How To Upgrade The Quality Of Your Financial Reporting—And Grow Your Business
In a December 20, 2023 article for Forbes Finance Council, Julie DeLong, the co-founder and COO of Backyard Bookkeeper, shares valuable insights on upgrading the quality of financial reporting for small businesses. DeLong emphasizes the critical role high-quality financial reporting plays in making strategic business decisions. While also, providing four key ways for small business owners to enhance their financial reporting:
#1 – Implement Accrual Accounting:
DeLong advocates for the use of accrual accounting. Consequently allowing companies to record revenue before receiving payment and expenses as incurred. She highlights the value of accrual reports for internal decision-making. Additionally emphasizing the benefits of accurately forecasting finances and planning expenses.
The author underscores the importance of regularly reviewing big-picture financial reports. Particularly the balance sheet is crucial after switching to accrual accounting. Analyzing accounts receivable, accounts payable, and deferred revenue provides insights into the company’s financial reality. Additionally it helps identify and address potential issues.
#3 – Leverage Automation:
DeLong advises business owners to take advantage of automation within financial software solutions. Automation facilitates data aggregation and integration between tools, but she emphasizes the need for oversight to ensure data accuracy. Reviewing balance sheets helps identify discrepancies caused by automation errors.
#4 – Engage the Right Accounting Expertise:
The author stresses the significance of having the right accounting team in place as businesses grow. DeLong recommends hiring experts with experience in accrual accounting, proficiency in dealing with balance sheets, and a good understanding of financial software solutions and integrations. Effective communication between business owners and financial experts is also highlighted.
In conclusion, DeLong asserts that by upgrading the quality of financial reporting through these four strategies, small business owners can make more informed decisions and foster the growth of their businesses. She encourages entrepreneurs to prioritize the accuracy and completeness of financial information for successful business management.