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Accounting for business financial statements is a common function of all businesses. But ever wondered why your business needs financial statements? Whatever the type of your business, you need to be aware of its financial status on a regular basis. Apart from this, as a business owner, you need to comply with certain regulations and provide financial information as required by statutory and taxation authorities. These vital tasks can be obliged to by maintaining business financial statements. Financial statements allow you to analyze company status, make vital decisions, and oblige to requirements by taxing authorities. Hence, there are several reasons to maintain business financial statements. Here are a few.
Measuring Business Growth
As a business owner, it is your responsibility to keep a track of the business’ financial status. You must know where your company stands financially on a regular basis. Financial statements provide answers to questions like are you making profits, are there enough resources to fund your goals, are you meeting deadlines, are you achieving set targets, etc. It also helps you manage your income and expense efficiently. Without financial statements, you will have no control over the efficiency of business operations and financial management. Moreover, you may miss out on regulatory compliance and taxation benefits without proper maintenance of financial statements. Having regularly updated financial statements allows you to evaluate your financial condition, make strategic decisions and track growth and performance.
For Obtaining Funds
Another reason why up-to-date financial statements are necessary is funding and credibility. Businesses need funding from time to time. Lending institutions and banks refrain from funding companies who do not have updated financial statements. Moreover, statements full of debts and losses are not considered by funding institutions. Investors and shareholders also assess the management’s potential through financial statements. Having good credibility is especially important for small businesses seeking expansion. Good credibility equals market reputation and ease in securing funds. Well-maintained financial statements help you with effective finance management. This will help you increase credibility and secure funding.
Taxation and Compliance
Taxation is another vital function of every business. You need to oblige to tax requirements set by provincial and federal authorities. Financial statements are an essential part of your preparations for the tax season. The tax season includes calculating taxable income, identifying payable taxes, and potential deductions and credits. Tax calculations and deducting potential expenses become easier with updated financial statements. Moreover, you need to oblige to requirements set by statutory authorities like Canadian Revenue Agency (CRA). The CRA has specifically set out a requirement for corporations to produce financial statements. Hence, for an efficient tax season, reduce the tax burden, and regulatory compliance maintaining financial statements is necessary.
These reasons sum up the need for business financial statements. As a business owner, accounting for day to day transactions and maintaining financial statements on a daily basis is a task. It is best to outsource your accounting and bookkeeping to experts for efficient financial management.