The importance of accurate financial data cannot be overstated; even a small error within a business’ reporting can threaten the integrity of its financial standing. Accurate financials provide full transparency into the business, help to mitigate errors and catch costly mistakes, and build trust with investors, lenders, and other stakeholders.
Financial data should be insightful, as the ability to draw understanding from reporting is crucial for a business to stay competitive. When financial reporting is insightful, a business can better understand current and past performance, predict future outcomes, and make strategic decisions accordingly. Financial insight results from data that is timely, accurate, and relevant.
Financial data needs to be relevant in order for it to be useful in making strategic business decisions. Financial reporting should be relevant not only for external stakeholders, such as lenders and investors, but internal stakeholders—employees and executives—so that data can be used to meet organizational goals. Additionally, a business wouldn’t want to use a balance sheet from ten years ago to make next year’s financial goals, nor would a report of employee salaries be useful to a lender.
Financial data must be timely in order to influence business decisions. When financial reporting is consistently done in a timely manner, it provides the financial team, executives, and other stakeholders with an accurate understanding of how the business operates. For example, a business that can complete the month-end close process within ten days will have far greater insight into their operations compared to a business that takes several weeks to close out the month.