Financial Reporting

Service description

Financial reporting is the process of systematically documenting and communicating a company's financial performance and position. It involves creating and presenting financial statements like the Balance Sheet (BS), Income Statement (IS) / Profit & Loss Statement (P&L), Cash Flow Statement (CF), Statement of Shareholders' Equity (SE) which provide insights into a company's financial health to both internal and external stakeholders. The purpose of financial reporting is to provide stakeholders (including management, investors, lenders, and regulators) with accurate and timely information to assess a company's financial status and make informed decisions.

Common industries

Applies to any business that reports to lenders, investors or owners, across industries.

ROI

Credible, standardized reporting unlocks financing, satisfies loan covenants, and supports better decisions.

Benefit

Prepare GAAP-compliant financial statements and management reports for lenders, investors, and internal decision-making.

Why get it

Lenders, investors and buyers decide on the financial statements. Statements that are late or inconsistent slow financing and weaken trust in management's numbers.

When you benefit

Recurs monthly or quarterly for management and lenders, with a full set at each year-end.

What it costs

Typically a monthly fee.

When you pay

Providers usually quote a monthly fee for recurring reports, scaled to the books' complexity, or a fixed fee per package of statements. Hourly billing is common for first-time statements or unusual transactions.

Other costs

Accounting software, and any review or audit a lender or investor requires, which a separate accounting firm performs.

Risks to know

Statements built on unreconciled books, or prepared on a basis a lender or investor didn't expect, can be rejected and delay financing. Misstated results can also breach loan covenants or mislead the owners' own decisions.

When risks arise

Problems appear when the statements are used: at a lender's covenant test, an investor's diligence, or a sale. Errors in a monthly report can be corrected quickly, but ones found later may require restating prior periods.

The process

The provider reviews the books and closes the period, makes adjusting entries, and prepares the balance sheet, income statement and cash flow statement. The business reviews the draft and answers questions, and the provider delivers the final package on the agreed schedule.

Your commitment

The business shares its books, bank and loan statements, and details of unusual transactions, and confirms who receives the reports and in what format. It should agree on the accounting basis, such as GAAP, and the reporting calendar before work begins.

Documents to gather

• Trial balance or general ledger for the period
• Bank, loan and credit statements
• Prior-period financial statements
• Lender or investor reporting requirements

Helpful reading

• Financial Statements: List of Types and How to Read Them — Investopedia
• Generally Accepted Accounting Principles (GAAP): Definition and Rules — Investopedia
• How to Read & Understand a Balance Sheet — Harvard Business School Online