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Outsourced Accounting Services | What Reviewed Financial Statements Are?
Many entrepreneurs are very good at the service that their business provides, which is why they went into business for themselves says outsourced accounting services. And although an electrician may provide extremely good services in his business, that doesn’t necessarily make an electrician great at running electrician business. Many entrepreneurs need significant help when it comes to learning how to operate their business, in order to make better decisions about their business. 50% of all entrepreneurs are forced to close the doors to their business before they’ve been in business for five years, 42% said they couldn’t attract customers, 29% said they ran out of money and 23% said they couldn’t find the right staff. Business owners often need a lot of help in understanding what they need to know in order to run their company smoothly. Helping them understand their finances, and how to read financial statements can go a long way in helping the business owner make better financial decisions in their business.
There are three different types of financial statements that an accountant can prepare for the businesses year end. They are the notice to reader financial statements, the reviewed financial statements, and the audited financial statements. Outsourced accounting services says that while the notice to reader financial statements are the most often used for small businesses, they have the least amount of due diligence that is needed in order to prepare them. They chartered professional accountants must ensure that the balance sheet balances, the income statement is calculated correctly, and the numbers are plausible.
Outsourced accounting services says that in reviewed financial statements, the accountant must go one step further to ensure that the numbers are more than just plausible, that they are reasonable. They do this by calculating ratios, comparing numbers to previous years, and testing it using a variety of analysis to ensure that the numbers are reasonable. This takes more time then the notice to reader statements, and therefore it is more costly to prepare.
The third financial statement that an accountant could prepare for a year end, is the audited statements. This has a significant amount of more due diligence required to prepare by chartered professional accountants. They will check with the banks to ensure that numbers are correct, they will even send out Accounts Receivable confirmation sheets to ensure that the balances are actually outstanding and that they are going to get paid, the goal of the audited financial statement says outsourced accounting services is going to ensure that the numbers are hundred percent confirmed. Because this takes the most amount of time, these are the most costly to produce.
The audited financial statements and the reviewed financial statements are typically only utilized by big companies or nonprofits. Not only is the notice to reader financial statement the most appropriate for small businesses, because it is the most cost effective, it also has other advantages says outsourced accounting services. Those advantages include being able to openly discuss their finances with their accountant. For the reviewed or audited financial statements, the accountant must remain at arm’s length, in order to ensure they are impartial.
When entrepreneurs don’t understand the finances in their business says outsourced accounting services, they tend to make less informed, and therefore for decisions about the finances in their company. Many accountants say that when entrepreneurs come to see them, they either don’t have any financial numbers with them, the numbers that they do have are in accurate, or they don’t know how to read their numbers. This is a common problem, because many entrepreneurs are very good at the product or service that your company offers, but they are not as knowledgeable in running their business. Helping business owners understand their finances, can help them make better financial decisions which in turn can help them avoid being forced to close down their business due to cash flow issues.
There are three different financial statements that a business owner could have as their year end numbers, those are notice to reader financial statements, reviewed financial statements, and audited financial statements. The obligation that chartered professional accountants have with each of these different types of financial statements are very different, which is the only difference between all of them. The notice to reader statement has the least amount of due diligence, the reviewed financial statements have more, where the audited financial statements the accountant must go to great lengths to confirm the accuracy of the numbers says outsourced accounting services. Because of the different amounts of due diligence required in preparing each statement, is reflected in their price. The notice to reader is the most cost-effective financial statement, where the audited financial statements are much more costly.
Many entrepreneurs believe that the additional checking that they chartered professional accountants does interview or audited financial statements is beneficial. However, outsourced accounting services says that this is not the case. Business owners don’t need to worry about spending more money on unreliable year end, because of the limitations that are associated with looking at the numbers only at year end. The recommendation is for business owners to spend the additional money that they might have spent on reviewed or audited financial statements, and to spend that money in their business on developing better internal reporting requirements. What this can do, is help business owners see the financial health of their business throughout the year instead of waiting until year end. Often, business owners need to make more immediate decisions in their business that can’t wait for year-end financial statements to come back to them. Decisions such as should they hire more people, should they lay people off, can they afford to buy an important new piece of equipment. These decisions are extremely important to whether a business succeeds, and a business owner shouldn’t have to wait until fiscal year end and then six months later to get there financial statements.