Considering the present economic climate, many organizations across the world face the challenge of implementing fiscal discipline at the time of frail economy. Only good financial reporting systems can overcome protracted recession and prevent any major long term implications for competitiveness and business enterprise.
Businesses – both medium and large- are in competition for credit sources and capital. With banks and other financial institutions becoming more cautious in their investment decisions, it is important to have good financial reporting to ensure financial transparency. Governments also require establishing a sound regulatory environment for accurate corporate financial reporting.
Good financial reporting systems can help businesses to attract the limited investment available in the market. Such capital is particularly important for small and medium-sized enterprises that often lack the collateral that banks demand.
Organizations with good prospects and sound financial reporting systems in place, but lacking collateral are more likely to receive credit. This is because banks will have more information on which to base their lending decisions. This also results in a reduction of their need for high levels of collateral. This is essential for investment and doing business at a global level. Therefore companies having effective financial reporting systems in place are in a better bargaining position.
If an organization wishes to go global, its corporate financial transparency must also traverse the national borders from where it is based. As highlighted by the recent financial crisis, economies have become ever-more interconnected and interdependent. The increasing importance of regional production networks and high volumes of intra-regional trade, are also a major reason for global firms to have a good financial reporting system in place.
Since the year 2004, the World Bank has also been reviewing the accounting and auditing standards and practices of the EaP countries. This is to assist national authorities and key stakeholders in developing policy proposals in an effort to strengthen their corporate financial reporting system.
As countries worldwide are waking up to the economic repercussions of financial frauds the demand for a good and effective financial reporting system has only grown louder! If you are considering upgrading or implementing a financial reporting system in your organization, we suggest you consider the Budget Mastero which provides single centralized database, integrating all the elements of your financial planning. It not only makes the forecasting process productive and more accurate, but also allows for making quick adjustments as global business conditions dictate.