EDITED VIDEO TRANSCRIPT:
Hey there! I hope you doing well during this COVID-19 pandemic.
So today we’ll be discussing what Annual Financial Statements are and why they are so important.
What are Annual Financial Statements?
Annual Financial Statements are just simple documents that tell an accurate story about the financial position and performance of your company in a given financial year.
The main Annual Financial Statements that you must know and understand include, a Balance Sheet, an Income Statement, a Cash Flow Statement and a Statement of Changes in Equity.
Why are Annual Financial Statements so important?
There are three main reasons as to why Annual Financial Statements are so important.
1. Compliance with government authorities
The South African Revenue Service (SARS) requires that you submit signed Annual Financial Statements as supporting documents to your tax return (ITR14) so that they can determine whether you have paid enough tax or not.
The Companies and Intellectual Property Commission (CIPC) also requires that when submitting your annual return, you also submit signed Annual Financial Statements.
Failure to comply with government authorities leads to not so pleasant consequences.
2. Business growth
While compliance is without a doubt essential, I believe that the most important reason for Annual Financial Statements is for your own business point of view.
You know, as a business owner, it gives you that 12 months point of view that tells you an accurate story of how your business has been performing. From how much you made in the previous financial year, how much of that money you still have and where the rest went, etc.
This gives you the opportunity to cut unnecessary expenses, improve overall profitability and invest more in marketing and sales if you are not making enough income among other things.
3. Business Opportunities
When applying for a tender or loan, for example, you may be asked to produce Annual Financial Statements.
Who should prepare Annual Financial Statements?
Any competent accountant who has the appropriate software and knowledge (that includes us – see our services here).
Do you have any other financial questions you need answered? Leave them in the comment section below.