A financial report is a document that summarizes a business’s finances for a specific period. Ideally, it includes all the information required by external stakeholders and adheres to a set of accounting standards. This way, it can be easily understood and compared across companies.
Financial reports serve many important purposes: informing shareholders and stakeholders, ensuring transparency and accountability, supporting investment and lending, assessing performance trends, and aiding strategic planning. But creating accurate and timely reports can be a daunting task. Using the right financial reporting software can make it easier and more effective.
The most essential part of any financial report is the balance sheet. This snapshot shows what the company owns (assets), what it owes (liabilities), and its shareholders’ equity at a given point in time, such as the end of the fiscal year.
To create an accurate balance sheet, you must have all your data organized and calculated beforehand. For example, sales data must be collected from all relevant sources and then consolidated into one spreadsheet. You must then determine the beginning and ending accounting balances of assets, liabilities, and equity, and reconcile them with supporting documents. You must also determine whether your balance sheet will follow a standard reporting framework like Generally Accepted Accounting Principles in the US or International Financial Reporting Standards in other countries.
In addition, a good financial report contains an executive summary that provides a high-level overview of the data included in the main body of the report. This helps your audience to focus on the most important aspects of the report without getting bogged down in details. The content of your executive summary may vary depending on the priorities and level of financial literacy of your audience, so it’s important to understand their needs and expectations before preparing your report.
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