A financial report is a record of your company’s assets, liabilities and equity at a specific point in time. The main goal of a financial report is to provide transparency for external stakeholders (investors, lenders, trade partners) and internal decision-makers alike. Clear and understandable reporting drives business clarity, connection, and action.
The most important elements of a financial report are the income statement, balance sheet, and cash flow statement. The first one lists revenue and expenses over a period, using accrual accounting to match revenues and costs regardless of when they were received or paid. It also shows profit and loss, cash flow from operations, and a total of all the invested capital.
Next, the balance sheet lists all your current assets (cash and cash equivalents, marketable securities, inventory, accounts receivable) and liabilities (accounts payable, loans payable) at a given point in time. It’s essential to display your assets and liabilities in separate categories, namely current assets (expected to be converted into cash or paid within one year) and long-term assets.
Finally, the cash flow statement is a detailed account of your cash inflows and outflows over a period. It’s best to present this report in a graph or table, so you can easily spot trends and patterns. This report also highlights a company’s break-even point (where your sales volume matches your business expenses). If you notice a problem, you can take corrective actions such as negotiating better payment terms with vendors or changing your inventory levels.
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