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Outsourced Accounting Services | The Impact Of Financial Statements On Business?
There are significant challenges that most entrepreneurs face when they open the business for the first time says outsourced accounting services. Since most business owners have business ownership experience, they have to learn very quickly about how to operate a business, while providing the service that they provide. Helping business owners understand how to be financially literate in their business can go a long way in helping them succeed in business. As Warren Buffett once said, accounting is the language of business. By helping business owners understand this language, this can help them not only avoid running into problems in their business, but make them successful in business and achieve their goals.
The first thing that business owners should understand when it comes to the financial literacy of their business says outsourced accounting services, is that what financial statement is, and how to read it. Financial statements are the formal statements of the corporation for the entire fiscal year. These provide the annual statements for the business owner to review and send off to the government in order to file their taxes. The information contained in the statements will be an income statement, a statement of returned earnings as well as a balance sheet. The business owner should be able to determine from these statements what the profit and loss is, as well as assets, liabilities and earnings over time.
The three different types of financial statements that an accountant can prepare for a business owner, and those are the notice to reader financial statement, the reviewed financial statement, as well as the audited financial statements. The information that are contained in each of these financial statements, is the same but how they are verified as what changes says outsourced accounting services. The notice to reader financial statement the chartered professional accountant has a professional obligation to ensure that the statement is arithmetically correct as well as plausible. In the reviewed financial statement, the CPAs professional obligation is to ensure that the financial statements are reasonable instead of just plausible. The audited statements, they chartered professional accountants professional obligation is to do a great deal of work to ensure that information is confirmed as correct. The accountant will work with the bank to ensure the information is correct as well as sending out Accounts Receivable forms to various customers that are outstanding money.
Business owners should understand that even though more due diligence goes into the audited and reviewed financial statements, this doesn’t necessarily mean these are better says outsourced accounting services. There also far more expensive to prepare, and there is no advantage a business owner has over getting the audited or reviewed statements in fact, accountants have to remain at arm’s length when preparing audited or reviewed financial statements, which prevents them from giving their client any advice. Outsourced accounting services says that the notice to reader financial statement is not only more inexpensive, it also allows them to get the benefit of their accountant’s advice to them on their business.
With all the challenges that business owners face, running out of money is one of the top three says outsourced accounting services. Industry Canada says that 50% of all business owners close the doors to their business within five years, and that 29% of those business owners that had to close the doors to their business, said that the reason why their business failed was because they ran out of money. If business owners are able to read their financial statements correctly, they will be able to make better financial decisions for their business, and avoid the reason that caused so many business owners to fail in the past.
There are three different financial statements that chartered professional accountants can create for their client says outsourced accounting services. These three different financial statements are the notice to reader financial statements, often known as the NTR, the reviewed financial statement as well as the audited financial statements. The information that is contained in each of these statements is the exact same information, they are just verified differently. The amount of time that a chartered professional accountant takes in verifying the information goes from a little amount of time to a lot, which means the prices go from being billed a little amount of time to being billed for high amount of time. The notice to reader financial statements are the most cost efficient for business owners while audited statements are the most cost prohibitive.
One big advantage of the newest reader financial statements says outsourced accounting service, is that since they have the least amount of verification to go into them, the accountant can be very hands on in discussing them with the client, and offering them advice. As the amount of due diligence increases in the reviewed financial statements in audited financial statements, so does the business owners objective miss. Since accountant needs to remain very objective when they’re providing audited financial statements, because they technically work for the bank, this means that they are limited on the amount of information they can advise the client on. Notice to reader financial statements are often the best resource for business owners because of the advice from the accountant.
Business owners should understand however says outsourced accounting services that there are limitations to these financial statements. Since they take a look at the business as a whole based on a year, and the financial statements are created six months after the financial year end, business owners are looking at the business year to 18 months after it’s already happened. Which means financial circumstances can drastically have changed and that amount of time. Because of that, business owners may be looking at financial information that doesn’t apply to their business anymore. If business owners want to get better financial information sooner than 18 months after the fact, their best bet would be to increase the amount of financial reporting requirements fro in m their business.