A Beginner's Guide to Financial Report: Definition, Types, Tools & Templates (2023)

A Beginner's Guide to Financial Report: Definition, Types, Tools & Templates (1)

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A Beginner’s Guide to Financial Report: Definition, Types, Tools & Templates

August 4, 2022

A Beginner's Guide to Financial Report: Definition, Types, Tools & Templates (2)

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The fluent operation of a company cannot be achieved without frequent financial reports. Through financial reporting, people will obtain an overview of the company’s financial status and predict future financial development. Therefore, it is necessary to access the basic information about a financial report first.

This guide is designed for beginners to learn the definition, types, tools, and templates of financial reports.

Contents

  • 1. What is a Financial Report?
  • 2. Three Types of Financial Reports
    • Balance Sheet
    • Income Statement
    • Cash Flow Statement
  • 3. How to Make a Good Financial Report?
    • Step 1: Be clear about your readers
    • Step 2: Collect financial data
    • Step 3: Design report and visualize financial data
    • Financial Performance Dashboard
    • Financial KPI Dashboard
    • Financial CFO Dashboard
  • 5. Why Does a Company Need Financial Reports?
    • For its executives
    • For its employees
    • For its stockholders
    • For its investors and creditors
  • 6.Conclusion

1. What is a Financial Report?

Financial reports (also known as financial statements) are formal documents used to comprehensively and accurately record and reflect an enterprise’s financial conditions, operating results, and cash flows in a specific period. In a standard financial report, a company’s financial activities and performance are presented in a readable manner for people to view and analyze.

2. Three Types of Financial Reports

Three main reports commonly used in financial reportingare balance sheets, income statements, and cash flow statements. I will introduce them one by one in the following part.

Balance Sheet

A balance sheet is a statement that shows an enterprise’s assets, liabilities, and stockholders’ equity on a specific date, usually the end of a certain period. There is a special relationship among them. The total assets must equal the total liabilities plus the total stockholders’ equity. Therefore, the assets are sometimes presented in the left part of the balance sheet while the other two are placed in the right part, enabling analysts to check the equation clearly.

A balance sheet is used to display the financial position of an enterprise to help analysts, investors, and executives to tell whether the enterprise is developing in a healthy and steady way.

Income Statement

An income statement, which also refers to a profit and loss report, shows an enterprise’s revenues, expenses, and net income in a certain period of time. Revenues can be divided into operating revenue, non-operating revenue, and other incomes according to different activities of getting the income. Some common expenses of an enterprise are the wages paid to employees, the costs of electricity and facilities, and the taxes. The net income equals the total revenues minus the total expenses, showing either profit or loss.

Income statements are used to assess the profitability of an enterprise. In other words, with the help of an income statement, investors and creditors will easily evaluate an enterprise’s ability to make a profit through increasing revenues and controlling expenses.

Cash Flow Statement

A cash flow statement shows an enterprise’s inflows and outflows of the cash in a given period of time. In other words, it precisely tells people where the money comes from and where the money is spent. In a cash flow statement, the three sections from top to bottom are the cash flows generated from operating activities, investing activities, and financial activities. The first section tells people how much an enterprise receives from selling products or services and how much it pays for suppliers and employees. Investing activities include the cash flows from the sale and purchase of assets, and the withdrawal and spending of investments. The last section mainly shows the cash borrowed from a bank or received from the investors, and the money returned to the bank and divided to the investors.

3. How to Make a Good Financial Report?

We have got a basic understanding offinancialreports until now. But you may be confused about the steps of creating a good financial statement. Therefore, I want to show you a step-by-step guide for you to follow.

Step 1: Be clear about your readers

Before starting making financial reports, you need to ask yourself who will read the report. The specific content of the financial report varies according to different readers. For example, it is more suitable to provide a non-professional reader with a financial report with key financial indicators instead of an entire financial report with all detailed metrics. If you don’t want to select the indicators every time, you need a tool that can store different financial report templates. I highly recommend FineReport, a professional reporting tool. You can use it to customize and store your templates. You only need to change the data in these templates when you need them.

In addition, company managers often need monthly financial reports. There are repetitive steps in creating reports manually. However, FineReport supports sending reports regularly to the managers, freeing you from repetitive work.

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Step 2: Collect financial data

Compared with other steps, data collection is a relatively tiring step in financial reporting. Also, it is an essential step that determines the report’s accuracy. First, you need to collect and organize the original receipts. Then, you can prepare corresponding accounting vouchers. These steps are time-consuming if they are followed in traditional ways, especially for a beginner. Therefore, a professional reporting tool can offer you some help. FineReport supports data connection from different systems, making it easier for you to collect financial data while ensuring the accuracy of the data. Besides, FineReport’s automatic report function can realize real-time data updating, which saves thetime of manual modification and improvesyourwork efficiency.

Step 3: Design report and visualize financial data

After data collection, it is time to display the data in a financial report. Traditionally, financial professionals are accustomed to making reports in Excel. There is no doubt that Excel is a very practical and convenient tool for a new company to do financial reporting. However, with the emergence of the company, the volume of financial data is also in a rapid growth. The traditional financial spreadsheet becomes more complex, making it harder for people to analyze. Therefore, the company needs a reporting tool for help. FineReport is a professional reporting tool specializing in financial solutions. It offers different templates and samples not only for financial statements but also for financial analysis. There are three built-in financial statement templates for you to apply, saving time and effort.

Different financial dashboards in FineReport help visualize financial data to improve the efficiency of financial analysis. The Excel-like designer of FineReport is very easy to use. After data collection, you can design the layout and drag and drop to generate reports. Dashboards can display key indicators more intuitively, making it easy for managers to find problems in time and adjust decisions.

Throughthe above steps,a satisfactory report is ready, just like the one below.

In addition, you can also view dashboardson the mobile terminal.

4. Best Financial Report Templates & Samples

To make financial reporting easier, many companies choose to utilize reporting templates and samples. Different companies may put emphasis on different metrics in financial reports when they are doing financial analysis. Therefore, FineReport, mentioned above, is a good choice for companies. It offers enterprises excellent financial report templates and samples to meet different analyzing requirements. In addition, by visualizing data on differentfinancialdashboardsprovided by FineReport, the process of analyzing financial reports becomes much easier and more accurate.

The following are several dashboards for you to have a try.

Financial Performance Dashboard

The financial performance dashboard shows you an overview of the main metrics on your balance sheet and helps you evaluate the effectiveness of your capital. The dashboard displays four indicators in the left part, including the return on assets, the return on equity, the working capital ratio and the debt stock ratio, and the balance sheet in the right part. This dashboard enables you to understand your company’s financial position at a simple glance.

Financial KPI Dashboard

The financial KPI dashboard displays vital financial performance indicators such as working capital, current ratio, quick ratio, cash flow ratio, current assets and liabilities, liquidity ratio and profit margin, budget variance, and vendor payment errors rate. By analyzing these indicators, a company can measure the current operation, predict future revenues and costs and adjust decisions.

Financial CFO Dashboard

The CFO dashboard presents financial metrics such as revenue, gross profit, an asset to debt ratio, current ratio, turnover, and price-earnings(P/E) ratio, as well as non-financial indicators including industry P/E, client satisfaction, No. of certified employers. Financial metrics can be used to analyze operating status and profitability, while the rest indicators enable a company to know whether their products and services have met the requirements of their targeted customers.

5. Why Does a Company Need Financial Reports?

After the introduction above, I believe that you have a better understanding of the definition of financial reports and the steps of creating them. But why does a company need financial reports? What can financial reports provide for different people? Let’s discuss the importance of financial reports for a company and the benefits of financial analysis reports for different groups, including the executives, the employees, the stockholders, the investors, and the creditors.

The Importance for an Enterprise

On the one hand, an enterprise needs financial reports to comprehensively measure the health of its financial position and obtain insights for future development. Through financial reporting, all the activities in the given time can be systematically recorded, and the results of these activities can also be clearly evaluated. Therefore, the enterprise can make predictions accordingly.

On the other hand, regular financial reports have some external advantages. Well-structured financial reports can display the company’s strength and its long-term stability for its cooperation partners as well as clients. As a result, the enterprise will gain more trust from them and establish long-term cooperation relationships.

The benefits for different groups of people relevant to the company

Regular and standard financial reports are also beneficial to different groups of people, including internal executives, employees, stockholders, as well as external investors and creditors.

For its executives

Financial reports help executives quickly discover the problems existing in the business operation and then adjust decisions. For example, suppose there are no structured cash flow statements, it will be hard for the executives to clearly remember a large number of different sources and uses of the cash, not to mention the net increase or decrease in cash and cash equivalent. However, if there are financial reports with visualized data, it will take a little time for the executives to find out what is wrong and then readjust strategies to ensure the healthy development of the enterprise.

For its employees

Employees play important roles in a company. Without them, the company cannot run business smoothly. The employees can also benefit from the financial reports provided by their company. Through looking at financial reports, common employees will know whether the company can pay their wages on time and whether they can stay in this enterprise for a long time and make long-term plans. The company, in turn, will receive trust from the employees if its financial reports display positive results.

For its stockholders

Stockholders’ efforts for a company cannot be ignored. However, some of them may not directly participate in the company’s management and consequently lack an overview of the financial status. Therefore, regular financial reports become tools for them to evaluate the company’s financial performance. For example, if they pay attention to the stockholder’s equity in the balance sheet, they will have a more clear idea about whether they can get rewards from the company. Besides, by analyzing financial reports, the stockholders can assess the management of the executives. If the majority of the results shown in the financial report are unsatisfactory, there may exist problems in the financial management and control. The stockholders can appoint and remove senior managers through stockholders’ meetings to ensure the company’s healthy growth.

For its investors and creditors

Financial reports are very significant materials for the investors to make a proper evaluation of a company. Investments are indispensable sources for an enterprise. Therefore, a company needs financial reports to convince the investors that it is developing healthily and steadily.

Similarly, creditors will also utilize financial reports to measure the current financial performance and predict the company’s future development, then decide whether they will lend money to the company or not. If the performance is not ideal or there is any indication of low profitability, they won’t take risks lending money to such a company.

6.Conclusion

Now, you finished reading the whole guide. Keeping these concepts and skills in mind,youcan successfully make a satisfactory financial report. If you want to save energy and improve efficiency, FineReport is a good choice for you.It’s completely free for personal use.

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