Financial Statements are for more than just your Taxes

If you’re a small business owner, you’ve had to prepare financial statements every year for your taxes — but that’s not the only time they’re useful.

Financial statements are essentially your scorecards, telling you and whoever reviews them how your business is doing. They can vary in levels of detail, from a quick overview to an in-depth exploration.

You may require up-to-date financial statements if you are:

  • Seeking investors
  • Looking for a loan
  • Attempting to sell your business

It’s also a good idea to have recent financial statements on hand for your own sake, so you have a clear idea of how your business is really doing.

Fortunately, a chartered accountant with an experienced eye can help with the process.

The following are three types of financial statements your accountant can prepare when required:

NOTICE TO READER

Also called Compilation Engagements, these are basic financial statements prepared by chartered accountants required by most small businesses. They are developed with the information provided by the business’ principal(s) and compiled into statements without any “background checking.”

REVIEW ENGAGEMENT

When a lender requires a more in-depth statement, a chartered accountant may prepare a Review Engagement. More detailed than a Notice to Reader and performed by an objective chartered accountant, a Review Engagement discerns the validity of a business’ financial statements.

AUDIT ENGAGEMENTS

An independent professional accountant performs the most stringent of all reviews, Audit Engagements, which are the accepted means of reporting finances to shareholders, bankers, creditors and government. The accountant will go over your financial statements with fine-toothed comb and render a judgment on their validity.

All three of these statements are intended to benefit the business, ensuring you’re not overpaying for taxes and its books are in line.

If you’re unsure what type of financial statements you need and what’s involved in their preparation, get in touch with your accountant. We’re always happy to help.

Tyler Vreeling