Accounting reports provide a snapshot of a company’s finances at a point in time. They offer essential details of the organisation’s operations and transactions.
Various accounting records are compiled together and presented in an accounting report to provide crucial insights that can help the company’s leaders make important decisions. Each report has a specific purpose such as determining the profitability of a new product, offering specific details of the sales in the region, the growth of revenue, etc.
Here are some major accounting reports a.k.a. financial statements that all start-ups should be aware of:
Balance sheets are a snapshot of the company’s finances at any given time. They list the organisation’s assets, liabilities, along with equity balances.
They help determine an organisation’s financial reserves and liquidity.
Income statements are also called profit and loss reports. These provide details on the revenue a company earns over a specified duration.
These offer details on where the company’s cash comes from and who it goes to. Cash flow statements are used to assess an organisation’s ability to generate profits.
Why Companies Need Financial Reports
According to a study discussed in Business Insider, 82% of businesses fail due to poor cash flows. Companies that don’t pay attention to problems highlighted in cash flow statements often run out of financial resources and are forced to end their operations.
Accounting reports are needed to keep track of an organisation’s transactions, its income and cash flow. These reports highlight problem areas in a business, financial managers and other business leaders can use them to make changes.
Companies can be penalized for accounting inconsistencies, so it’s in their best interest to hire an accountant or an external accounting firm to produce accurate accounting reports.
The Association of Certified Fraud Examiners states that every year, US business lose 5% of their revenues to corporate fraud.
An accounting firm can provide auditing services and generate other accounting reports that managers can use to ensure that no fraud is taking place.
A business can’t grow without funds; accounting reports help financial managers maintain a budget, so the company has the finances it needs to expand operations and increase profits.
Revenue forecasting won’t give you an exact picture of what revenues may look like in the future, but these methods can give you an idea of where your business is headed and how much growth/loss you should be expecting.
Duggal Professional Corporation is a trusted accounting firm that offers comprehensive accounting services including business reporting, taxation, and consultancy services to SME’s in Edmonton.
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