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How better business reporting can boost capital investment interest

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How well do you position your business and its performance to your key investors? KPMG recently sought to determine how businesses can gain increased interest from capital markets through more holistic reporting of business performance and operations. The results of this study were compiled in their recently released report, ‘Integrated Reporting – Performance insight through Better Business Reporting’.

The report aims to demonstrate how an in-depth understanding of business strategy, performance and future prospects improves interest from capital markets in investing in your business. KPMG says this can provide a key competitive advantage to businesses at little cost.

“The current model of business reporting is limited as a source of information for the analysis of competing investments,” says KPMG in a media release. “There is now an increasing desire by capital markets to have a holistic view of a business.”

In fact, as competition for capital investment increases, Michael Bray, leader of Better Business Reporting Group KPMG Australia, says more and more businesses are opting to provide a more comprehensive and transparent picture of their business.

“As it becomes more difficult to provide a complete picture through traditional reporting, and access to finance tightens as a result of challenging economic conditions, many companies are re-evaluating the scope of their communications to the capital markets,” says Bray. “Fierce competition for limited funds and increased scrutiny by regulators is pushing organisations to provide a more comprehensive overview and outlook for their business.

“Providing strategic and forward-looking information about the performance and prospects of the company is a powerful way to convince the capital markets of the worthiness of investing in a company.”

Integrated Reporting involves comprehensively outlining business performance and forecasts, in line with strategies and targets established in the business plan. This type of reporting should be specifically geared towards relevant stakeholders, making it easy for them to evaluate the company’s current performance and future plans and how this relates to their investment.

According to KPMG, Integrated Reporting should cover the following content elements:

  • Organisational overview and business model
  • Operating context, including risks and opportunities
  • Strategic objectives
  • Governance and remuneration
  • Performance
  • Future outlook.

“Providing historical and forward-looking information about the performance and condition of the company is a powerful way to tell a business’ perspective to the capital markets,” says Bray. “When done well, this commentary provides insights into a company’s financial performance, position and prospects, equipping investors with critical information to evaluate a company and make more informed investment decisions.

“Delivering information in this manner will enable the capital markets to better understand the strategy, align their models with business performance and prospects, and make efficient and forward-looking investment and other key decisions based on Integrated Reports.”

As well as providing potential capital investors with greater insight into the business, KPMG also believes Integrated Reporting can help business owners with operations.

“With leadership support and active involvement in developing the integrated reporting strategy, KPMG believes that organisations will develop a more consistent understanding of their own business model and how they drive sustainable value through the effective use of available capital,” says KPMG in a media release. “Armed with this better understand, internal reporting for decision-making and incentives will be streamlined and focused on core strategic matters.”

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Published on: Tuesday, September 13, 2011

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