GOOD GOVERNANCE: HOW IMPORTANT IS SOUND FINANCIAL REPORTING FOR YOUR BUSINESS HEALTH? | EDITORIAL
GOOD GOVERNANCE: How important is sound financial reporting for your business health? BY FIONA WAKELIN The King IV report, which came into
effect in South Africa in 2017, provides
governing bodies with a model for good governance. One of the objectives of King IV is to encourage transparent and meaningful reporting, so that
stakeholders are able to make informed assessments on the short, medium and long-term prospects of the business. Recommended practices, regarding
reporting in King IV, include the fact that
CASH FLOW
which are worthwhile tools to assist with
Covid has brought with it a unique set
weekly financial reporting that gives you.
struggling to stay afloat. Now more than
Gearing is a crucial part of managing
flow pulse gives you a picture of your
refers to the relationship, or ratio, of
Weekly reports which provide detailed
Gearing shows the extent to which a
your business’s temperature, but also
versus shareholders – in other words,
assist with planning for either profit
leverage.” – Investopedia.
unawares and can either ensure profits
To ensure your D/E ratio remains at a
of challenges and many businesses are ever keeping your finger on the cash
business growth and stability. “Gearing
organisation’s state of financial health.
a company’s debt-to-equity (D/E).
data and metrics will not only help take
firm’s operations are funded by lenders
provide a set of indicators which can
it measures a company’s financial
or loss. This way you won’t be caught
are sustainably invested or liabilities are
healthy 25-50%, debts and liabilities
red-flagged for immediate attention.
must be rigorously monitored.
published reports.
LIABILITIES
Sound financial reporting and analysis
A keen eye needs to be kept on liabilities
REAL-TIME TREND IDENTIFICATION AND TRACKING
and rigorous financial reporting must
Being on the financial ball in terms of
be regularly presented to ensure the
reporting means you will be aware of
monitoring of loans, debt, credit cards
any movements and trends in your
and possible strategies to cope with
sector and, with your financial status
defaulting on the part of major clients.
quo at your fingertips, be able to make
How does financial reporting and
TIMEOUS DEBT MANAGEMENT
of the company. This includes both
company? Let’s dive into how it can
increasing debt and decreasing equity
the governing body should oversee the annual financial statements and ESG, and ensure the integrity of externally
have two major spinoffs: they provide
insight which helps businesses remain compliant and information which can
lead to improved, streamlined practices.
analysis lead to positive results for a
Staying on the liabilities continuum,
benefit your business:
is a recipe for business closure. It does
COMPLIANCE There are many software packages which provide accurate, real time,
sound financial reporting. This not only enables you to make sound financial
decisions, based on constant insight into your organisation’s liquidity and debt
management, but also helps to ensure
complete compliance with government regulations and requirements.
informed, agile decisions for the benefit opportunities and challenges.
not matter which sector you operate in, unmanaged debt will eventually sink your ship.
To help keep you in the
picture, there are a number of software packages
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