Financial reports aren’t just a chore of bookkeeping. If so, they would be a practice exercise for the junior bookkeeper, then never see the light of day. In reality, that would be a huge mistake for the success of your business. It’s important to understand financial reports because they’re summaries of your business’s performance over time — you’ll need the reports to figure out which decisions worked, which didn’t, and what to try next.

Making a financial report is like drawing up a map; before you know where you’re going and what’s possible, you must understand where you’ve been and where you are right now. This is more complex than “revenue higher than expenses, thumbs up.” Common sense doesn’t equal financial insight, so it can be hard to know where to start. Anyone online could teach you about financial reports — the best part about ACMCPA is we’ll learn about your business and talk to you before explaining how financial reports are affecting your success. Book a free consultation with us to get started.

For now, here are the basics. 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) 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 Cash Flow Statement

The cash flow statement shows the sources and uses of cash during the same period as the income statement — it helps you understand where all your money comes from, where it goes, and what happens in between.

Your Balance Sheet

The balance sheet presents a snapshot of your company’s assets, liabilities, and owner’s equity on any given day.

Why Financial Reports Need To Be Recent

By creating financial 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 insist on seeing 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.

Quickly Create Financial Reports With This Process

The intimidating part is that creating financial reports requires well-organized business records and an understanding of bookkeeping principles. When you create financial reports, it’s important to review them carefully and ensure 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. But once you understand the basics, it becomes much easier.

Here’s the most basic procedure.

1. To create your financial statements, start by gathering all the necessary data — income, expenses, assets, liabilities, and owner’s equity.
2. You then enter this information into accounting software, such as QuickBooks.
3. 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. Or maybe your financial report is still hypothetical. If you’re confused, hesitant, or too busy to start, here’s something to cheer you up. In minutes, we can make a financial report for your business. Simply book a free consultation and let us know how you’d like to succeed.

For now, we can catch you up on financial statements — a decision-making superpower.