Luckily, you must not master accounting as all you need is a grasp of the fundamentals.
Quarterly earnings results can significantly impact setting investor expectations for public and private companies. Quarterly earnings reports can also expose weak points in your company’s growth outlook.
Private companies are not required to file quarterly reports with the SEC. However, those who intend to go public should maintain proper recordkeeping practices. You must understand the quarterly reporting requirements which public companies need. In this case, your startup will be in a better position to prepare for its first form 10-Q after an initial public offering.
Before the IPO, your startup company may have to file a form S-1 registration statement with the SEC. Form S-1 is the primary disclosure document received by potential investors. It shows a comprehensive view of the company’s performance.
You must also understand the quarterly filing dates according to form 10-Q. Q1 ends on March 31, Q2 on June 30, Q3 on September 30, and Q4 on December 31. Your company must submit the 10-Q form 40 to 45 days after the end of its fiscal quarter.
Disclosure, according to the SEC, requires that your organization submits financial statements from the most recent eight quarters. The company’s financial statements include the balance sheet, income, and cash flow statement.
A balance sheet is a vital tool in your organization’s performance since it reveals the assets and liabilities that lay the foundation of its financial status. The assets represent the items owned by the organization, while liabilities represent your organization’s obligations. The balance sheet gives investors a picture of your organization’s liquidity.
It is an essential financial document that gives a screenshot of the company’s performance. The financial statement represents the company’s revenues, expenses, cost of goods sold, and net income or loss.
Cash flow statement
The cash flow statement serves as a tool that shows how well your company manages its cash and overall position. The company’s activities are divided into three: investing activities, operating activities, and financing activities. From these activities, it is possible to analyze the company’s strengths, overall productivity, and future outlook.
Importance of quarterly filing
There are some important benefits to quarterly filing that no startup should miss out on.
Helps to generate projections
Quarterly filing helps the startup financials to make financial projections for the coming periods.
Financial projections help your startup financially to see when financing needs may be necessary while outlining the best time to make capital expenditures for your firm. This way, it is possible to alter plans in the production department, monitor cash flow, or even change pricing patterns.
Financial projections may also provide the information that stakeholders need to understand your business, including your sources of revenue and how you spend your money. In addition, financial statements can be of importance to potential buyers in case your business is a target for acquisition.
A quarterly financial report is necessary for your startup organization since it will help to make sales projections. The three-month frequency provides a clearer picture compared to the annual report.
Helps on earnings calls
Quarterly filing is also helpful to public companies since it enables them to conduct quarterly earnings calls. These calls involve direct communication with the company’s investors regarding the company’s performance and strategy. However, you must ensure that your earnings calls are organized, as poorly organized earnings calls could lead to a loss of investor confidence.
If your startup is planning to go public, it would be necessary that you rehearse the earnings call process. You can do this by identifying the most critical information to investors and anticipating questions that investors might raise on an earnings call.
With quarterly financial data, the management has an opportunity to put together a presentation for interested stakeholders. The management will not only present the financial figures but will also add some context. Therefore, quarterly financial reports provide a channel for your startup to disseminate good news to your investors or potential investors.
Promotes accessibility of financial information
Every company that has its securities listed on regulated markets should have its financial reports prepared quarterly. If you plan for your startup financial to go public, you must prepare well for the quarterly financial reports. Quarterly financial reporting helps to create a more level playing field that provides access to financial information for both insiders and outside investors. Ultimately, this promotes investor confidence and helps to improve capital allocation.
Provides a perspective on business performance
Quarterly filing can give your business a clear picture of how it is fairing in a certain period. This is made possible through the ability to spot any cyclical patterns that need to be addressed or encouraged.
In the absence of quarterly financial reporting, firms may choose only to disclose information that creates a positive image while leaving out other important information to investors. Nevertheless, investors may have to look for other ways to determine how the company is performing. The results would, however, be less informed investment decisions and less efficient allocation of capital across markets.
Did you know you can pay R&D tax for your startup finances? However, with quarterly financial reports, you may qualify for the R&D payroll tax credit, which is usually charged as 25 percent of the qualifying expenditure. Overall, the R&D payroll tax credit helps reduce the taxes your corporation may have to pay.
It is essential to understand the need to create regular financial reports as this could help you understand how your finances have changed over time and make informed decisions regarding the next steps for your organization. Preferably, you should ensure quarterly financial reporting as this helps to ensure that no mistakes go unnoticed as this could lead to financial troubles for the company.
Every company is prone to financial mishaps, but being aware of these risks can help minimize the chances that your company will experience financial problems. Startups can manage their finances by consulting an accounting professional who will help to make sense of their financial statements.