As a CPA, it’s essential to provide your clients with the necessary financial reports that will help them make informed decisions about their business. Despite differences in industries, size, or goals, all companies must have five core financial reports. These reports provide valuable information that helps business owners understand the financial health of their organization. In this article, we will discuss these financial reports and explain why they are crucial for your clients.<\/p>\n
Also known as the Profit and Loss report, the income statement focuses on a company’s revenues and expenses during a specified period, such as monthly or quarterly. The income statement shows the efficiency or inefficiency of management, underperforming areas, and compares the company’s performance with industry competition. This report is essential because it highlights the numbers that show how well the company is performing.<\/p>\n
This report compares the projected budget to what occurred during a specified period. It shows your client’s spending and revenue income data from their income statement and visually displays the information side-by-side with your projected budget. This report helps clients to assess their overall performance, forecast future income, and identify any company areas that perform better or worse than expected.<\/p>\n
The Accounts Receivable Aging Report is a table that categorizes accounts receivable based on how long an invoice has been outstanding. This report shows how long customers are taking to pay, which is vital information during the collections process. It also gauges the financial health of a company’s customers. If a high percentage of customers are slow to pay, this is a red flag for possible investors and the company’s future health.<\/p>\n
The Balance Sheet is a financial report that compiles a company’s total assets, liabilities, and shareholders’ equity in one place. Along with the income statement and cash flow statement, it is one of the Big Three reports used to evaluate a company. A comprehensive balance sheet will help your clients see trends and make decisions with all of the relevant data in front of them.<\/p>\n
The Cash Flow Statement shows the money moving in and out of a company. This report provides your clients with a way to measure their company’s strength, long-term outlook, and profitability. It helps them understand where their cash is coming from and where it is going.<\/p>\n
After you send these five crucial reports, you must ensure your clients can read and understand them. Remember, those you send your reports to are not accountants; that’s why they hired you! Breaking things down into layman’s terms and teaching them will improve your client\/CFO relationship.<\/p>\n