A compiled financial statement will give your business a critical, realistic and objective insight into its operations. It’s the type of report that will help business owners make better decisions, but also show third parties and potential investors how the company is doing.
From this point of view, a financial statement could help in the relationship with a lender or investors, but also pinpoint the right direction for success.
In theory, it sounds simple, but let’s see when your business may need compiled financial statements.
Although this shouldn’t be the primary reason behind an audit of financial statements, the truth is most businesses rely on such services when a third party requires financial information.
For example, if you need a business loan, your lender may require you to provide an audit. You might be asked for financial statements, but compiled by a professional accountant too.
This isn’t necessarily about getting money from a lender, but also about further investments to grow your company. Anyone in their right mind will want to know more about where their money is going, hence the necessity of these statements.
Potential investors and stakeholders view detailed, professionally audited financial statements as a fundamental indicator of a company’s operational integrity and financial health.
Talking about the main reason behind financial statements, they should be done even if you don’t need external investment, only to help you understand every bit about the financial side of your business.
Success can be determined in more ways.
If you run a small company, compiled financial statements represent a good idea because they give third parties more confidence in your operations. Your financial records are transparent and you’re not afraid to showcase this aspect.
Furthermore, this option is ideal for small companies because compiled financial statements normally cost less than internal audits or other similar services. But then, there are also situations when audited statements are required.
A small café with $70,000 annual profits will most likely require compiled financial statements to get a loan from a bank. On the other hand, a public company with $250 million in revenue will need to undergo an actual audit.
It depends on where the company is registered, of course, but small companies can usually do with compiled financial statements. As for large companies, they might be required by the law to conduct annual audits.
Success isn’t always defined by what papers say. It’s not defined by third party investments or loans either. Each company is different, meaning compiled financial statements can offer valuable insights even if you’re not trying to expand.
Knowing how you’re doing financially will showcase a better direction for the growth of the company. This means your decisions will be more informed, rather than just guesswork. Risks are significantly reduced, too, not to mention the possibility to identify potential problems at an early stage.
Having all this financial data will help identify potential fraud as well, regardless of the size of the company.
Without any of these, decisions are based on visions and rough numbers. In other words, small issues will go undetected and they’ll only aggravate from that point on. Simply put, compiled financial statements will reveal data that can help your business achieve success.
Performance tracking through compiled financial statements is like having a financial health checkup for your business.
When you regularly monitor your financial progress, you’re not just looking at numbers, you’re gaining a deep understanding of your company’s true financial condition. It gives you a clear picture of where your company stands.
Whether you’re a small startup or an established company, tracking your financial performance gives you the confidence to make smart, informed decisions that can drive your business forward.
Whether you conduct this audit for an investor or maybe before a partnership, compiled financial statements represent a boost in terms of confidence.
When discussing directly with managers, rough numbers could help investors or lenders get an idea. But a rough idea isn’t enough. Before compiling financial information, an accountant or auditor looks at all the financial data.
Those interested in these numbers will understand that they’re not just rough numbers put together by a manager. Instead, they’re taken out of verifiable financial records.
The professional scrutiny behind these statements provides an additional layer of assurance, demonstrating the company’s commitment to accuracy, accountability, and high standards of financial management.
As a short conclusion, running a business isn’t just about having a great idea but about understanding your financial journey. Compiled financial statements are like a roadmap that helps you navigate through challenges, make smarter choices, and show the world you’re serious about your business.