Preparing Financial Statements

Preparing Financial Statements


We’ll Help Prepare All Relevant Financial Statements for Your Business


Many business owners only find an accountant to prepare financial statements when they need them for a specific purpose. You might need them if you’re seeking funding from investors or venture capitalists (VCs), or when you’re trying to sell your company or get a loan from your bank. 

However, there are compelling reasons to have up-to-date financial statements prepared periodically (or at least at the end of the fiscal year), even if you don’t have a specific, pressing need for them. Financial statements provide a window into your business’s health, wellness and sustainability. 

Things like balance sheets, profit and loss reports and cash flow statements can help you make more informed decisions about nearly every aspect of your business, from hiring more staff (or laying some off) or expanding to a new location to equipment investments or fleet expansions. 

As a business owner, you likely have an intimate understanding of your business and everything that happens within it. There’s likely no one who knows it better. Many business owners are still surprised at the observations they make when they see their business’s performance in the cold, hard black and white of a balance sheet or profit and loss report. You might discover things that seem obvious in retrospect, but that you never really consider in the day-to-day operations of your business. 

Working with a CPA or accounting firm can help you gain a broad understanding of your business’s financial health and what that means for your sustainability and future growth.

Financial statements are prepared at various frequencies depending on your business’s needs (monthly, quarterly, annually or as needed). 

Compilations

These collections of financial statements come with a cover letter on your CPA’s letterhead making it clear to outside parties (such as lenders) to establish independence from the business for whom the compilation is performed and assurance that the financial statements were prepared according to Generally Accepted Accounting Principles (GAAP).


If a CPA isn’t independent from the business, they must disclose and detail the circumstances of the relationship. This adds a veneer of trust and authority to financial statements used by lenders to verify the condition of your business’s health and financial situation.


A compilation is not the highest level of assurance of financial statement accuracy for outside viewers and is therefore not as expensive. Other measures, like reviews or audits, come with greater levels of independent assurance.



If your business is in need of complications, reviews or audits for loan applications or other purposes, get in touch with the team at H&H Accounting Services.


How Is a Compilation Created? 

Essentially a compilation is generated by the CPA based on records and documents provided by the client. The accountant doesn’t need to go into your bookkeeping software to dig up that information on an in-depth review or audit; it’s simply based on what you provide. It’s accuracy is based largely on your business’s level of transparency.


You may be expected to provide things like:

  • Bank statements
  • Schedules of accounts
  • Aging schedules
  • Operating agreements
  • Loan agreements
  • Leases
  • Any other relevant documentation


The accountant you speak to about generating your financial statements can give you a detailed list of the resources they’ll require.




Is the Added Cost of a Review or Audit Worth It?

That depends largely on the purposes of your financial statements, who needs to trust they’re accurate and the quality of the information you’re providing to your accountant. A review offers more assurance than a compilation, meaning the CPA will perform a more analytical review of your accounts when preparing your financial statements. They aren’t necessarily verifying the resources you provide though, which is why it’s considered a medium level of assurance.


During an audit, the accountant will do a deeper dive into internal controls and look for evidence to support the resources you provide. This may include inspection, independently obtaining and reviewing source documents, detail-oriented observation of internal accounting practices and other fraud risk assessments.




Get Help with Financial Statement Preparation in Phoenix

Does your business need to generate reliable and accurate financial statements? The CPA and accounting professionals at H&H Accounting Services are here to assist. Call us at (480) 561-5805 today to schedule a one-hour consultation.




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