Do you know how your business performed this past year? Savvy business owners know that year-end financial reporting and analysis present a perfect opportunity to reflect on the year and guide data-driven decisions for the future. The data your business creates each month, including expenses, revenues, cash flow, customer data, and profits, holds invaluable insights that you could use to steer your company.
The trick is knowing which statements and reports provide you with the most value.
This post highlights the importance of financial reporting and analysis as part of a year-end review. Year-end reporting helps businesses make informed strategic decisions and comply with tax regulations.
Year-End Financial Reporting and Analysis Checklist
A thorough financial performance review is an excellent way to finish the year. Take a look at what went well, what stagnated, and what needs to be improved. Our comprehensive year-end reporting and analysis checklist provides an overview for businesses to prepare your startup for success in years to come.
Review the Income Statement and Balance Sheet
The income statement provides valuable insights into the core operating activities that generate earnings. It helps your team spot trends and anomalies in revenue and expenses.
The balance sheet is a snapshot of the business’s financial position and focuses on assets, liabilities, owner equity, and structure.
Run a Cash Flow Analysis
Cash keeps your business running. Cross-examining the cash flow as a vital aspect of the year-end financial reporting and analysis helps you see where your money goes. The evaluation process reveals the company’s liquidity while identifying ways to enhance cash management.
This metric provides an overview of the business’s liquidity. It can help by:
- Breaking down cash in and out to check the company’s financial flexibility.
- Assessing operating cash flow via net cash created or utilized by core business operations.
- Evaluating the relationship between operating cash flow and net income to gauge returns.
- Identifying opportunities to optimize operational efficiency through inflow and outflow patterns.
Compare Budget vs. Actual
An essential element of measuring financial performance throughout the fiscal year is comparing the budget baseline to the actual performance.
- Identify significant discrepancies between budgeted and actual figures
- Evaluate the causes of the differences to get an overall view of their impact on financial performance
- Determine the next steps. Should the deviation items be managed better, or does next year’s budget need modifications?
- Align financial plans with operational realities.
Look Over Financial Ratios
Financial ratios compare performances over different periods to follow the business’s profitability, solvency, liquidity, and financial health.
- Profitability ratios can gauge earning capacities and potential
- Liquidity ratios help you to understand the short-term solvency of the business
- Solvency ratios assess business’ long-term financial stability
These ratios present a comprehensive view of the business’s financial health.
Review the Results of Tax Planning and Strategy
A review of the results of tax planning and strategy helps businesses adapt to their environment while legally minimizing income taxes.
- Evaluate outcomes of implemented tax planning strategies
- Identify core areas with tax impact on financial performance
- Examine the contribution of tax planning to overall savings
- Adjust tax planning based on review
Looking Ahead to Next Year
The new year brings your business new opportunities to seize and improve from lessons learned in previous periods. Use these strategies to get the most from your year-end review.
Plan for Future Financial Reporting and Analysis
Astute business owners recognize the impact of robust financial reporting and analysis. The insights from completing the checklist give a stable foundation for strategic planning and improvement.
Use the opportunity to plan for the year ahead. Establish clear and measurable objectives that align with the overall business strategy. Create a detailed plan with actionable steps and outline the roadmap to achieve these goals.
Leverage Technology for Financial Reporting and Analysis
Part of your strategy for the new year should be leveraging cutting-edge technology tools as part of the financial reporting and analysis process.
Technology streamlines repetitive tasks in data collecting, entry, and reconciliation with high accuracy, eliminating pesky human errors that can impact your decisions.
Modern, advanced financial software can even automate fundamental analysis while streamlining data collection and reporting. The tools can free up valuable human resources for informed decision-making.
Contact a Trusted Accounting Partner
A year-end review is a fantastic way to assess your startup’s performance and look ahead to next year. Insightful financial reporting and analysis need data collection, expert analysis, and presentation of conclusions. Financial experts bring a wealth of experience and specialized skills to help you decipher your business’s data so that you can set your business on a path to success.
At Founder’s, our seasoned experts can help implement and optimize your company’s financial reporting and analysis so that you have accurate data for strategic decision-making in the coming fiscal year. Contact us at Founder’s today to see what you should focus on next year.