Why Quarterly Financials are Important

Financial statements are an integral part of business performance indicators. As owners are busy with the day to day operations; financial record keeping and performance reports are left for year-end with tax reporting.

Financial statements provide management relevant, reliable and comparable information that will help owners/managers make informed economic decisions.

Let’s begin with balance sheet; it’s a snap shot of a business at a specific interval and conveys the following:

  • Accumulated cash in company bank accounts
  • Receivable balances; sales not yet collected
  • Product base business; levels of inventory on hand
  • Funds invested in capital assets
  • Regular vendor payables; for on-going regular business operations
  • Payroll taxes liabilities.
  • GST payable; GST collected less paid
  • PST payable; PST collected on sales
  • Short and long term business debts

Income statement is financial performance reporting over specific accounting period and conveys the following:

  • Sales for the period
  • Cost of sales; direct labour, materials and other supplies
  • Other operating costs not directly related to sales
  • Overhead costs such as rent, telephone, utilities etc. incurred regardless of sales levels.

So, what is the importance of quarterly as opposed to annually?

  • Quarterly financial statements are comparable over time
  • Quarterly communications in the year where there is idle cash versus shortage of cash
  • Timing of sales versus collection of receivables
  • Timing of purchases versus payment of payables
  • Overall sales trend of the business, are sales increasing, decreasing or remain flat
  • Overall cost of goods sold relative to sales, does cost of goods sold increase, decrease or remains flat
  • Relationship between sales and costs of goods; gross margin; will convey a quarterly trend for the business of its gross profitability
  • Net income before income taxes or net losses for the business will convey the trend of the business
  • Increases/ decreases in cash both short and long term effect of performance trend
  • Increases/decreases in short and long term debts
  • Opportunity to maximize working capital, by properly identifying trends of idle cash
  • To be relevant; information must be timely

Quarterly financials greatly benefit business owners and management.


Sylvia Katz

Sylvia Katz is a Certified General Accountant and has held senior level management positions in a number of companies. With a wealth of over 18 years’ accounting experience and a passion to help people, she brings a lot of value to small & medium businesses. Her experience includes a wide range of industries such as retail, car dealership, manufacturing, construction, research and development as well as not-for-profit. Find more about her at www.katzaccounting.ca or email her at sylviakatz@shaw.ca

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