The Financial Statement for your business is probably the single most referred to report that your company will produce. It comprises several other documents including the Balance Sheet and the Profit and Loss statement and provides all of those looking for a complete financial picture of your business with a detailed account.
So, who actually uses the information in a financial statement? Which groups of people find such things essential and why?
Owners & Managers
First and foremost you will need the information yourself as the owner of the business without the information in a financial statement it would be very difficult to make any important business decision. Anyone that you may have put in charge of your company will also need to access the financial statement not only in order to run things on a day to day basis but to allow them to provide more detailed reports to shareholders.
If someone has a vested interest in the success or failure of your business they will often require seeing regular and up-to-date financial statements to check on their investment; if they need to withdraw funds the financial statement lets them know what if anything is available.
Anybody who is considering extending finance to your business has to have access to your business’ financial statement; whether a high street bank or an independent investor, they will be looking to ensure that you are a safe bet to pay the money back with interest.
Before any potential investor makes a decision to put money into your venture, they will want to view your business’ financial health, the way that they will do this is by looking at your financial report; investors, like lenders, will want to judge your company sound, so that they can guarantee a return on their investment.
Employees may need to see the firm’s financial statement at one time or another, to work out anything from compensation, to their prospects for promotion.
Anyone selling anything to your business that may be looking to extend credit terms will want to assure themselves that you can pay and that you are not going to end up on their bad debtor list.
The Government will need to see your business’ financial statement regularly, as assessing your tax requirements and checking that you are paying your dues is probably one of the most important reasons for the statement’s existence.
Believe it or not there are many reasons why the media and/or the public at large may be interested in the financial statement your business produces, especially if you are a firm in the public eye or with whom they feel a special connection; also large employers in certain areas will be of interest as their success or failure is often tied in with that of the community as a whole.
Never has one business report meant so much to so many; it really is the ‘go to’ report for anyone who needs to make a decision based on the financial health of your company and as such is probably one of the most important things your business will ever have to say.