Corporate Financial Reporting is part of corporate reporting that consists of financial statements and accompanying notes that are prepared in conformity with Generally Accepted Accounting Principles (GAAP). The financial statements are summaries of business transactions during the financial year of the corporation. The business world has many forms of organizations ranging from the for profit sole proprietorship, partnership and incorporated businesses with limited liability to the not for profit organizations whose existence is not mainly driven by financial gain.

Regulations that govern the preparation of financial statements largely apply only to the incorporated entities. This has given rise to accounting standards setting bodies and legal provisions that form the frameworks used when preparing the financial statements. The process of preparing the reports in accordance with the GAAPs and legal requirements presents advantages and disadvantages to the organizations and to other interested groups. The International Financial Reporting Standards are increasingly being adopted by many national accounting standards setting bodies leading the way to a single set of accounting standards all over the world. It is therefore worthwhile to look at the advantages and disadvantages of financial reporting to create an awareness of the complexities that corporations and accounting professionals contend with.

THE ADVANTAGES

A number of advantages of corporate financial reporting can be enumerated and perhaps among the most important is that organizations are able to compare their individual performance with others in the same industry or line of business. This is because the established principles, standards and regulations ensure that there is a benchmark to be followed in the preparation of financial reports. Recognition of income, expense, assets and liabilities is standardized by the existing framework and any deviation can be countered with disciplinary or legal action. Organizations strive to prepare their financial statements to closely match the set frameworks as much as possible. In some countries for example Kenya, this has been translated into an annual competition (the fire award) where companies performance in this area is assessed by professional bodies including the national accounting professionals body with the aim of awarding the company with the best prepared financial statements. This in turn promotes staff and professional development which is a desirable aspect in the growth and wealth creation of the corporate organizations.

Investors and owners of companies in jurisdictions where corporate financial reporting follows strong established and clear frameworks can make the appropriate investment decisions. Corporate reporting in this case enhances the development of understanding of the activities of the companies and at the same time keeps the companies themselves on their toes as the wider society is well-informed of the expected reporting standards. This also acts as an incentive to managers to perform at their best and to institute control measures that aid the organization to comply with the frameworks.

Requirements of corporate financial reporting lead to timely preparation of financial reports. This is desirable to the stakeholders who may be more interested in the organizations immediate past rather than wait for a long time before the outcome of their input is known. When financial reports are prepared and published within the stipulated time, it is possible for necessary actions to be taken to correct any anomalies that may have led to undesirable outcomes. In a more serious case where a material error happens to be discovered, it can be corrected and the necessary measures taken to avoid a repeat of such occurrences.

IFRS give room for flexibility as they are based on principles rather than rules. As principles are based on value, corporations can adopt the standards that best suit their circumstances as long as fair value is adequately reported. This also encourages professional development as accounting standards setting requires qualified academics who can develop the required standards after lengthy and rigorous discussions and considerations to come to a consensus.

Overall, corporate financial reporting acts as a control measure as management, owners, employees, customers, creditors and the government are dependent on the reports in their decision-making. For instance the government in taxation of companies relies at the outset on the financial reports prepared and examined by qualified public or certified professionals. Trends on the growth of the companies can also be quickly determined by comparing sets of reports for different periods.

THE DISADVANTAGES

Corporate financial reporting does not bring desirable results only. There are some undesirable outcomes that should be mitigated against. The consideration of cost guides many companies in their operation. In preparing corporate financial reports in accordance with laid down standards and rules, expertise is required and the company has to engage highly qualified professionals for this task. The fee payments to qualified professionals can be prohibiting especially to small companies controlled closely by their owner managers. Compared to larger companies the small entities do not have adequate resources to implement adoption of the standards or even to train or employ qualified staff. In many instances such small and medium enterprises (SMEs) are tempted to forgo compliance with certain aspects of the standards or rules leading to problems with regulatory bodies including the government.

Freedom to adopt standards that suit the particular circumstances of the company leads to manipulation of reports. Disclosure of important information is in jeopardy as there is no legal enforcement for implementing the standards. Even where the government imposes legal obligations on what financial reports are to be prepared, there are still loopholes that can arise especially when the accounting standards and the legal stipulations are not in conformity in some areas.

For multinational companies, there are challenges in preparing their consolidated financial reports especially where operations are in countries with different accounting standards and legal regimes. There are also other challenges in dealing with for instance exchange rates, interest rates and transfer pricing where treatment of such aspects may be considered differently in different countries. Taxation and existence or non-existence of dual taxation treaties also poses another challenge.

CONCLUSION

It can be concluded that corporate financial reporting is essential and the gains from following accounting standards based on principles far outweigh the disadvantages as freedom to prepare reports in whatever way organizations deem appropriate may lead to financial chaos.

The term “financial skills” covers a range of activities that a professional buyer or procurement executive needs to have if they are to deliver value for money and manage commercial risk for their organisation. However, these skills are not always covered by conventional training which means that a buyer could be creating needless exposure both for themselves and their career as well as their organisation.

There are six financial skills that everyone who works in procurement should acquire.

1. Financial analysis – this covers the use of financial ratios that enable you to identify suppliers who are under performing compared to their competitors or who might be financially vulnerable and so create a supply risk for you. Ratios compare one financial value with another in order to give you an insight into the way that supplier is run. For example, liquidity ratios look at the ability of a supplier to meet its short-term financial obligations by dividing the value of current assets (such as cash and inventory) with the value of current liabilities (such as creditors). Other ratios tell you how efficient the supplier is in turning sales into profit, generating sales from the use of assets and its ability to grow.

2. Activity based costing – this is a method that takes all of the costs of an organisation and assigns them to the products or services that the supplier sells. The big difference between this approach and more conventional costing methods is that it first allocates costs to the activities that create those costs and then to products or services in direct proportion to the amount of those activities that they use in their production or service fulfillment. What this means is that you get a clearer picture of the true costs of making a product or delivering a service than you get from conventional means. The importance of this for the buyer is that they get an understanding of what drives costs and so what actions suppliers can take to reduce them which in turn lets them reduce the price to the buyer and still make an acceptable profit.

3. Understanding profit and loss accounts and balance sheets – the profit and loss account shows a buyer a summary of all the transactions a supplier has made in a period of time (such as a year) with the resulting profit they make and the balance sheet is a snapshot of the financial position of the supplier at that point in time. Accounting policies that the supplier adopts can make a big difference to the declared profit; for example, a supplier can choose how much to charge each year to the profit and loss account for an asset it has bought and this can have a major impact on the profit in any one year. Knowing what accounting policies a supplier uses can help a buyer to understand their accounts and so make sure that the financial ratios that are used to get an insight paint an accurate picture.

4. Understanding cashflow – the lifeblood of any organisation is its cashflow as it can only pay its bills on time and remain solvent if there is cash in the bank. It is important to understand that this is not the same as its profit. For example, if you sell something for $100 now and give your customer 14 days credit then you will not physically receive the cash for another two weeks. If you have bought materials that have been used to make that product and your supplier has given you only 7 days credit then you will have to make a payment to them before you receive the cash from your sale. If you do not have the money in the bank then you may be in difficulties. Understanding the concept of cashflow and how to calculate and analyse it is an important tool in predicting the solvency of your suppliers and their vulnerability.

5. Understanding break-even analysis – this technique calculates the level of activity your supplier needs to have if it is to break even. Levels of activity above the break-even point result in a profit for your supplier and levels of activity below it means your supplier is operating at a loss. The importance of knowing this figure is in negotiations. If your supplier is already above its break-even point and has included your current level of purchases in its calculation, then any further business from you will provide a “super profit” (that is, profit over and above its expected amount as their fixed costs have already been covered). You should be able to negotiate a price reduction based on this information.

6. Price and cost modelling – one of the key questions that procurement people ask of themselves is “am I paying the correct price for this item?”. Price and cost modelling helps to answer this question. Price modelling involves comparing the price you pay against some yardstick of reasonableness such as the price paid last time or a benchmarked price. Cost modelling goes further and is a technique in which you build up an understanding of the cost of the materials, component and other costs that go into the items production or delivery (if it is a service) so that you can assess whether or not they are reasonable and whether the subsequent profit is fair.

Quite a few people have written to me asking how to use Reiki to bring abundance, prosperity and/or

financial success into their lives. This article is a somewhat shortened version of my blog entry on this

matter. Please click on the link below to read the longer version.

I’m going to present a few ideas for using Reiki to achieve abundance, prosperity and/or financial success.

But before I do that, I want to mention that this is one area where Reiki and Feng Shui go together very

nicely. Many books on Feng Shui specifically tell you how to set up your environment to encourage abundance and prosperity.

I do want to acknowledge something before I continue my discussion. To some people, speaking of Reiki and money or Reiki and financial success in the same breath makes them cringe. They view Reiki as pure Love, a spiritual calling, and to introduce the idea of money into the sacred realm of Reiki is abhorrent to them. If that is your viewpoint, I completely understand and respect your position. I have known healers in many fields who have felt the same way.

But I am a bit more of a pragmatist and a realist. I recognize that we need to make a living and we need to support our families. Even more importantly, I realize the negative effects poverty and monetary insecurity can have on us.

When a person feels financially uncertain, even endangered, that person may find it very hard to pay attention to the spiritual aspects of his/her life. If someone has so much financial worry, thoughts of “How will I pay the bills?” and “Will we lose the house?” may occupy so much of that person’s energy and time that they can scarcely think about things like helping others heal.

Does this mean that poor people and people with financial difficulties can’t be spiritual and can’t help others heal? Of course it doesn’t mean that. However, survival issues can become paramount, and for many, many people, these issues interfere with their ability to give any of their energy to spiritual and healing issues. We are all human, with a limited amount of energy and resources available to us at any given time.

But beyond this, I don’t believe there is anything inherently wrong in the desire for abundance, prosperity

and financial security. We live in a world that is run by money; that is the reality we live with, no matter

how much we might wish it were otherwise. Without sufficient money, we are in deep trouble! When we have sufficient money, we can turn our attention more easily to helping others.

Everyone has to define what the term “sufficient money” means to them. For example, I am not fond of the idea of using Reiki to win the lottery, or to win at gambling. Frankly, I don’t like the energy of gambling, because so many people’s lives are ruined by gambling.

Having said that, however, I leave it up to you to decide how much money is “sufficient”. The people who

contact me about using Reiki for prosperity usually want to have enough money to pay their bills on time and provide a good home for their families. Some of them have started Reiki and other healing practices, and want those practices to be financially successful so that they can both help others and support their

families.

The term “abundance” is also open to interpretation. Abundance is not necessarily the same thing as having a lot of money, or being very prosperous. Each person has to decide what “abundance” means to them. Someone who does not have a lot of money but who has a lot of friendship and love might feel that their life is filled with abundance. Having a sense of abundance allows us to feel content with what we have. That assumes, of course, that we don’t struggle to find the money to eat every day, or we don’t live in an unsafe place.

You can use Reiki to attract abundance and prosperity towards you in many ways. Here are a few suggestions:

1. Draw the Reiki Power Symbol and the Long Distance symbol on a piece of paper, and place them in your wallet or purse. Every time you see them there, think of abundance/prosperity being drawn to you across time and distance. You can also place these symbols in a jar of coins and tuck one in the back of your checkbook.

2. Draw the Power Symbol on your Palm Chakras each morning. This will serve as a symbolic reminder of how money changes hands, and it will help draw that money toward your hands.

3. Use Aventurine stones or Malachite stones, both of which are often used to represent money. Place the

stone in one hand while you draw the Power and/or Long Distance Symbol over that hand with your other hand. Concentrate on the idea of wealth flowing toward you. Leave the stones near your checkbook, purse, wallet, etc.

4. Using the Long-Distance Symbol, you can send Reiki into the future for your finances. In other words, you can send positive energy into the future. You can also use the Long-Distance Symbol to go backwards in time to help heal some of the emotional toll that financial difficulties have taken on you.

5. If you have a business, you can draw the Power Symbol and/or Long-Distance Symbol in the air in the

corners of your place of business, over the cash register or credit card machine, etc. Leave small

Aventurine or Malachite stones that you have charged with Reiki near the register or credit card terminal.

There are several Chakras that are important to pay attention to in money matters:

1. The Palm Chakras – since money literally “changes hands”.

2. The Third Eye Chakra – because it’s the seat of your intuition, and it can help you make good decisions

about your future.

3. The Solar Plexus Chakra – because it’s the place of your inner wisdom, your “gut feelings”, and it can

help you determine whether something is a good or bad financial decision for you.

4. Be sure to focus on your Root Chakra, too, if self-confidence (or lack of it) is an issue. Your Root

Chakra is also important if past financial problems have disturbed your sense of stability and security (and

made you less confident as a result).

The subject of Reiki for abundance, prosperity and financial success is complex and multi-faceted. I have

just scratched the surface with this discussion. Please feel free to sign up for my newsletter to learn more

ways that Reiki can help you in your everyday life.

In the olden days a career in finance did not offer anything more than a back-office recording keeping job. A finance person was understood to be a record-keeping person in an organization.

However, with the evolution of business landscape, the role of finance has evolved and become more challenging. In today’s organization a finance person occupies a much broader role involving decision-making, planning, controlling the financial operation of a business.

Within finance, one can find a variety of job roles that are not limited to just the accounting field. You can explore financial career options in various industries such as financial service, financial planning, fund management, regulatory compliance, trading, financial management, and so on.

These different jobs require you to have completely different skill sets, and you can choose a financial career that suits your personality and skill level.

If you are analytically oriented, you can choose a career in risk management, where your job is to measure and manage the risk faced by a bank or a financial institution. Alternatively you can also join the insurance industry as an actuary where you ass the risk of loss, and design and price new insurance products. These jobs require number crunching skills. You are also expected to be very diligent as a small mistake can turn into big losses.

On the other hand, if you are a very outgoing person and like meeting people, you may be better suited for selling financial instruments. You may want to join a bank or an insurance company, and promote their financial products to prospective customers. In a bank, you are expected to sell their financial products such as deposit accounts, credit cards, personal loans, home loans, etc. For a career in sales, most organizations provide you a thorough training on their products and common techniques for selling. You are expected to be a go-getter with the ability to close deals quickly. In most financial services institutions, you are paid a decent salary and a commission, which is based on your sales targets.

One more lucrative career option is in trading. As a trader you use your employer or client’s funds to trade in financial products such as equity, bonds, currencies and currencies in an attempt to make a profit. Traders study the financial markets and identify opportunities to make profit. This is a high stress job and requires you to have strong analytical skills and a tough attitude. A career in trading also offers good salaries with bonuses and incentives linked to your performance.

While these are a few important career options available in finance, a person interested in this field can choose from a much wider array of job roles. Best of luck with your financial career!

Nobody knows your business better than you do. After all, you are the CEO. You know what the engineers do; you know what the production managers do; and nobody understands the sales process better than you. You know who is carrying their weight and who isn’t. That is, unless we’re talking about the finance and accounting managers.

Most CEO’s, especially in small and mid-size enterprises, come from operational or sales backgrounds. They have often gained some knowledge of finance and accounting through their careers, but only to the extent necessary. But as the CEO, they must make judgments about the performance and competence of the accountants as well as the operations and sales managers.

So, how does the diligent CEO evaluate the finance and accounting functions in his company? All too often, the CEO assigns a qualitative value based on the quantitative message. In other words, if the Controller delivers a positive, upbeat financial report, the CEO will have positive feelings toward the Controller. And if the Controller delivers a bleak message, the CEO will have a negative reaction to the person. Unfortunately, “shooting the messenger” is not at all uncommon.

The dangers inherent in this approach should be obvious. The Controller (or CFO, bookkeeper, whoever) may realize that in order to protect their career, they need to make the numbers look better than they really are, or they need to draw attention away from negative matters and focus on positive matters. This raises the probability that important issues won’t get the attention they deserve. It also raises the probability that good people will be lost for the wrong reasons.

The CEO’s of large public companies have a big advantage when it comes to evaluating the performance of the finance department. They have the audit committee of the board of directors, the auditors, the SEC, Wall Street analyst and public shareholders giving them feedback. In smaller businesses, however, CEO’s need to develop their own methods and processes for evaluating the performance of their financial managers.

Here are a few suggestions for the small business CEO:

Timely and Accurate Financial Reports

Chances are that at some point in your career, you have been advised that you should insist on “timely and accurate” financial reports from your accounting group. Unfortunately, you are probably a very good judge of what is timely, but you may not be nearly as good a judge of what is accurate. Certainly, you don’t have the time to test the recording of transactions and to verify the accuracy of reports, but there are some things that you can and should do.

  • Insist that financial reports include comparisons over a number of periods. This will allow you to judge the consistency of recording and reporting transactions.
  • Make sure that all anomalies are explained.
  • Recurring expenses such as rents and utilities should be reported in the appropriate period. An explanation that – “there are two rents in April because we paid May early” – is unacceptable. The May rent should be reported as a May expense.
  • Occasionally, ask to be reminded about the company’s policies for recording revenues, capitalizing costs, etc.

Beyond Monthly Financial Reports

You should expect to get information from your accounting and finance groups on a daily basis, not just when monthly financial reports are due. Some good examples are:

  • Daily cash balance reports.
  • Accounts receivable collection updates.
  • Cash flow forecasts (cash requirements)
  • Significant or unusual transactions.

Consistent Work Habits

We’ve all known people who took it easy for weeks, then pulled an all-nighter to meet a deadline. Such inconsistent work habits are strong indicators that the individual is not attentive to processes. It also sharply raises the probability of errors in the frantic last-minute activities.

Willingness to Be Controversial

As the CEO, you need to make it very clear to the finance/accounting managers that you expect frank and honest information and that they will not be victims of “shoot the messenger” thinking. Once that assurance is given, your financial managers should be an integral part of your company’s management team. They should not be reluctant to express their opinions and concerns to you or to other department leaders.