For individuals who do not belong to the business financial sector, it may be easy to assume that all financial statements are transparent. By transparent, the assumption is that the said financial documents are clear and filled with relevant and pertinent financial information. Unfortunately, this is not always the case as some companies opt to hide information rather than to let it all out in the open. And you can only imagine how investors feel about such.
In a recent article published by CNN on the 14th of January, it was reported that JPMorgan Chase, considered as one of the major banks in the US, experienced a 10% surge compared to the profit it yielded around the same time last year. The actual figure yielded a $5.4 billion profit.
JPMorgan Chase: A Perfect Case in Point
Among the other big banks in the country, JPMorgan Chase was the first to release reports on its actual profit in the last quarter of 2015. While this could lead to some confusion, especially considering the earlier reports from the Wall Street Journal regarding an ongoing economic downturn, JPMorgan Chase’s efforts at financial transparency is evident - and much appreciated - by the business community.
Financial Transparency: Why is it Important?
Why is transparency in financial reporting important? While there are many ways to answer this question, the primary reason why financial statement transparency should be prioritized is because it allays the fears and uncertainties from an investor’s end. Imagine yourself in the shoes of an investor - would you put your money in a business that has a hazy and unclear business financial position? Of course not. Investors are good at calculated risks and a questionable set of financial documents are not something they would readily gamble with. Moreover, a business that lacks financial transparency may also affect its debt and bankruptcy risks.
Moving forward, it is important to exert serious effort to ensure financial transparency across all your financial documents. Otherwise, you run the risk of putting your business finances at a tight spot - and we all know what that would mean for your SME.
As it is, financial accountability and transparency comes with having your business financial policies aligned as well as putting the right bookkeeping and accounting mechanisms in place. Seeking help from experts in the field could also go a long way.
Need further assistance in ensuring financial transparency? Get in touch with our qualified advisers at D&V!