Why is it that some businesses outperform others? It’s not because they’re in better markets, have more resources or they’re smarter than the rest. The answer, we believe, is they are prepared to think differently and make the ‘right’ choices more often with the best management information to hand.
Preparing interim financial statements (commonly called ‘interims’) each third quarter annually is crucial for your business to succeed. Professionally prepared interims provide a summary of your company’s financial activities for an accounting period of less than one year. Businesses generally release annual financial statements, but many also opt for reporting financial statements on a more frequent basis giving them an earlier insight into what may lie ahead for 30 June.
How often should your business prepare interims?
To take a proper look at your business, you should prepare interim financial statements annually, usually one quarter out from the financial year end deadline of 30 June. Interims illustrate your business’s financial fitness at the time the statement is prepared and generally comprise the balance sheet and the profit and loss account.
How are interim financial statements used?
A number of interested parties may be interested in reading your financial statements, such as key stakeholders, managers or lenders, in order to evaluate the fiscal health of your business. But interims come into their own because they provide a valuable snapshot of business performance before tax liabilities are settled and results become fully finalised on 30 June:
- The information is key to knowing and planning your tax position at 30 June. Typically business owners who are hit with a large tax bill could’ve determined a plan of action to legally minimise their tax liability three months in advance. If you think your tax position isn’t an issue, then ask yourself why is it not?
- The results of your interim reports can quickly highlight any performance problems and, with your accountant, allow you to steer a course of action to get your business back on track e.g. generating a profit or dividends before the financial year end
- You can apply the information to track and further improve your business performance, such as increasing production, cutting costs or going after a new market
- Lenders and investors may use your interim financial statement to decide whether or not to give or extend funds to your business
2012 promises to be another white knuckle ride for business owners. We see local businesses struggling to keep afloat AND unable to obtain additional funding from the banks. There is no doubt that budgets are tight. And it appears that market uncertainty fuelling consumer uncertainty is set to continue.
However the message for business owners remains the same as ever: those who continue to steadily monitor their position and invest in periods of downturn are the ones more likely to reap the benefits when normal service resumes.
Making the right choices using accurate financial information IN ADVANCE is an enormous part of making it through periods of uncertainty. Contact OBT to find out more about preparing interim financial statements for your business.