Financial Reporting
We’ve mentioned that accounting serves as a means to score how your business is doing. All the transactions you’ve learned about so far are just that—individual transactions. The reports you generate via your accounting software bring together those individual transactions to provide the higher-level scorecards you need to run your business and communicate with others about its health.
In Part 4, we go through the most essential accounting reports, including how and when to generate them, how to interpret them, and cues to act on. First, you learn how and why it’s important to generate routine reports about accounts such as Accounts Receivable and Accounts Payable. Next, we explore the “big three” financial statements: income statement, balance sheet, and statement of cash flows. These overview reports provide information about the financial health and value of your company. Next, we cover security issues, including keeping your accounting information safely backed up and managing risk such as customer information theft, identity theft, and even business check theft. Part 4 concludes by giving you insights into how external stakeholders can use and interpret your business reports, including what the IRS may be looking for, what lenders and investors want to see, and what key ratios help you keep your financials on track.