A financial report is a document that provides transparency and accountability for your company’s operations. It includes key financial statements (income statement, balance sheet, and statement of cash flows) along with any related footnotes, supplementary schedules, and management’s discussion and analysis. Financial reporting is used by external stakeholders (like investors and lenders) as well as internal management teams to make informed business decisions. In the case of public companies, financial reports are filed with the Securities and Exchange Commission (SEC) and must adhere to Generally Accepted Accounting Principles (GAAP) in the US or International Financial Reporting Standards (IFRS) internationally.
In general, a financial report is longer than a financial statement. This is because a financial report typically contains more detail and explanation, such as the purpose and period of the financial statement, assumptions, and accounting methods used.
Without consistent and accurate financial reporting, it would be difficult for investors, lenders, and other stakeholders to understand a company’s true financial health and performance. This lack of transparency can damage trust and credibility for a company. Good financial reporting also helps managers and other staff create strategies for success by tracking income in real-time, monitoring expenditures, and identifying opportunities to cut costs or grow revenue.
As a result, many businesses have dedicated departments that focus on financial reporting. In midsize and larger companies, these departments often include the finance, accounting, or controller’s office. In smaller startups, the lead accountant or the business owner may be responsible for creating financial reports. In either case, financial reports are a critical component of any business.