influence over the ultimate outcome in that area.
If anything in your reports doesn’t add up, go to your finance department to figure out what’s going on.
The money you count is less essential than financial reporting
You may have $5 billion, but if you don’t keep track of your finances, you risk squandering every cent and stifling your capacity to attain any degree of success.
You don’t only need money; you also need to know how much you have, where it comes from, and where it goes for costs.
Financial reporting is your golden passport to success, whether you measure success in terms of money, making a difference, or becoming a household brand.
Thanks to Peter Daisyme at Business 2 Community whose reporting provided the original basis for this story.
