A financial report summarizes your business’s performance and position for investors, creditors and other stakeholders. It turns raw data into insights you can use to evaluate and improve your company’s bottom line, increase profitability, manage costs and plan for the future.
Depending on your needs, you can create a variety of financial reports. For example, if you want to compare budgeted and actual figures, you can create variance analyses that identify the root cause of performance gaps. You can also analyze historical trends in income statements, balance sheets, cash flow statements and statement of shareholders’ equity, or you can look at individual metric categories like cost-saving opportunities, receivables management or inventory valuation methods (e.g., FIFO or LIFO).
A clear structure makes it easier for you and your team to translate financial data into strategies. This helps you communicate with stakeholder groups, maintain trust with investors and creditors, and keep your accounting staff focused on the most valuable areas for growth. In addition, modern reporting solutions help you monitor your company’s income in real-time, track expenditures and suggest ways to improve resource allocations.
The primary purpose of financial reporting is to offer useful information about a business to external users, such as investors and creditors. This information should be relevant, reliable, comparable and understandable while disclosing the financial reporting practices of a business and any potential risks that could impact its financial health. Lastly, these reports must adhere to established frameworks for preparing and reporting financial statements, such as Generally Accepted Accounting Principles (GAAP) in the US and International Financial Reporting Standards (IFRS) in other countries.