Business Financial Information Secrets

CHAPTER 6Reliability and Timeliness, the Best of Friends

PRODUCING RELIABLE FINANCIAL INFORMATION

To close the discussion on the “what” and “when” of producing CART financial information, we will turn our discussion to the remaining two components – reliability and timeliness. What should be remembered with these two concepts is that for financial information to be reliable, it not only must be presented in the proper format and structure but, in addition, needs to be provided in the ideal time frame with the assurance of accuracy. Managing businesses in today's hyper‐data‐driven economy no longer affords companies the opportunity to delay producing and distributing financial information, as management cannot wait on critical data. Rather, management must be provided certain financial information in real time to assess operating results and, if needed, implement corrective business actions.

The second section of this chapter focuses on the timeliness of financial information reporting, both as dictated by external parties and required by internal management, but we start by diving into the topic of financial information reliability and direct you to Exhibit 4.2 presented in Chapter 4. This exhibit provides a crash course in understanding the importance and difference between accuracy and reliability.

Exhibit 4.2 presents the income statement of a small professional service company that realized approximately $4.25 million a year in sales revenue for 2020, resulting in a net ...