A financial report is a summary of the financial state of an entity. The purpose is to provide transparency and understanding of a business to its stakeholders so that they can make informed decisions about investing in or providing funds for the company. It also allows the business to evaluate its operational effectiveness by identifying trends and areas of concern. Financial reporting is a core function of any business and, in the case of public companies, a mandatory requirement for regulatory compliance.
The basic types of financial reports are income statements, balance sheets, and cash flow statements. They summarize data from a specific period and are usually presented in comparison to prior periods. An income statement reports revenue, expenses, and net income/loss for the period. It often includes footnotes that describe the accounting methods used and any unusual or infrequent events, and highlights the impact of any non-cash items on the bottom line. A balance sheet is a snapshot of a company’s financial position at a specific point in time and lists assets, liabilities, and equity according to the accounting equation: Assets = Liabilities + Equity. The balance sheet is useful for assessing a company’s profitability, strength, and liquidity.
Internal financial reporting is a key component of any business and it can be a daunting task, particularly when creating a 10-K for a public company. However, robust automation and a solution that integrates all the relevant data into templates for each fiscal period can save enormous amounts of time and resources. It can also ensure consistency and accuracy by reducing the likelihood of manual errors.