A financial report is a formal document that captures all significant financial activities within your company during a given period. It is a requirement for any business that wants to attract investors or gain access to the capital markets. But these reports aren’t just useful for external stakeholders; they help your internal management team to understand your business and make better decisions that drive growth.
The most common types of financial reports include the income statement, balance sheet and cash flow statement. The income statement measures your company’s revenue, expenses and net income/(loss) over the reporting period. This report uses accrual accounting to match your sales, cost of goods sold and operating expenses (like rent, utilities and salaries) with the associated revenue, irrespective of when the actual cash is received or paid.
Similarly, the balance sheet includes your company’s current assets (cash and cash equivalents, inventory and marketable securities) and fixed assets (property, machinery and equipment). This report also uses accrual accounting to record your company’s purchase, sale or debt settlement transactions in the accounting ledger.
Finally, the cash flow statement provides a detailed account of all inflows and outflows of your company’s cash over the reporting period. This report helps you to assess whether your company has sufficient cash to meet its short-term liabilities, as well as manage revolving credit lines like credit cards.
All of this information should be included in your financial report to demonstrate transparency and accountability to your external and internal stakeholders. However, creating the perfect financial report can be a daunting task for many businesses. Fortunately, there are robust tools available that can turn financial reporting from an administrative burden into a collaborative team sport that helps your business grow.
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