What makes good financial reports

Confucius said: an image worth a thousand words. Each graphic must hold a clear message to help the understanding of complicated information. Your financial reporting is not an end in itself. Consider it as a step in your decision-making process. Thus, it is absolutely necessary to update it periodically.

Your environment, projects, goals, and constraints are changing. Good reporting sustain those changes or even direct them. Thus, you should always make sure that your dashboard is made with indicators that correspond to your needs and that push your team to act. An indicator that triggers no action in case of sudden change is not a good one. The easier data are to read, the faster they will be understood, and decision-making will thus be facilitated. Furthermore, people are not always familiar with the format you use and it is crucial to make information accessible.

A graphic must hold only one message. Dashboards are presenting dozens of indicators and graphics too often, and that confuses the audience. Do not overload your graphics. It is more impactful to present an idea with one visualization on one screen. Then, present your ideas on distinct slides. You have now understood that building a financial reporting does not mean compressing the more technical information you can on the shorter support you can find.

Building a financial dashboard means making that information comprehensible for everyone. Pick the most relevant information and try to see them through the eyes of your audience. Your dashboard has to be meaningful without any explanation. Regulatory compliance is a necessity when it comes to managing your organization. Not only do you have the financial reporting requirements mentioned above but have tight deadlines to provide reporting to regulatory agencies, debt holders, investors, and other key stakeholders.

This helps them make rational decisions on lending or investing in your company. In addition to the regulatory requirements, an organization must internally be able to assess their performance and adapt to any variances that arise quickly. Automated financial reporting offers internal and external stakeholders of the business a clear insight to overall health and performance of your company however there is an immense amount of risk associated with it.

The ability to mitigate the risk associated with the creation of financial reports from the automation of data consolidation through to financial reporting will give you peace of mind that your external stakeholders have reports that are accurate, and enable you to assist should questions arise.

Mitigated risk coupled with internal stakeholders abilities to perform ad hoc analysis on key financial analysis reports will enable your team to be proactive in the organization helping them identify opportunities and improve operations and performance of your company.

Ready to find out more about automating your reporting needs? Contact our experts today for help with adopting financial reporting software on the Planful platform. Subscribe to get a weekly digest of our latest posts. We respect your Privacy. Knowing how to work with the numbers in a company's financial statements is an essential skill for stock investors. The meaningful interpretation and analysis of balance sheets , income statements, and cash flow statements to discern a company's investment qualities is the basis for smart investment choices.

However, the diversity of financial reporting requires that we first become familiar with certain financial statement characteristics before focusing on individual corporate financials. In this article, we'll show you what the financial statements have to offer and how to use them to your advantage. There are millions of individual investors worldwide, and while a large percentage of these investors have chosen mutual funds as the vehicle of choice for their investing activities, many others are also investing directly in stocks.

Prudent investing practices dictate that we seek out quality companies with strong balance sheets, solid earnings , and positive cash flows. Whether you're a do-it-yourself investor or rely on guidance from an investment professional, learning certain fundamental financial statement analysis skills can be very useful.

His principal point was that in business you keep score with dollars, and the scorecard is a financial statement. He recognized that "a lot of people don't understand keeping score in business. They get mixed up about profits, assets , cash flow, and return on investment.

The same thing could be said today about a large portion of the investing public, especially when it comes to identifying investment values in financial statements. But don't let this intimidate you; it can be done. The financial statements used in investment analysis are the balance sheet, the income statement , and the cash flow statement with additional analysis of a company's shareholders' equity and retained earnings.

Although the income statement and the balance sheet typically receive the majority of the attention from investors and analysts, it's important to include in your analysis the often overlooked cash flow statement.

The numbers in a company's financial statements reflect the company's business, products, services, and macro-fundamental events. These numbers and the financial ratios or indicators derived from them are easier to understand if you can visualize the underlying realities of the fundamentals driving the quantitative information. Don't expect financial statements to fit into a single mold.

Many articles and books on financial statement analysis take a one-size-fits-all approach. Less-experienced investors might get lost when they encounter a presentation of accounts that falls outside the mainstream of a so-called "typical" company.

Please remember that the diverse nature of business activities results in a diverse set of financial statement presentations. This is particularly true of the balance sheet; the income statement and cash flow statement are less susceptible to this phenomenon.

The lack of any appreciable standardization of financial reporting terminology complicates the understanding of many financial statement account entries. This circumstance can be confusing for the beginning investor. There's little hope that things will change on this issue in the foreseeable future, but a good financial dictionary can help considerably. Investopedia's Glossary of Terms provides you with thousands of definitions and detailed explanations to help you understand terms related to finance, investing, and economics.

The presentation of a company's financial position, as portrayed in its financial statements, is influenced by management's estimates and judgments.

In the best of circumstances, management is scrupulously honest and candid, while the outside auditors are demanding, strict, and uncompromising.

Whatever the case, the imprecision that can be inherently found in the accounting process means that the prudent investor should take an inquiring and skeptical approach toward financial statement analysis. Information on the state of the economy, the industry, competitive considerations, market forces, technological change, the quality of management and the workforce are not directly reflected in a company's financial statements.

Investors need to recognize that financial statement insights are but one piece, albeit an important one, of the larger investment puzzle. The absolute numbers in financial statements are of little value for investment analysis unless these numbers are transformed into meaningful relationships to judge a company's financial performance and gauge its financial health.

The resulting ratios and indicators must be viewed over extended periods to spot trends. Please beware that evaluative financial metrics can differ significantly by industry, company size, and stage of development.

The financial statement numbers don't provide all of the disclosure required by regulatory authorities. Analysts and investors alike universally agree that a thorough understanding of the notes to financial statements is essential to properly evaluate a company's financial condition and performance. As noted by auditors on financial statements "the accompanying notes are an integral part of these financial statements.

Prudent investors should only consider investing in companies with audited financial statements, which are a requirement for all publicly-traded companies.