As a small business owner, your financial reports will show you the performance and current standing of your company. Hence, you must request from your accountant some reports that you believe are essential. These reports should be able to help you guide and monitor your company effectively.

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Before you contact your accountant to ask for financial reports, you should know that there are several types of these. Some reports can show you the value and the source of your income for the period. On the other hand, other statements can show you the monetary value of your company. Some reports provide an overview of the financing activities that your small business engages.

Although having as much information about your company is essential, too much of it can be overwhelming and counterproductive. Hence, below are some vital financial reports that you should first ask from your accountant before moving on to others:

Essential Financial Reports Every Small Business Should Have

The Statement of Financial Position

The Statement of Financial Position provides users and the business owner a list of properties, and liabilities a business has. It is often shown divided into two parts. The right part is the company’s assets and the left side being the company’s sources of finances. If prepared correctly, these two sides should be equal; thus, the other name for the statement, which is the balance sheet.

Why Is The Statement of Financial Position Important?

The balance sheet help owners of small businesses understand where the value of their company lies. By using the right side of the balance sheet, they can see how much they have invested in each property type. This knowledge can help them decide where they can reallocate their finances, and if they have enough current assets to keep their business going.

The left side of the financial position is divided into two categories, the Liabilities, and the Equity. It shows the owners where they get their financing. By knowing these sources, owners can decide if they are relying too much on each type of financing. They can also determine if they can incur more loans or other payable.

Your Cash Flow Statement

The cash flow statement gives you an overview of where your cash funds went and came from. It is divided into three activities; operating, investing, and financing activities.

Operating activities are activities that involve income and expense generating activities. Investing activities are cash purchases of assets that are expected to provide continuing and long term benefits to the company. Lastly, financing activities are the inflow or outflow of money from sources of cash, such as lending institutions or stocks.

Why Is The Cash Flow Statement Important?

Cash is one of the most critical assets of a company. Having the information to determine the flow of this asset can give owners the ability to receive more and pay less of it. By knowing where your money comes from, you can identify if these sources are beneficial for the business. You can also determine which parts of your business are using up too much or too little cash.

Periodic Income Statements

The income statement tells owners the real value their business made during a period. Real value means the actual increase in the assets of the company less the increase in its liabilities. It only recognizes receipts that have been earned and payments that have actually been incurred.

Why Is The Income Statement Important?

The income statement shows you the profitability of your business in the long run. Since it disregards unearned incomes and prepaid expenses, it tells you the true change in the value of your business. You can also use this statement to determine if your business strategies during a period are beneficial for the company.

Statement Of Changes In Owners’ Equity

The equity statement shows you’re, as an owner, share in the change in the value of the business. The report also shows the events that have affected your equity in the company. It tells owners if their efforts in managing the business are benefiting them personally.

Why Is The Statement Of Changes In Owners’ Equity Important?

For any small business owner, the most important thing for them regarding the business is their share. If you own a company that has multiple investors, you need to show them that their investments are worth it. The statement of changes in owners’ equity is the best way to show this value to them.  The reason is that it is comprehensive in a way that explains these changes.