A financial report is a formal document that captures all significant activities within your business for a specific period. It aims to provide external stakeholders, such as investors and banks, with enough insight to decide whether they’ll invest in or lend to your company.
It combines the information found in your business’s income statement, balance sheet, and cash flow statement into one report. It shows the current state of your company’s finances and can help you make better decisions for future growth by identifying potential issues.
Typically, the financial report contains notes to the statements that explain the accounting methods and details behind each number (e.g., depreciation methods, inventory valuation), major events that affect the financial statements, and contingencies. Depending on your industry and regulatory requirements, you may also need to include a statement of changes in equity and a summary of accounting policies.
In addition to providing a snapshot of the company’s finances, a financial report can be used to determine your profit margin and potential growth. However, financial reporting is often time-consuming and complicated. This is because preparing accurate financial reports requires a lot of data collection and analysis. Additionally, meeting rigid external deadlines can take away valuable resources from your company.
Fortunately, you can turn financial reporting from frustrating admin into a collaborative team sport with the right tools. With the right solution, you can automate your entire financial reporting process and get up to date with less effort in each fiscal period.