Financial Reporting Explained - Introduction

Introducing Financial Reporting

Financial Reporting is a term normally reserved for publicly traded companies or Fortune 500 firms. It's important to note, that financial reporting is important for small business owners too. But first...

What is Financial Reporting? According to Accounting Tools, financial reporting is, “the financial results of an organization that are released to its stakeholders and the public.” This definition doesn't make it seem like it would be useful for small business owners, but trust me, it's VERY important. Financial Reporting contains the following documents:

  • Financial Statements (income statement, balance sheet, and statement of cash flows)

  • Footnotes which provides additional information about specific topics related to the aforementioned statements

  • Any financial information a company chooses to convey to stakeholders/public

For small businesses, financial reporting provides detailed insight about the health of the business and helps business owners make informed decisions about future of their company.

Financial Reporting for Small Business

As a small business owner, its not always necessary to create a set of financial reports that are similar to those of a public company. A public company financial reports are usually for the use of outside investors. For a small business owner, that investor is usually the owner. Like public companies, the key financial statements contain important information for a small business owner. Additionally, statements such as AR aging and AP aging provides additional insight on how your business manages the collection of money from customers and the paying outstanding bills. In this blog series, I will provide a detailed explanation of the key financial reports for a small business. Those reports are:

Income Statement Balance Sheet

Statement of Cash Flows

AR Aging

AP Aging

This blog series will analyze each financial reporting document and provide deep insight to the importance of each statement. I will also provide tools that can be used to help understand how each statement helps a small business owner understand the health of their company.