Financial Reporting Services
in the Philippines
Detailed Financial Statements, Clean Financial Reports and Key Financial Ratios for your PH Business
Financial Reporting - The Process
Financial Reporting - The Output
Financial Reporting in the Philippines:
Essential for Business Growth!
Understand Your Company’s Financial Health
A company’s finances are the oxygen that keeps the business alive!
The financial reporting service enables a company in the Philippines to get a clear picture on the financial position of its entire business. In short, all businesses in the Philippines should be receiving value-added financial reports from their accountants on a regular and consistent basis.
Company management must always know what cash they have in the bank, what monies are owed to creditors, what monies the company is due to receive and the value of all other assets and liabilities! Financial reporting enables the delivery of this information!
Management must ask questions and receive accurate answers on fundamental financial data. What was the real value of my sales and costs during a period? What are my sales margins? What is the value of assets currently under control of the company? What do I owe my suppliers? Have employee costs risen? Has this financial period been better or worse than the previous financial period? What does our financial future look like?
A financial reporting service is the mechanism to “stitch” all of the above information together and clearly understand how the business is doing from a financial perspective.
If management is not receiving a full suite of financial reports on a regular basis – Income Statement, P&L Account, Cash Flow Statement, Balance Sheet – they are effectively driving a car blindfolded!
Business Performance and Financial Analysis
Financial data should always be presented to management in a way that actually makes sense. This enables management to quickly understand business performance and take action quickly where necessary.
The optimal mechanism for presenting financial data is through the financial reports! Financial reports provide key indicators on the areas where a company is succeeding financially and where a company could be performing better.
By receiving accurate and up-to-date financial reporting services on a consistent basis, management can monitor financial performance in accordance with key performance indicators (KPIs) for each business function or business segment and identify specific areas or business departments that require further attention.
A value-added financial report should also include additional financial analysis prepared by your accountant. This might include the monitoring of financial KPIs, key financial ratios, budget monitoring and other forms of financial analysis that might relate to your business model or industry.
In effect, financial reports and the financial data they include provide an invaluable source of business intelligence. If company management is not receiving accurate financial reports regularly, they are missing out on a significant opportunity to leverage important information about their own business to help it grow.
Remember, the financial information required for a financial report already exists and is being generated within the company! What a shame if it isn’t utilized for the benefit of the business!
Informed Strategic and Commercial Decisions
Management will only be in a position to make informed commercial and strategic decisions about the future of a company if they have accurate financial data on which they can rely. This is another key benefit of receiving financial reports for businesses in the Philippines.
When considering big decisions such as capital expenditure, investment opportunities, office expansion, recruitment budgets, etc – management must take into account all financial data generated by the company.
For example, it is not sufficient for a PH business to consider only the Balance Sheet when considering a capital investment – management also needs to understand what cash is coming in and out of the business on a weekly or monthly basis by reviewing the Cash Flow Statement and P&L Account.
Key decisions that can affect a PH business should be made with the most up-to-date and accurate financial information available. This is a fundamental requirement for ensuring that key decisions are as informed as possible. It is the role of the accountant or accounting services provider to ensure they can obtain and provide this financial data to management and provide financial advisory services to management based on this information.
If you are engaging an outsourced accountant in the Philippines or employing an in-house accounting team, make sure that they are generating and delivering regular financial reporting services and financial advisory services so management can get a clear picture on how the business is performing!
Compliance & Audit
The need to receive financial reports is not only relevant from a commercial and strategic perspective – there are important statutory and compliance requirements in the Philippines to be considered also!
In the Philippines, there is a statutory requirement to file financial statements at the end of each financial year with the BIR and the SEC. These financial statements outline and confirm all of the activities and transactions of the company during the previous financial period.
If financial reports are not prepared, monitored and reviewed throughout the year, it will be very difficult for management to prepare and file accurate financial statements at the end of the year with the SEC and the BIR.
In addition, the Philippines tax compliance framework is quite complex and requires companies to file tax returns on a monthly, quarterly and annual basis. If a company is not generating financial reports on a regular basis, it will be difficult for management, or indeed the company’s accountants in the Philippines, to know how much tax has to be filed and to maintain a proper record of these tax filings.
Finally, the end of year financial statements also need to be audited by an independent auditor in the Philippines! If a company has been generating and reviewing financial reports on a monthly basis throughout the year, they will have a much better understanding of their finances and compliance on an ongoing basis. This will then make the end of year audit a much more efficient process to complete.
Shareholders and Investors
Shareholders and investors in a company will always want to understand the financial performance of the business in which they have invested!
Sure, company management might be able to meet with shareholders and explain how the company is performing. However, if there are no financial reports and no data to support the claims of management, it is difficult for investors or shareholders to rely fully on management perspective.
Any business with shareholders who are invested in the future of the company will generally demand to receive financial reporting services on a monthly basis. In fact, the requirement to generate and present financial reports will usually be an important term of the initial Shareholders Agreement.
By receiving regular financial reporting services that can deliver value-added financial reports on a regular basis, company management can benefit from receiving key financial information that they can simply pass on to investors and shareholders at predetermined intervals. This ensures that shareholders and investors are kept up to date at all times on all financial aspects of the business!
Finally, a growing company may also be considering future investors! During any investment process, a potential investor will always want to understand the financial position and financial prospects of the target company! Without regular and detailed financial reporting, it will be difficult to provide a potential investor with key financial data!
Investment and Due Diligence
When a company is seeking to raise investment monies or indeed, apply for a bank loan, the lender or investor will want to first understand the financial status of the business.
They will usually request access to the financial reports of the company over a historic period of time. If the company is unable to produce full financial reports – i.e. Income Statement, Cash Flow Statement, P&L Accounts and a Balance Sheet, this can raise two red flags!
First, the lender or investor won’t have any financial data to rely on! So how can they make an informed decision on the financial viability of the business?
Second, if a company is not able to produce historic financial reports, this can be a key indicator that there is an issue of concern with the finances or indeed, the management of the business!
A lack of financial reports for historic periods could result in the failure of a potential investment deal!
Financial reports are generally one of the most important elements of the due diligence process. So, make sure your company is availing of value-added financial reporting services in the Philippines which helps ensure you are always receiving financial reports that are up-to-date and accurate!