Melissa Jacobs of MJ Chartered Accountants discusses what annual financial statements are and who needs them.
Annual financial statements provide an overview of the financial position and performance of a business and include an income statement, balance sheet, cash flow statement, statement of changes in equity as well as other important disclosures and notes.
Section 30 of the Companies Act 71 of 2008, requires every company to prepare annual financial statements within six months after the end of its financial year.
If you are the business owner of a company, no matter the size, you are required to have annual financial statements prepared and submitted. Depending on your Public Interest Score, your financials might have to be independently reviewed or audited.
Why are financial statements important and what are they used for?
Financials are used by a wide range of users and stakeholders to make informed economic decisions about the business.
- Shareholders want to know how their investment is performing.
- Banks, lenders, suppliers, credit reporting agencies and insurers want to know about creditworthiness.
- SARS – it is compulsory for small, medium and large businesses to submit signed financial statements to SARS on the submission of their ITR14.
- You as a business owner get much-needed insight into the development and growth of your baby.
The following information can be gleaned from your annual financial statements:
- How solvent and liquid your business is.
- Your level of profitability (gross profit and net profit).
- How productive your assets are in generating revenue.
- How efficient your business is in turning revenue into profit.
- How effective you are at turning your profit into cash.
Implications of receiving financials late?
- You fail to take any timeous remedial action on items that require improvement.
- Your investors/lenders might think the worst and make assumptions. You may also lose/compromise any credit facilities.
- Income tax submissions with SARS are missed which will result in admin penalties for late submission and might result in further penalties and interest on any amounts payable.
OUR GUARANTEE TO YOU
We guarantee a turnaround time of 30 days on finalising your financial statements (Ts & Cs apply). Does your accountant offer you that guarantee? Email melissa@mjacc.co.za or sune@mjacc.co.za should you require any assistance with the preparation of your annual financial statements and tax submissions.