Financial reporting is the process of evaluating and documenting income, cash flow, how resources are used, and other business activities. It helps managers, investors, shareholders, and regulators gain a more detailed understanding of a company’s health and possible trajectory. This information is vital for strategic decision-making, attracting investment, and meeting statutory requirements.
The main financial reports include the balance sheet, income statement, and cash flow statement. The balance sheet is a snapshot of a company’s assets, liabilities, and equity at a specific point in time. It shows what a business owns (assets) and what it owes (liabilities), as well as the interest held by shareholders.
A cash flow statement details the inflows and outflows of cash for a period. This includes operating expenses, capital investments, and debt payments. The statement also includes any retained earnings. Retained earnings are earnings that aren’t distributed as dividends to shareholders. Instead, they’re re-invested into the business to drive growth or pay down debts.
Creating these reports requires an in-depth understanding of accounting principles and the ability to analyze complex data. While it’s critical for business success, preparing these documents can be a tedious and time-consuming task. A FP&A solution can help simplify this process by automating manual tasks and reducing the number of manual errors.