Financial reports are a snapshot of your business’s financial life over a set period, typically a quarter or year. They pull together key data from the balance sheet, income statement, and cash flow statement to help you better understand how money is coming in and going out of your business. This information can help you improve your operations, attract investors, and make smarter decisions. Financial reports are also often legally required for public companies to file with regulators and publish for the benefit of their shareholders.
When creating your financial report, it’s important to take time to carefully organize and calculate your data. For example, if you’re making a sales forecast, start by collecting data on all of your sales from the past three years before organizing it in a spreadsheet on a yearly, monthly (for year one), and quarterly basis. Then, use this data to create a detailed sales forecast.
As a part of your financial reporting, you should also prepare an income statement that includes all your company’s revenues and costs over the specified period. This report should reflect your actual profits and losses and highlight any changes from the previous period. It should also include the accounting equation: Assets = Liabilities + Equity (stockholders’ equity). Finally, your financial statement should contain a cash flow statement that analyzes all of your company’s cash inflows and outflows. This includes operating cash flows from sales and service revenue, investing activities like purchasing or selling assets, and financing activities like debt issuance or repayment.