Financial reports are a vital tool for tracking company progress and performance. They provide insights that help businesses make strategic decisions, avoid obstacles and capitalize on opportunities for growth. Financial statements also enable companies to stay compliant and secure better deals with lenders and suppliers.
Financial reporting is the process of organizing and presenting financial information so stakeholders like managers, investors, creditors, and tax authorities can analyze it and understand your business’s health. Financial statements include documents such as balance sheets, income statements, cash flow statements, and management’s discussion and analysis (MD&A). These statements present the beginning and ending accounting balances for assets, liabilities, and equity accounts, while also demonstrating how each account was reached by reconciling it against your company’s books of records.
The statement of cash flows provides a detailed overview of your company’s cash inflows and outflows over the report period. It helps stakeholders see how well your company manages its cash, preventing it from running out of funds and attracting debtors. It also supports the preparation of budgets and financial forecasts by showing how much money your business is bringing in and where it is going out.
Investors, lenders, and credit agencies rely on accurate financial reports to assess the safety of their investments and make informed lending and borrowing decisions. By establishing a clear and consistent practice of financial reporting, your company shows that it is trustworthy and reliable, attracting potential partners, investors, and customers.