A financial report provides insight into a company’s money to help inform strategic decision-making and attract investors. It’s also a legal requirement for publicly traded companies and helps them maintain trust with stakeholders and shareholders. But creating accurate and timely financial reports is challenging for many companies, especially small businesses.
The process begins with collecting and organizing data before it’s analyzed in a spreadsheet or financial reporting software. Then it’s tallied on a yearly, monthly (for the first year), and quarterly basis. An executive summary is included as well, to give executives a quick overview of the report’s findings. Including charts, tables, and graphs is helpful to simplify complex data.
Stakeholders rely on financial reports to evaluate the company’s performance, make informed decisions about investing or lending money, and set SMART business goals for future success. These reports can also identify potential obstacles and opportunities for growth or investment. But they are most useful when they’re clear and understandable to the people who need them most.
The goal of financial reports is to improve transparency and accountability within a business, allowing stakeholders to hold the company accountable for its practices and outcomes. The primary audiences for financial reports include regulatory authorities, tax authorities, shareholders, lenders, investors, and trade partners. Larger companies often release their financial reports to the public to build interest and investor confidence. They may also voluntarily provide their financial information to nonpublic stakeholders as a form of marketing.