Considering the present economic climate, several countries are facing challenges in stimulating the growth of fragile economies. In this regard, financial reporting is deemed to be essential. However, financial reporting must be based on some standard criteria as transparent and effective reporting is imperative. Both the large scale and small scale businesses are competing for capital and credit. The financial institutions and banks are cautious while making decisions for investment.
Different businesses must be financially effective and transparent. In this regard, the government must develop a strong regulatory environment for various companies’ financial reporting. In the case of limited financial resources, different businesses require investment for achieving high returns on the money. Financial transparency and efficiency can assist the business organization in attracting some investors to invest in their companies. The businesses giving effective and transparent practices of financial reporting can receive good prospects. Thus they can earn credits and investments from banks because of a good reputation and financial record.
Financial transparency and efficiency can also transverse the borders. The financial crisis has highlighted that the high volume of trade at the intra-regional level makes the economies more interdependent and interconnected. Keeping efficiency and transparency as the prime characteristics of the reporting system helps businesses expand at the national and international levels. Transparent and efficient reporting can assist the companies in developing and adopting a common framework, compiled according to regulatory factors.
The transparent and efficient reporting system can ensure that the business follows auditing and accounting practices and standards and complies with all standard procedures. Ensuring efficiency and transparency of the financial information is a practical approach for imposing market discipline, providing an opportunity for the businesses to grow. Evaluation of business organization success indicators has also presented the significance of financial reporting. Financial reporting affects different operational activities of companies as it has a significant association with the activities of capital, firm managers, and directors. In this regard, the management of transparency and efficiency of financial reporting can bring significant strength for businesses.
There are some approaches, which can be used for transparent and effective financial reporting by business organizations.
One of the approaches, which are used for transparent and effective financial reporting, is bookkeeping. Bookkeeping is a complete record of sales, purchases, payments, and receipts of the businesses, thus maintaining transparent and effective financial reporting. The significant aspects of bookkeeping are transparency, efficacy, and accuracy of up-to-date records.
Another approach that can be used for transparent and effective financial reporting is the use of an automated reporting system. The use of automated reporting can keep extensive records of the financial transaction about different business activities. Using rules and guidelines for automated record keeping can be useful in securing a lot of data with less time consumption.
There are some important benefits of financial reporting. It can communicate information from a business to customers, shareholders, creditors, and the public. The transparent and effective financial reporting, therefore, becomes crucial to the integrity of a business. Open financial reporting can reduce the risks of errors and can develop a consistent system. Improved efficiency and regulatory compliance are the major positive factors associated with financial reporting. Though it is a complicated and time-consuming procedure, it is beneficial in attracting investors. This gain can provide competitive advantages to the businesses and assist in short-term and long-term financial and non-financial benefits.