The Companies Act (No71 of 2008 section30) requires all companies to prepare Annual Financial Statements within six months after the end of its financial year.

Apart from this legal requirement, there are numerous other reasons why companies benefit from compiling financial statements:
 

• Give a view of the company’s financial position to make critical managerial decisions regarding the future growth of the company.
• Current and potential investors can see the health of the business, which will assist them in deciding whether they should invest or not.
• To apply for an overdraft or a loan, banks request financial statements to see whether the business can afford credit.
• SARS requires tax returns to be accompanied by annual financial statements.
• Determine if the company is solvent. According to section 22 of the Company’s Act, the solvency and liquidity of a company should be continuously monitored. If records are not up to date the business could be insolvent and running the risk of reckless trading as envisioned in section 22 of the Company’s Act.