Business finance reports

There are several different types of business finance reports. Balance sheets, statement of capital, income statements, and cash-flow statements are some of the most popular finance reports we see in the business world. Do you know what the differences are between these reports? Let's look at each report separately:

Income Statements
Income statements are sometimes called profit and loss statements. The income statement lists the revenues and expenses from business operations during a given time period. Most often these statements are done by month, quarter, or year. The revenues and expenses report shows the company's net income or net loss. The purpose of these reports is to show managers and investors whether a company made or loss money during a given period. The income statements are also important to business owners because they represent the bottom line.

Statement of Capital
The statement of capital represents how much of the company you own if you are a business owner. The statement of capital report shows any changes in owners' capital over a specific amount of time. These reports are particularly important to a business owner because at the close of an accounting cycle, the net income becomes yours. Many owners choose to reinvest this money in the business. The statement of capital report will reflect any changes you make with this money. Generally the statement of capital report is prepared after the income statement. This way your accountant knows whether a company has net income or net loss.

Balance Sheet
The balance sheet is the summary of the company's assets, liabilities, and ownership equity bases on a specific date. The balance sheet is described as a snapshot of the company's financial condition. Out of these 4 statements, the balance sheet is the only statement which applies to a single point in time. The balance sheet has three main parts: assets, liabilities, and shareholders' equity. Assets are usually listed first followed by liabilities. The main difference between assets and liabilities are known as the net assets or the net worth of the company.

Cash-Flow Statement
As you may know, cash-flow is the lifeblood of your company. The cash-flow statement shows all sources and uses of the company's money during a particular time period. Typically your cash-flow statement will include revenues, long-term financing, sales of non-current assets, increases in current liability, and decreases in current assets. Your cash-flow statement is used to determine the budget for operating losses, debt repayment, equipment purchases, and increases in any current asset account.

Since your cash-flow statement is used to show whether the business's cash-flow is increasing or decreasing, you can create strategies to avoid cash-flow problems. Your positive cash-flow is essential to expand your business. Many companies do not track their cash-flow report properly and run into problems quickly. Many smaller companies have adopted "factoring" as a way of quickly solving their cash flow problems. . Factoring is the process of selling your accounts receivable invoices to a third party who then is in charge of collecting on the invoice. The agents in charge of collecting are called factors. Factoring for small business is a great way to provide financial growth. Since cash flow is so essential in business, factoring is the best method to expand operations.

As you can see, there are several different business financial reports you will be working with. The four we have discussed are the most popular reports used in business finance. Keep in mind that you must have proper reporting procedures to apply for a business loan. Many banks need to see your cash-flow, profit and loss, and other statements to be assured they are taking a good risk in lending you money.