Did you know that financial reporting is necessary for business owners and it is highly recommended that you implement such reports on a regular basis. As a business owner, you should take the opportunity to learn as much as you can on finance to not end up like most failed businesses. There are many reasons why but one of them is not planning for unexpected financial pitfalls that could cause many problems later on down the road. You should know that two types of financial reporting are historical and predictive reporting. Let’s look at the difference between the two in order to get educated even more on this topic.
Reviews of a business’s past financial performance are called historical reporting. Only by looking at the report will you be able to break the cycle of bad debt. Or improve the business financial aspect by using predictive reporting. It means you create projections for the future which comes from the historical data shown by the financial performance. Only by comparing and preparing for the future will you succeed with the business.
When it comes to historical reporting, that is the one area that most businesses concentrate on more, however; future financial reporting is more beneficial, or just as, important for your business’s financial future.
The forecasts and projections should be a period between three and five years for future budget reports. It must go beyond an annual budget. To follow and meet the long-range strategic goals provides a road map of what to do to stay on course.
On a monthly basis at least do a projection future cash flow to spot and plan out the lulls that follows later on in the near and/or upcoming future. Not having enough cash flow is the problem for many businesses that tend to fail.
Contact the CFO Strategic Partners if you needed help from an expert to review your financial reporting. An outsourced CFO has the knowledge and the know-how to help you with the resources on preparing your business’s financial success.