Financial analysis of a company to someone’s MSME business is useful for knowing the financial health of a company. As explained earlier, we don’t just look at healthy companies from the number of profits that they get. In addition, if you want to ensure the accuracy of your bookkeeping process, we recommend you hire the expert of MYOB Parramatta.
Here are other benefits of financial statement analysis.
– Become a barometer for projecting financial position in the future.
– Review the current condition of the company, problems in management, operations, and finance.
– Measuring instruments make efficiency in all departments of the company.
– Comparing companies with other companies or competitors in various aspects of accounting, finance, and managerial.
– Give recommendations needed based on the results of the analysis.
In addition to these benefits, there is a danger for the company if the analysis is made poor or does not match the original data. The following errors that often occur and their effects:
1. Cannot distinguish cash and accrual-based accounting
Cash-based accounting is the process of recording transactions where the transaction is recorded when receiving or issuing cash. Accrual accounting is the process of recording accounting transactions where transactions are recorded when they occur, even though they have not received or issued cash.
2. Error classifying cash flow statements
The cash flow statement will make the business more developed. If the company’s cash flow is bad, then the business can be paralyzed. This means we do not have any other money deposits to grow the business.
Other common mistakes are usually caused by cash flows divided into operational, investment, and financing activities. Therefore, we must be smart and understand each understanding in the classification of cash flows.
3. Errors in classifying the balance sheet
Classifying assets and liabilities often place a person in the mistakes made in making a balance sheet. These two things must be separated for ensuring data accuracy.
If we unconsciously place long-term obligations in the wrong column, it can indirectly increase the amount of debt to be paid in the coming year. This has the potential to cause us to lose clients or investors because on paper our company is unstable and has a lot of debt. Therefore we need to be careful in gathering data and processing it.