Financial reporting is more than just a legal requirement — it shows that you’re open and honest with your stakeholders, which builds trust and opens doors to new opportunities. Learn about the different types of financial reports, who uses them and how to create a strong one.
Financial statements are records of your business’s financial health. They include the balance sheet, income statement and cash flow statement. The balance sheet lists your company’s assets (like inventory or equipment), liabilities and equity at a specific point in time, such as the end of a quarter or year. It also explains how these values changed over the period, like through purchases or sales. The income statement, sometimes called a profit and loss statement, lists your revenue, expenses and net income/(loss) for a fiscal period, usually presented in comparison with previous periods.
The cash flow statement, which is especially important for small businesses, tracks how cash comes in and goes out of your business. It helps you anticipate cash needs, prevents unexpected shortages and optimizes how you use your available funds. It can also help you identify opportunities to save money on things like utility bills, rent or employee salaries.
Many businesses produce internal financial statements, while others prepare external reports for investors, lenders and other stakeholders. Externally prepared reports must comply with a set of taxation, accounting and legal standards, known as International Financial Reporting Standards (IFRS). These requirements are designed to make your company’s finances easier to understand across countries and cultures.
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