All types of businesses have to file their financial reports to comply with provincial and federal regulations, for filing and paying corporate taxes, and for the trade commission showing accurate records of profitability, (this pertains to companies that sell stocks). Even if your small business does not have shareholders there are investors, (loan originators, financial institutions) that require the following reports;
- Statement of Cash flows
- Statement of Income
- Balance sheet
This is a report that depicts an overall picture of all cash coming into and going out of all of the business accounts on the books. This translates into identifying the resources of external investments, incoming revenue from normal operations, (sales), in addition to outgoing cash targeting all liabilities, operating costs, building rental, mortgages, up keep company vehicles, training, payroll, and so on. The purpose of this report is to tie the following reports together in order to show a representation of the business’s capabilities in the given market.
This report contains information that pertains to profit and loss over a specific period of time, for instance, annually, quarterly, or bi-annually. This period is also understood as the “accounting cycle.” The picture it paints in financial terms is the amount of revenues lost or profited during the accounting period through normal business operations.
This report provides a picture of the owner’s equity and investor equity in the business. What these are is the initial amount of cash it took to start the business, in the form of assets, which are the liabilities, (investor loans), inventories, cash on hand, equipment, and owned or rented real estate.
All three of these reports carry weight with respect to how well a business is managed and operated within its given market, because of the amount of financial information contained within them. Moreover, having these reports prepared by a certified accountant ensures their accuracy. This translates into attracting more business and investors, which enable your business to grow.