Traditionally, large businesses are used to a cycle of daily, weekly, monthly , quarterly and annual financial reports which are reviewed by senior management and also the Board. This process is quite formal in large businesses whether public or private with closing timetables, routines and deadlines. In medium to small businesses this process gets emasculated to the point of being informal and “if and when”, with no review done sometimes to the organizations’ peril !
Businesses of all sizes, must know their numbers at all times. Some metrics should be run monthly, others even daily. Towards this end all organizations must set up a closing routine daily and monthly to produce financials.
Some examples of metrics that are useful; on a daily basis they should know their cash balance, Sales, AR and Inventory movements. Monthly , firms should review a complete set of financials within 30 days of the month being over – Income, Balance Sheet and Cash flow. This enables then to spot problems and take corrective action.
Good reports is a by-product of running good systems. If the daily data entry and other accounting work is set up well , this becomes easy. It is not only important to produce reports timely, but it should be of good quality. What this means is good accounting principles and practices, must be followed.