Can a traditional financial report have multiple purposes?

Businesses can find it tough to decipher the huge amount of financial facts and figures they collate. After all, in times of struggle in particular, doing enough to keep the enterprise profitable is often more important than trawling through the applicable account information.

However, are there any added benefits that a traditional financial report can offer? Well, according to research produced by Chartered Accountants Australia and New Zealand (CAANZ), the short answer is yes.

Important financial information can be lost in unnecessary clutter.

Evolving existing financial reports

Doing so involves a progressive approach. Taking a broader view, removing any text that isn't relevant and finding new and interesting ways to present existing data are just three hurdles to overcome.

It's the de-cluttering that can be the biggest challenge. Many businesses have an idea of what their average financial report should look like, and what information it has to encapsulate. However, the ability to actually make decisions using the data is limited by irrelevant information.

"While some level of complexity in financial reports is necessary given the increasing complexity of businesses and the environment in which they operate, important information can be lost in unnecessary clutter," explained commissioner of the Australian Securities and Investments Commission John Price, as noted by the CAANZ research.

Benefiting the business

Going to the trouble of producing more effective and useful financial reports may be difficult, but it has benefits for the wider business. For example, it can be used to define the wider strategic planning processes of the company.

The simple principles aren't enough anymore when presenting data.

While it may not necessarily dictate a huge change of direction, the quality of financial statements can be directly relatable to the overall quality of the business. Consequently, finances that are easy to understand and read at a glance have the potential to help the enterprise secure further capital.

Potential investors will, of course, need to see an accurate reporting of company finances before they put money forward. Consequently, having information not only at hand, but also presented in a way that presents true value is typically best practice.

Business forecasting can be tough regardless of the size of the enterprise. However, better decisions can be made and backed up by a usable and concise financial statement. 

Ultimately, businesses should look to reframe their finances in a way that satisfies all of the applicable parties. In the modern enterprise environment, the simple principles aren't enough anymore when presenting data, and a way to gain better insights is through progressive thinking.

Latest Business Accounting Articles