5 reasons why Accounting reports are important

No matter the size of your business or the products/services you offer, accounting reports are essential for you. More importantly, organizing these reports without errors and having them ready when needed will save you a lot of time, effort, and trouble.

Here are some reasons why accounting reports are important for your business.

Reason 1: They keep you on top of your business performance

Many small businesses fail because of poor financial management, and some never grow because they care less about their business status. You need accounting reports to tell you exactly how your business is performing at any given time.

Accounting reports help you stay informed on your revenue, your expenses, your assets, your liabilities, and any possible debts. They help you conduct business strategy reviews to know the strengths and weaknesses of your business. Also, they help you compare your business performance over months or years, to see what is really driving (or preventing) your growth.

Reason 2: They help you make good decisions

Business owners make decisions every single day for their businesses, and these decisions make all the difference between growing and dying brands. While successful business owners make highly informed decisions based on accurate data, unsuccessful business owners decide based on guesswork and assumptions.

Accounting reports are crucial for planning budgets and making future projections, because they ensure that you’re realistic in your business efforts. For instance, they keep you informed on your expenses and give you insight on where to reduce costs. Not having these reports can cause you to overstate your revenue and assets or underestimate your expenses and liabilities. As we’ve seen many times in the industry, such a mistake can shatter a business completely.

Reason 3: They’re essential to get investments and loans

Whether you need investments into your business now or you need them in the near future, accounting reports are necessary to get them. Every investor desires to know how a business is really performing, whether it is profitable, and whether they can trust you, the business owner, with their money.

In the same way, you need accounting reports to request a bank loan. Before they issue loans to business owners, banks usually request a set of financial statements and, in some cases, a cash flow projection for the next year. In such cases, you’ll need to have your reports in place.

Reason 4: They enable you to checkmate fraud

Fraudulent acts remain a big problem for many small businesses, but they can be prevented by preparing and keeping good accounting reports. For instance, billing statements and debtors lists keep you updated on customers’ activity with your business, and with them you can identify any financial errors or products/services that have not been properly accounted for. Also, keeping good expense reports greatly reduces the chances of employee theft by overstating their expenses.

Reason 5: You need them for tax time

When it comes to paying taxes, accounting reports serve two major purposes: they help you communicate with tax authorities effectively, and they help you pay the right amount of taxes, so you don’t pay more than you should.

Tax authorities collect taxes based on what is written, not what is spoken. That’s why all your records must be complete during tax time. More importantly, keeping good accounting reports means you don’t miscalculate in your tax amounts, because that money belongs to you and your business.