Canada has experienced variations in its economic growth, showing the perception of strength as positive in several sectors. This is reflected in the behavior of consumers, vendors, and entrepreneurs. Precisely, more and more Canadians decide to start their own business. However, those emerging businesses are the most susceptible to market fluctuations. Financial considerations like strategic tax planning, revenue cycles, and payment systems are decided on the basis of information collected over business activities. The key for every entrepreneur is to be clear about how to order and structure their company so that the decisions made can meet the objectives set.
Entrepreneurs must be aware that current market conditions require growing processes and the use of more sophisticated tools that allow them to properly focus their efforts, both on strategic and operational issues.
Small to medium size entrepreneurs focus their attention on the growth of the company and on day-to-day operations, such as sales and the development of products and services, and end up delegating accounting and control activities to third parties. This external help provides specialized attention that ends up improving the company’s future operations, since having timely, reliable, formal and transparent accounting information is essential for any organization.
Reliable Financial Information
It is essential that an entity, whether small, medium or large, has reliable financial information and that it reflects its real situation and performance. It is the responsibility of the management of a said entity to establish the mechanisms that guarantee that this information is reliable and useful for the management, decision making and transparency in the market. The most essential aspect of hiring specialized financial management service providers is to gain tax preparation services.
For this, it is necessary to identify opportunities for improvement, related to the generation and/or preparation of operational information, which will be the basis for the preparation of accounting records and financial statements. Likewise, the application of a substantial improvement in internal control, so that the company has its accounting records ordered and that they are consistent with reality.
Subsequently, the audits of financial statements take on special importance since their objective is that an independent auditor, based on the execution of certain review and validation procedures, gives his opinion on the fairness of the financial statements prepared by the entity. Thus, said audited financial information will become more than a document, as it will become a powerful and reliable management tool for use by investors, banks, customers, suppliers, regulators, among others.
It should be noted here that, once the financial statements of an entity have already been audited, Management and/or Administration must be aware that, from there, these financial statements will be subject to questions by third parties, such as a bank, for example, in the process of deciding whether or not to grant a credit. That is, the accounting information must include all the day-to-day information of the company, regardless of whether or not the employer wants to disclose certain information.
Timely Financial Information
In Canada, it is almost a general rule that small and medium-sized companies prepare financial information in a timely manner. In most cases, the monthly financial statements are prepared with a significant period of time with respect to the closed month (for example, the balance as of June 30th is only available during the month of August or September). Meanwhile, the annual financial statements are prepared basically for tax purposes and with the purpose of complying with the dates of filing of affidavits before the Tax Administration; that is, during March or April of the following year.
In this regard, we must bear in mind that the financial statements must reflect the economic reality of a company at a given time, as if it were a photograph and; therefore, such information would lose all relevance if analyzed after two or three months, much more in a context of constant changes and consolidation of competition. In this sense, it is important that the implementation of procedures to expedite the accounting closures in the companies be considered as well and these are made, at most, within a period of 15 days.
Accordingly, some recommendations to take into account regarding the preparation of reliable and timely financial information can be:
- Identify and implement improvement opportunities related to the generation of operation and business management information.
- Implement and/or restructure financially, accounting, systems, etc. This will give added value to the company because, if done properly, it will be able to generate complete, reliable and timely information that meets the requirements of the current market and the company itself.
- Implement procedures to expedite accounting closures in the company, and prepare financial and accounting information in a timely manner (monthly) as an example.
- Establish schedules of monthly and annual accounting closings and send them in a timely manner to the areas involved.
- Establish dates for the closure of the operational modules (for example sales, billing, accounts payable, payroll, etc.).
Financial Management Consultancy
When it comes to business ownership and tax time, decision-makers of the business often get restricted in timeframes to carefully audit financial information themselves. This creates an important need for external specialized financial management service providers. These specialists do the basic footwork and collect the most important aspects of the financial information and present it to the business decision-makers.
The decision-makers are able to make strategic and tactical plans based on the findings of the financial information that is both crucial and utility-based for them. There are findings that prove the business who work on ad hoc planning in financial proceedings is more at risk of making a loss or simply face the need to change their financial strategy as time passes on.
These forced changes in the continuation of the business practice affect the operations, resources and even the strategic planning of the overall business one way or the other. The specialized help from the financial management service providers directly helps in maintaining the business dynamics and keep in line with strategic business goals.