Why is On-Time Accounting Information Crucial for Success in Business?

One of the qualitative characteristics of accounting information is its timeliness. If information is not available when it is required, it loses its value. The term "timeliness" refers to the process of making information available to decision-makers before it loses its ability to influence them. As a result, if timelier information can be delivered to financial statement users, the more relevant it is to the decision-making process.

By users of accounting information, timeliness of financial reporting is viewed as a critical characteristic of financial accounting.

When do you need to be concerned about the timeliness of accounting information?

Accounting information is timely when it is provided to users to enable them to act on it. The concept of timeliness is critical in the following areas of a business and are detailed below:

Financial Statements

The issuance of financial statements cannot be delayed to the point where company managers realize too late that there is a severe issue with performance or liquidity problems that must be addressed. As a result, it is the accountant's responsibility to close books and statements within a reasonable period.

Variance Analysis

There are numerous cost and accounting variances in the areas of sales, purchasing, overhead, and labor. In general, after the end of the month, the accounting department compiles and reports such changes. Therefore, managers will be unable to take corrective action if there is a delay in reporting.

Responsibility Reporting

A company's revenue and expense results can be subdivided and assigned to various responsible parties across the organization. If so, it may mean that due to delayed accounting information, the accountability of the responsible party cannot be assessed promptly.

From the above examples, we can see that the accounting department's reporting schedule should be adjusted to accommodate users' varying needs for various types of information.

General Causes for Delay in Accounting Information

One inherent problem with the concept of accounting information timeliness is that it may cost more to set up an elaborate accounting department to compile, analyze, and report information at a faster rate. Further, due to the lesser availability of time, the existing accounting department may be unable to detect and correct errors, increasing the risk of inaccurate information and delayed accounting reports.

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