The Importance of Financial Statements for SMEs

Posted by Cedric Joshua Martinez

Aug 17, 2020 11:37:00 AM

Every business endeavor requires a tangible representation of its actual financial status. A company's financial statements importance is most seen when the business needs to attract potential investors.

Importance of company financial statements in a glance
These documents also play an integral role in cash flow management. Financial statements are commonly generated by professional advisory services and used collectively to know how a business financially stands in the present.

Financial statements come in 3 primary forms: the balance sheet, the income statement and the cash flow statement. Through these financial statements, tracking SME fraud can be a breeze. But more than anything else, they also serve as a decision-making tool, a requirement for various  financing options and a necessary document in ensuring tax compliance.

For Decision-Making 

Financial statements are surefire ways to show performance trends. They clearly depict how your business has performed over a certain period of time. 

As such, profit and loss statements shed light in executing small business operations and help you drive a smart and sound decision. If your financial statements are not updated, it will be difficult to have an objective take on the important decisions you need to make, most of which will likely affect the way you do business.

For Credit Requirements 

When it comes to your business finances, nothing is ever certain. And when your cash flow is not running as smoothly as you want it to, you might need to look for financing institutions for help. 

While having loans approved is not too difficult, most credit organizations will require a complete set of financial documents to check the financial viability of your business. A statement of your financial position not only shows your financial status; it also  identifies trends which can be a pitfall in the near future, thus helping you project possible ways to avoid it over the course of the years. To that end, you cannot afford not to keep your financial statements accurate and up-to-date

For Tax Compliance 

Strict compliance with Australian taxation standards involves a complete set of financial statements. These financial statements will serve as the basis for calculating your quarterly state and federal tax obligations. Thus, if you are not keeping a close eye on your financial statements, your business will be prone to tax miscalculations.

 Moreover, messy financial statements will also likely put you at a tight spot if your company gets chosen for a random business audit.

 Read Next: Beyond Financial Statements: Assessing Company Management in Startups 


To say that financial statements are the pillars of a successful business is an understatement. The importance of a company’s financial statements is best portrayed when the business undergoes big successes or unexpected downfalls.

With that in mind, don’t you think it’s only apt that all your financial statements are as organized as possible?

Our qualified advisers take great pride in their ability to take charge of advanced finance and accounting services for Australian SMEs. To get the ball rolling, visit our website at D&V Philippines today!

Download Solution for StartupsThis post was first published 7 October 2015 and edited 17 August 2020.

Topics: Business Cash Flow and Financial Statement, Financial and Accounting Services, Financial Management and Analysis

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