Monitoring the financial health of your company can make the difference between failure and success and this can be achieved through up-to-date book-keeping which ultimately feeds the financial statements with complete and accurate financial information. In this article we will show you benefits of having your financial statements up-to-date for your business, not only as a compliance and statutory requirement in Malta.
There are two main components making up the financial statements: the balance sheet and the income statement. The balance sheet demonstrates the basic accounting equation: Assets = Liabilities + Owner’s Equity. Assets include everything of value that a business owns or is owed, whereas liabilities are what a business owes. Owner’s equity, the balance left over after you subtract liabilities from assets, represents the owner’s share of the business. The income statement, also known as the profit and loss statement, shows the profitability, or lack thereof, of a business over a set period.
The financial statements are a snapshot of a company’s financial position as at a given date, making them an important decision-making tool. Financial statements also provide various business trends, for example, the rate at which you are collecting receivables, the rate at which you are paying creditors and any cash flow problems. These are challenges that one has to address as you make strategic decisions on how to make your business grow.
Furthermore, businesses may require credit facilities as a part of their strategy to remain financially viable. A firm seeking to obtain a credit facility will always be required to present the latest financial statements to the bank as they provide a very good indication of the risk involved.
Maltese companies are required to appoint independent auditors registered with the local Accountancy Board. In Malta, audited financial statements are a statutory and regulatory requirement, and have to be approved by the Company’s directors and filed with the Registrar of Companies within the Malta Financial Services Authority within 42 days from the end of the period for submitting annual financial statements to the general meeting.