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Effective Financial Reporting

Updated on January 14, 2011

           Effective financial reporting is important for a business because of three main reasons. The first is that this allows a business owner or group of stakeholders to make timely and accurate decisions that may impact the business both in the short and long run. In the article, accurate break-even models and pricing models are mentioned as those types of decisions that can impact the business greatly. The second reason is that effective financial reporting helps those in charge to simplify the tax preparation process in the firm.  The tax preparation process is thus less time-consuming and less taxing, and thus saves the company in terms of salaries and other itinerant expenses.  The company and its employees can use the extra time for value-generating tasks, which will help improve the financial position of the firm in the long run too.  The third reason is that effective financial reporting will help analysts and other potential investors and lenders to quickly and accurately generate a financial picture of the firm via the use of accounting ratios that will immediately reveal whether or not the company is in good financial condition (Burns, 2007).

 

A Rolling Forecast

 

            Rolling forecasts incorporate past, current and other baseline data, and all the action plans that the company has in store, plus all anticipated events that will impact the firm. Today, the rolling forecasts are an integral part of the budgeting and planning process of major corporations. The time period for the forecasts has also increased to six quarters from the usual three or four. Data is not only computed for, but it is analyzed also for purposes of evaluation and action.

 

            Rolling forecasts allow managers and other employees to take into account the overall business environment and how it is likely to impact the firm within the time frame concerned. It also helps managers to look at what they had planned for in the immediate past, and make the necessary adjustments should there be any new events in the business environment as well (Sullivan, 2007).

References

 

Burns, Joseph, (2007), ‘The Case for Accurate Financial Reports’, Retrieved 01 June 2009 from: http://farihaonline.com/tmp/DocumentView.htm

Sullivan, Kate, (2007), ‘By the Numbers’, Retrieved 01 June 2009 from: http://farihaonline.com/tmp/EBSCOhost.htm

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