Financial Reports that Will Tell the Health of Your Business

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While in business, reviewing a number of financial reports allows you to understand the health of your business. In consideration should be the balance sheet, the income statement and the cash flow statement. Despite them all being statements, they give different financial reports. 

Financial Reports that should be reviewed

There are a number of financial reports that a business should review and monitor on a regular basis. For accurate results, this should be done consistently. The income statement, the balance sheet, and cash flow statements are the most important reports. If the management wants to know the condition of the business at any given time, this is what they should look at.

  • Balance Sheet

You want to know the condition of your business at a specific time probably month or annual. The balance sheet is the report you should look at. It indicates liabilities (what the business owes other entities), assets (what the business owns) and capital at a specific period. By comparing different balance sheets (from different periods), you are able to tell how the business is fairing. It’s a crucial financial report that should be monitored regularly. 

  • The Income Statement 

The income statement is another crucial report that should be checked regularly. It clearly indicates the losses and profits that have been made in a certain period. It helps in determining how much loss has been made and what caused it as well as how much profit has been made, and ways of improving it. 

  • The cash flow statement 

A business could be generating the expected revenue but if expenses are more than the income, there will just be losses. It’s a statement that shows whether there is an increase or a decrease in cash. 

Interpreting the Financial Reports

Interpreting financial reports may be a challenge for some. The accountants in the business should help with interpretation. Besides the explanation of what the statements indicate, accountants should give clear guidelines on what needs to be done to improve the situation. They should be able to explain every detail in the reports and what it means to the business.

Financial reports should be monitored from time to time and consistently. This is the only way a business can get to know its health and strategies on how to improve the situation. It’s better if the reviews are done on a monthly basis. Focusing on just one of the reports will give wrong details that are harmful to the business.

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