During this era of the information revolution, we should all expect to receive timely and accurate data to make decisions, including investment decisions, financial decisions, retirement decisions and career decisions.
The information we receive appears to be endless. Annual reports can be hundreds of pages long. Continuous disclosure rules require ongoing reporting by listed companies. New financial reporting and disclosure standards are added by company regulators every year.
And yet investors are still not receiving all the financial information they need to make their strategic decisions. For example, companies are still not sure how to measure the value of the loans (and related financial instruments) involved in the sub-prime mortgage crisis.
With all this uncertainty, banks around the world are refusing to lend to each other. Many companies are finding it hard to obtain debt finance. Householders and businesses are finding it more expensive to borrow money.
Trust in the financial system (particularly in the USA) has been eroded.
In periods of uncertainty, where there is a lack of clear, timely and reliable financial information, the economy suffers.
The same may be said for a business. Without clear, timely and reliable financial information, a business will suffer. Suppliers restrict credit or refuse to do business with you; banks impose higher interest rates and reduce or remove their lending facilities; employees seek more secure employment; taxation authorities and corporate regulators take more notice; poor strategic decisions are made; investors become nervous. And business owners and managers lose sleep!
So, when considering the global financial situation, the lessons for your own business are clear. If your business can produce timely, accurate and relevant financial information it will engender trust, it can differentiate you from your competitors and it will certainly give you the edge when times are tough.
Andrew Blunden CA is a Director of Pittwater Business Limited and is Managing Director of Part Time Professionals (www.ptprofessionals.com.au) which represents more than 190 Financial Controllers and CFOs throughout Australia.
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