Financial reports aren’t just an essential part of bookkeeping. If so, they would be a practice exercise for the junior bookkeeper and subsequently never see the light of day. But that would be a huge mistake for the success of your business. It’s important to understand financial reports because, since they’re summaries of your business’s performance over time, you’ll use the reports to figure out which decisions worked, which didn’t work, and what to try next. Generally, a financial report can be divided into three categories: the income statement, the balance sheet, and the cash flow statement.
Your Income Statement
The income statement (also called a profit and loss statement) is a financial report that summarizes the revenues, expenses, and profits or losses of a business for a given period of time. It tells you how much money your company made or lost during a period of time.
Your Balance Sheet
The balance sheet presents a snapshot of your company’s assets, liabilities, and owner’s equity on any given day.
Your Cash Flow Statement
The cash flow statement shows the sources and uses of cash during the same period as the income statement — it’s helps you understand where all your money comes from, where it goes, and what happens in between.
Why You Need To Have Recent Financial Reports Available
By creating these reports on a regular basis, you gain valuable insight into your business’s financial health. It’s also crucially important to note that lenders and investors may want to see these reports before providing financing or investment capital. And you’ll want to have a deep knowledge of your finances well before you’re printing out charts for the bank or potential investors. That’s why any successful business relies on accurate and reliable financial reports. Therefore, you should know how to make them.
When you create financial reports, it’s important to review them carefully and make sure that everything is accurate and up-to-date. This will help you spot any areas where the numbers don’t add up; it might not seem like a big difference, but these things can be symptoms of deeper issues or they can add up to a big problem down the line.
Use This Process To Quickly Create Financial Reports
The intimidating part is that creating financial reports requires an understanding of the principles of bookkeeping. But once you understand the basics, it becomes much easier. Here’s the most basic procedure. To create your financial statements, start by gathering all the necessary data — income, expenses, assets, liabilities, and owner’s equity. You will then enter this info into accounting software, such as QuickBooks. When you’re done, your software can generate a report according to a time period, often monthly, quarterly, or annually. Ta da, you just took another step towards success for years to come.
