What is financial reporting?

Introduction to financial reporting

Financial reporting involves collecting, analyzing, and presenting financial data in various formats – usually for the benefit of internal or external stakeholders. For example, you might need to share financial reports with your management board, investors, regulatory bodies, or perhaps even the public if the company is listed. Your primary objective when creating financial reports is to provide your audience with key information about your company’s financial position, past performance, and future forecasts.

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Components of financial reporting

The type and format of a financial report is tied to its audience and purpose. Below are some key examples of the kinds of financial reports you may need to prepare, plus supporting formats.

Financial statements

Financial statements form the backbone of your financial reporting. They include:

• Balance sheet: This is a snapshot of your company's financial position at a specific moment in time. It details financial information about your assets, liabilities, and equity.
• Income statement: This covers your company’s revenue over a period of time. It includes your expenses, gains, and any losses, revealing whether you’re profitable or not. 
• Cash flow statement: This tracks the cash that’s coming in and going out of your business and categorizes it into various buckets, such as:
  • Operations (i.e. salaries)
  • Investments (what you’ve invested in shares and equities)
  • Financing (i.e. any funding you’ve received)‍‍
• ‍Statement of changes in equity: Equity here refers to the difference between assets and liabilities. This statement includes changes that affect your share capital as well as changes that will impact your company’s retained earnings. ‍
• Notes to financial statements: These contain additional information to help readers understand the figures behind the reports. They explain accounting decisions made plus any policies, assumptions, and contingencies.

Management Discussion and Analysis (MD&A)

MD&A is senior management’s opportunity to provide context to the financial reporting and guide readers on how to interpret the data. It will highlight relevant trends, risks, and future opportunities.

Auditor's report

An independent auditor will evaluate your financial statements for accuracy and compliance with accounting standards. It acts as a stamp of authenticity, confirming the reliability of the financial information presented.

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Why financial reporting is important

When running a business, various stakeholders must be kept informed of its financial well-being. From investors to regulators, your customers, and the public – anyone with a stake in your business has a right to know its financial health. Financial reporting provides a clear and unbiased view, which is key for transparency and, importantly, holds management accountable. Here’s a quick summary of the role financial reporting plays in the running of your business: 

Decision-making

Financial reporting is key for informing decisions around investment, lending, partnership and other financial questions. It provides leadership with timely, reliable information vital for spotting risks and identifying opportunities.

Compliance

Regulatory bodies, such as the International Financial Reporting Standards (IFRS), require businesses to adhere to specific frameworks and reporting standards. Financial reporting is central to this.

Investor relations

Financial reporting is a great way of instilling confidence among existing and potential investors. If you’re able to demonstrate financial integrity, stability, and growth potential, you’re more likely to secure funding. Clear, in-depth financial reports may also improve the terms and lower the costs of borrowing.

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Financial reporting pitfalls (and how to avoid them)

There are some pitfalls to watch out for when preparing financial reports, such as complexity, subjectivity, and fraud risks. These can be overcome by keeping a laser-focus on compliance and ensuring ethical practices throughout your business. Modern financial management tools (like Atlar) can help too. Here’s a summary of potential problem areas and how they can be mitigated with the right technology and support.

Complexity and compliance

Financial reporting standards and regulations are complicated and they change all the time. Your technology partners ensure you’re ontop of the latest reporting requirements. Further, if all your finances are managed on a single platform, it should be simple to extract the data in any format required.

Subjectivity

Accounting can be as much an art as it is a science. It requires judement and estimation. Every decision around accounting policies, assumptions and interpretations will impact the final reports. This is where your notes to financial statements come in. Here you must outline and justify all accounting decisions to ensure your reporting is as objective as possible.

Fraud

Fraud poses a huge risk to any organization, both in terms of regulatory fines and reputation. You must implement robust internal controls and ethical practices to keep fraud risk to a minimum.

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How Atlar can help with your financial reporting

Cash reporting is one of the core features of the Atlar platform. Our easy-to-use analytics tools let you create custom reports and rich visualizations, providing strategic insights for your stakeholders. You can leverage ready-made report templates to simplify routine data analysis, save any custom reports you've created, and easily share with the rest of your team.

Your reports can also be set to update dynamically over time as new data becomes available, streamlining your reporting cycles. And you can always make changes on an ad hoc basis by adding your own manual inputs.

Regardless of the types of reports you're looking to create, Atlar's cash reporting feature is designed to automate manual data collection work so you can focus on analysis. Atlar normalizes data from your banks and ERP, auto-labels transactions, and lets you easily create reports and forecasts for any account, entity, and time interval.