What is an accounting report?
Your business has to keep a lot of balls in the air at all times, and reporting is one way to assess how well you juggle. To measure your financial performance, you’ll rely on a variety of accounting reports, which are quantitative financial documents that allow you to track your business’s financial history and make projections. Similar to financial statements, these reports provide key insights into your company’s financial status for a given period of time.
Of course, if numbers aren’t your jam or you don’t have in-house accountants, accounting services can help you navigate the reporting process. Your accounting partner will prepare monthly accounting reports in accordance with Generally Accepted Accounting Principles, giving you a snapshot of the business and accurate information for taxes.
Importance of Accounting Reports
Whether you’re way ahead or far behind what you’ve anticipated for the business, you need to know where you stand. Accounting reports provide a reality check, exposing your current financial picture compared to previous and forecasted information. With this backbone of information, everyone from business leaders and investors to shareholders and employees gets a clear view of your financial posture, helping to understand business performance, monitor transactions and budget, and determine profitability.
More importantly, reports give context to numbers, helping you make sense of vast amounts of financial data and take action. Running the right reports helps distill and communicate key information, plus reveals problems, pain points, and opportunities to guide your decision-making.
What are the three types of accounting reports?
As Joey Tribbiani might ask, “How you doin’?” Well, a handful of accounting reports will tell you. Most companies lean on three specific reports to measure their performance monthly, quarterly, and/or annually, and your accounting services partner can help make sense of each.
1. Income Statements
Show me the money! Accounting services rely on your income statements—or profit and loss statements—to show your financial performance over an accounting period, including all money coming (revenue) and going (expenses). These reports break down to reveal net income or net loss broken into sales (goods sold), operating expenses (rent, advertising, and so on), and nonoperating expenses (loan interest).
2. Balance Sheets
But you have to take the good with the bad, and balance sheets can help. Balance sheets look at your financial picture from multiple angles, including assets (cash, property, inventory, and so forth), liabilities (accounts payable, loan payments, and so on), business value, and debt situation. Distilling all of this data, they measure your performance based on your ending balance at a specific point in time.
3. Statements of Cash Flow
Money trickles in and out of your business every day, so you need to understand where it's coming from and where it’s going. Accounting services look at your statements of cash flow to understand this and see whether you’re spending more than you’re earning in a given period. These reports can vary widely depending on how big or small your business is. For smaller companies, they might be as simple as cash inflows and outflows, but larger operations also need to look at operating, investing, and financing activities.
The important thing is that reporting isn’t one-sided—you need all three to accurately manage your finances. In fact, depending on the size and complexity of your business, you might even need a fourth report! Have shareholders? You’ll need a report for owner’s equity too.
Keep an eye on performance with reporting.
Data, data, everywhere—and it all has to come together to make sense of your business’s financial health. Accounting reports such as income statements, balance sheets, and statements of cash flow keep you on the straight and narrow to identify strengths, weaknesses, and opportunities.
Need to make better sense of your accounting system? Ignite Spot offers expert bookkeeping and accounting services and can keep your reporting on track. Explore our offerings to find the right fit.