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Darren Wingfield

Darren Wingfield

Commercial Manager

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Financial Statements: A Weapon Of Business Growth

Posted on 04/11/22  |  3 Minutes

Financial statements can be the secret weapon to unlocking business growth - providing they’re accurate, updated frequently and used effectively, that is.

Financial statements are documents that act as an official record of a company’s financial status. The intention is to clearly and comprehensively demonstrate the financial performance (and health) of a company at any given time.

What exact data is included in these reports will vary depending on your business but, at a minimum, you should be looking to include:

  •  A balance sheet
  •  A profit and loss/income statement
  •  A cash flow statement

These essentials are used by HMRC, accountants, banks and more for tax and finance purposes - but they can also be used to springboard your business’s evolution and growth.

Here’s how.

How can financial statements help your business grow?

Financial statements boast a range of benefits that help businesses scale with greater opportunity, purpose and success.

Make more informed decisions

The more data you have on your business’s performance, the better you’re able to use this data to your advantage.

Accurate, comprehensive and up-to-date financial records assist everyone from senior managers and team leaders to departments and shareholders in making better informed decisions.

Most notably, financial records can inform you on where’s best to invest and reduce expenditure, in addition to helping you effectively measure financial basics such as tax, ROI and more.

If your business has shareholders (or plans to have them in the future), they’ll also make use of these financial statements to inform them of board performance and investment opportunities.

In the end, this all amounts to your business having a better understanding of its finances - and being able to analyse this invaluable info when making data-backed business decisions that are more likely to pay off as a result.

Assist with forecasting

Financial statements don’t just give your business critical insight into current and past performance - they can also provide you with a comparison with previous years to help you better understand the overall trajectory of your business.

From sales and expenses to losses and profits, these figures (most frequently listed on the profit and loss account) are integral to helping your business and its investors forecast future cash flows.

If you’re a larger business, financial statements can also help you determine valuation ratios to establish the price of shares, understand dividend pay-out ratios and forecast future dividends.

Improve your financial opportunities

Financial statements can stimulate business growth by opening more doors of financial opportunity.

Not only are they essential for bringing in new investment, but they’re also invaluable in the eyes of banks or angel investors looking for an accurate and complete account of a business’s financial status.

Proper financial statements can also help your business to look more attractive in the eyes of lenders by lowering your risk profile, potentially leading to better interest rates when borrowing funds.

Likewise, they can also help to appear more attractive to shareholders, increasing your pool of capital as a result.

The result is a wave of new opportunities to increase your cash flow, expanding the scope for business growth.

Purposeful financial statements rely on accurate and comprehensive bookkeeping. So, to ensure you’re getting the very most from your financial statements, it’s often a good idea to consult a professional accountant. Drop us a line to find out how we can help you stimulate your business’s growth today.