The advantages of financial reporting become evident once you begin to think about the purpose it addresses inside and outside your enterprise. A financial statement can offer a clear picture of the financial situation of your company in real time. Keeping a track of your organizations finances can be the differentiating factor between failure and success. For instance, when you look at your financial statements, you will be able to keep your spending in check. Such close scrutiny of your finances can help you analyze if you have sufficient money to invest in the growth of your enterprise.
Financial reporting consists of three major statements, namely incomes statement, clash flow statement and balance sheet, with the last one being the most fundamental of all the three. The balance sheet displays the relationship between equity and liabilities and how they comprise of the total assets. The income statement, which is also known as the profit and loss statement, will display the profitability of the business during a specified period. The cash flow statement on the other hand displays the exchange of goods and accounts to cash and will show the transformation of a business’s finances from the accrual form to the cash form.
Here are 3 ways how financial reporting can assist your small business.
