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Accounting reports are essential to maintaining the financial health of your organization. They help track its evolution over time and identify opportunities to improve business transactions and cash flow, as well as support tax and legal requirements.
Created centuries ago with the development of trade and commerce, accounting is now the backbone of any business’ financial world. A company needs a fluent, accurate accounting system to flourish and disqualify itself immediately when it cannot keep its standards right. It facilitates comparison, eliminates ambiguity, and is the only way to disclose a business’s financial status to its stakeholders.
In this guide, we will go over the different types of basic accounting reports and KPIs, why you need them, and how you can make and present them – this last point is crucial in the communication of your financial story, especially when we consider all that is at stake with accountancy.
What Are Accounting Reports?
Accounting reports are periodic statements that present the financial status of a company at a certain point in time or over a stated time period. It details business transactions and operations.
They are a compilation of financial metrics that infers from a business's accounting records. Their nature varies, as they can be brief or custom-made with a specific purpose: detailing sales per region, the profitability of a product, etc.
Essential types of accounting reports
Typically these types of reports are considered to be financial statements which include:
- Balance sheet: a snapshot of a business at a specific time and shows the ending assets, liability, and equity balances as of the balance sheet date. It is useful to measure the financial reserves and liquidity of a business.
- Income statement: is also known as a profit and loss report. It details the revenue earned over a certain period of time.
- Cash flow statement: as the name states, it is a statement of the flows of cash both in and out. It details the sources and uses of cash in relation to a business's operations, investments, and financing. It is often considered the most reliable source of information when it comes to the cash generation capacity of a firm.
These are just three of the main types of accounting statements that businesses use for their daily financial operations. We will cover this more in detail later in the post with a few financial dashboard examples. But before we delve any deeper, let’s consider who uses financial accounting reports.
Who benefits from accounting reporting?
There are a multitude of people in modern organizations that stand to benefit from accounting reports and analysis. Let’s take a closer look.
- Accountants: As you might have guessed, accountants and individuals who operate in relevant financial teams frequently use accounting metrics to ensure the compliant regulation of funds while drilling deeper into trends or patterns. Using trend-based visualizations to their advantage, accountants can improve an organization’s overall financial efficiency while developing forward-thinking tax strategies (which are particularly beneficial when a company is looking to grow or sell its brand or assets to another organization).
- Insurers: To assess risk and provide ample protection to their clients, insurers use accounting KPIs to their advantage. Gaining access to accurate visualizations means that insurers can come to grips with potential fiscal risks so they can propose appropriate coverage for the right premiums.
- Shareholders: Shareholders or financial stakeholders also work with accounting reporting software to gain an objective and accurate view of both a company’s existing and prospective value. Using a mix of historic, predictive, and real-time data, shareholders can make sound investment decisions while assisting with strategies that will ultimately benefit a company’s long-term fiscal growth.
- Lenders: Financial lenders like banks use visual accountant reports to make swift and informed decisions when it comes to offering businesses a loan. Working with the right visualizations and metrics, fiscal lenders can provide loans with repayment terms and rates that reflect a company’s existing financial health as well as the potential level of risk they pose.
Why Do You Need Accounting Reports?
These reports are essential elements of a business, regardless of its size. As we have said, they are very useful when it comes to maintaining a track record of transactions, cash flow, income, etc. But they also reduce the risk of reporting inconsistencies to investors, financial managers, or worse, tax authorities. You can be sanctioned for accountancy inaccuracies. That’s why you want to avoid them at all costs. Some other benefits you can reap from these analytical tools include:
- Knowing the business's financial health: Generating accounting reports is crucial for the correct management and functioning of a business. They provide all the key information needed to paint an accurate picture of the company’s financial health and help decision-makers make key financial and non-financial decisions to ensure the company is growing in a profitable way. Having an objective view of the financial situation enables top management to make better-informed decisions for investments, sales, and purchases.
- Maintaining a budget: In order to ensure the correct functioning of the different strategies and activities, managers need to set a budget that will cover everything while still ensuring profitability. This is a fundamental aspect, especially considering that a shocking 82% of small businesses fail due to cash flow mismanagement. Smart accounting reports prevent this from happening by providing businesses with everything needed to make the best decisions and build a sustainable budget.
- Organize transactions and invoices: Transparency is key when it comes to efficient financial reporting. Reporting in accounting helps you do just that by providing an efficient bookkeeping system of all transactions and invoices to keep close track of every movement. Having a centralized location for transactions with the time, date, and nature of the transaction helps organizations understand money and goods distribution.
- Stay compliant with law and tax regulations: The risk of greed, theft, and dishonesty exists everywhere – and every month, we discover corporate abuse somewhere in the world. Companies have to be held accountable for their methods and ways of running a business, and therefore specific areas were enforced to eliminate fraud (auditing, income taxation, …). For that purpose, monthly accounting reports serve as a means for businesses to prove to authorities that they are staying compliant with any laws and tax regulations. They assist organizations in calculating the correct amounts of taxes to pay, keeping in mind regulatory guidelines.
- Improve relationship with investors: As we said already, professional accountant reports provide a complete picture of a company’s financial health. This also proves to be a very useful document for attracting new investors and keeping the ones you already have happy.
- Minimize errors: You might have full trust in your accountant's reporting abilities. However, managing data and sensitive information manually is both time-consuming and risky due to the possibility of human error. With modern accounting statements generated with professional online reporting software, the process of calculation and report generation is done automatically. This means more time to make informed decisions as well as significant mitigation of errors that can resonate across the organization.
Accounting statements will let you keep track of business transactions, but they will also help you maintain a budget, predict cash flow, and forecast revenue. They also allow for an assessment of the current situation compared to a previous one and/or compared to a forecast—the more accurate the records, the better the financial analysis or projection.
In general, a well-implemented accounting reporting system makes it easier to access the financial statements you need whenever you need them. Good accountancy helps financial analysts to understand and interpret the data and thus communicate it effectively. To do so, however, you need several tools: good accounting software but also a solid online data visualization tool. We will go deeper into the role of visuals for efficient financial analysis, but first, let's take a deeper look into the common types of financial reports.
Types Of Accounting Reports
Now that we have an accounting report definition and analysis as well as a list of insightful benefits organizations can reap from them, it is time to go deeper into the topic by looking at the main accounting report types and what is their main purpose.
1. General Ledger
Starting off with the general ledger, it's the foundation of your business bookkeeping, used to organize and summarize all your financial transactions. This report is often used to prepare for an audit, apply for a loan, and balance your books. It is composed of various accounts, which represent categories that show where your money is going and where it is coming from. Common account types include your assets, liabilities, equity, revenue, and expenses.
Another key element from a general ledger report is debits and credits. These represent whether the amount of money your business has increased or decreased. The meaning of these two changes depends on the type of account being observed. For instance, when we are talking about assets, cost of sales, inventory, and other related accounts, a debit increases the amount of money, and a credit decreases it. On the other side, when we talk about fiscal concepts like liabilities, revenue, equity, and capital, to name a few, a credit increases the money in the account and debit decreases it.
2. Profit & Loss
The profit and loss statement portrays details regarding a business's revenues, costs, and expenses over an accounting period which is usually a quarter or a year. It is one of the most popular or common reports as it essentially tells organizations if they are able to generate profit by increasing revenue or decreasing costs or both. This information enables managers to make important decisions such as budget planning, adjusting expenses, and evaluating profit generation, to name a few.
Also widely known as an income statement, this type of report is composed of 4 key indicators: income, expenses, costs of goods sold, and net income. It can be compared to other periods to see how things changed over time, as well as highlight areas of the business that could be more profitable.
3. Balance Sheet
The balance sheet is another of the most important reports in accounting. It summarizes a company’s assets, liabilities, and shareholders’ equity during an observed period of time. In short, it provides a complete picture of an organization’s liquidity by listing what it owns and owes, as well as what is invested by shareholders.
That said, the balance sheet has 3 main components: assets which is everything your company owns that can be turned into cash, liabilities which is everything your company owes to others; and equity which is the value of ownership of your company. By looking at these 3 elements together, you get a complete picture of your company’s financial health and can extract deeper conclusions such as the effectiveness of your pricing strategies or if you are spending too much. Lastly, a balance sheet is also a great document to show to potential investors or to apply for a loan, as it shows how financially stable you are.
4. Cash Flow Statement
A cash flow statement is the third of the most important financial accounting reports, together with the P&L and the balance sheet. It provides insights into a company’s inflows and outflows of cash during a specific period of time, which can conclude in a positive or negative cash flow. A positive one indicates you earned more than what you spent and you are able to pay creditors and investors, while a negative one means you spent more than you earned.
There are two ways to use a cash flow statement. On one hand, we have the direct method, which considers all movements of cash from core operating activities. And on the other hand, we have the indirect method, which considers cash movements coming from operations, investments, and financing activities. The sum of these three core elements is called the net cash flow, and it is often used by investors to determine the value of a business’s stock.
5. Statement Of Retained Earnings
As its name suggests, this report portrays the beginning and ending of retained earnings over an observed period of time. In short, retained earnings are a portion of the company’s profit that is retained from the net income at the end of an accounting period for future use as shareholder’s equity, paying liabilities, or investing.
Also known as a statement of owner’s equity or a statement of shareholder's equity, this report is used by analysts to understand how profits are being utilized. It can be used as a complement to a balance sheet or income statement as well as a separate document. Its main three components include the beginning retained earnings, net income, and dividends paid to shareholders. This type of report is done once in every accounting period, and it allows businesses to understand if they are in a position to finance operations and pay off debt or if there is a deficit.
6. Accounts Receivable Aging
Next in our list of types of accounting report examples, we have the accounts receivable (AR) aging report. This report type categorizes a company’s AR by the time they’ve been outstanding or, in other words, have not been paid yet. Receivables arise when a company offers its customers services or goods on credit. For example, an energy company provides electricity to its customers and cashes them once the month is finished based on their consumption.
Generally, the receivables are broken down into time intervals that can be 1 to 30 days up to 90+ days, along with details such as the customer name, money balance, and days past. Businesses use this report to keep a record of customers' debt and stay on top of collections and any bad debt.
7. Accounts Payable Aging
Following on the same line as the previous report type, the accounts payable (AP) aging shows the money your business owes to others instead of what others owe to you. Examples of AP include transportation and logistics, production materials, energy/power, and building leases, among others.
The AP aging report is intended to provide businesses with a quick idea of all payments that are due in the immediate future. Typically, payments are separated into different time intervals, for example, a 30-day period. Managers use the information extracted from these statements to manage cash flow, build budgets, and calculate future expenses, among other things.
Accounting Reports Example & Samples
With the help of financial analytics software, you can connect your various data sources and work on them conjointly. This eliminates potential data silos and creates a single source of information. The intuitive drag-and-drop interface will make it even easier to build professional financial accounting reports.
We just went through the main types of accountant reports. As mentioned, there are 3 big report types often used by organizations to assess their financial performance in various aspects. These are the balance sheet, the income statement, and the cash flow statement. Here we will see how these reports can be elevated with the help of interactive visualizations and a dashboard generator. Let’s dive into our management accounting reports examples!
The Balance Sheet
The balance sheet is a snapshot of your business finances at a moment in time, showing assets and liabilities. It is a good testimony of how efficient you are at spending your capital.
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This dashboard presents four important metrics when it comes to understanding how your assets are being managed: ROA (Return on Asset), ROE (Return on Equity), Working Capital Ratio, and Debt-Equity ratio. Each of them is detailed, thanks to its evolution over time. On the side, the balance sheet is summarized, showing the current assets (inventory, AR, and cash) and long-term assets, as well as the liabilities.
Having your balance sheet visualized that way is a great advantage to keeping an eye on the essential facets of your company’s progress and ensuring viability and success in the long run.
The Cash Flow Statement
This accounting report sample will monitor what goes in and out of your treasury. It gives a good overview of your liquidity and cash flow situation and, at the same time, gives a good indication of how you can improve it: tracking and optimizing the accounts payable and receivable. It then details the quick and current ratio, along with the cash balance.
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Visualizing your cash flow statement is critical because you immediately know whether you are still on track or not. That’s an essential asset since your main goal is to keep the financial fluidity necessary to survive and thrive.
The Income Statement
The last of our examples provide an easy-to-understand view of the income statement by detailing all of its components, from the gross to the net profit, as well as all the other performance ratios.
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As stated above, the income statement helps you evaluate the profit and loss. It gives the month-to-month trends of the OPEX ratio and each of its components, the EBIT (earnings before taxes) evolution over the year, and finally sums up the four categories into the overall income statement.
That visualization is much more efficient and communicative than any table in Excel. It is a great help if you want to evaluate your performance in light of market fluctuations, investments, and other operational considerations.
Accounting KPIs & Metrics For Your Reports
Now that we’ve explored a dynamic mix of real-life accounting management reports, let’s drill down a little more by looking at the essential visualizations that result in consistently successful outcomes related to financial accounting reporting.
1. Operating Cash Flow (OCF)
This essential accountant report metric offers an objective overview of the cash your company generates based on its regular or everyday operations. By omitting any additional investments or deals from the mix, this powerful visual will help you gauge whether your company is healthy enough to sustain itself and grow through its base strategies and operations. If you notice any anomalies, you will be able to act swiftly and take targeted actions to improve your OCF levels, boosting your business’s financial health in the process.
2. Budget Variance
A staple of any valuable accounting annual report, the budget variance is a KPI that presents actual figures compared to budgeted or projected figures based on key financial investments or categories. This dynamic metric serves up real-time fiscal information while calculating the difference or variance of each financial category automatically. Working with this visualization will give you the tools you need to understand which areas of the business are underperforming and get to the root of the issue. Being able to drill down into any potential issues with ease will empower you to make more accurate budgetary projections while keeping your revenue flowing across the board.
3. Working Capital
Presented in a dynamic listed format, the working capital KPI will give you an informed overview of your business’s general financial stability at any given time. Working with this metric will allow you to see what working capital you have remaining after subtracting your company’s key liabilities, including outgoings such as inventory, prepaid expenses, and taxes payable (these liabilities can be tailored and customized to reflect your specific liabilities). By keeping a keen eye on this accounting KPI, you can maintain a firm grip on your ongoing fiscal health and formulate strategies that will not only protect the organization but result in progress.
4. Current Ratio
Knowing that you can pay your short-term obligations is essential to maintaining balanced, healthy, and progressive accounts. A trend-based marker of financial liquidity, tracking this KPI will help you uncover trends based on your ability to pay your debts or outgoings with efficiency. The current ratio is calculated by dividing your existing assets and liabilities. The higher your current ratio, the better, and by weaving this most valuable of visuals into your accounting analytics mix, you will ensure your business’s short-term health remains buoyant at all times.
5. Quick Ratio
Also known as the ‘acid test’, this prime accounting reports example will empower you to assess the ongoing health of your organization’s liquidity at a glance. With trend-based info highlighting peaks and troughs over a 12-month period, as well as dynamic visual markers showcasing both quick and current ratios, you can assess the stability of your near-cash assets, as well as a mix of additional liquidity factors, with ease. The aim here is to boost your current ratio and ultimately improve how your company converts its assets or investments into cash. This powerful visualization will help you do just that.
6. Accounts Payable Turnover
Accounts payable turnover is an essential addition to any well-rounded accounting reports list. Monitoring this metric regularly will give you a granular overview of how quickly and consistently you pay your expenses back over a set timeframe. Broken down into a digestible column chart format, this dynamic visual serves up insights based on how swiftly you pay back your expenses based on different time ranges from 1 - 30 days to 90+ days. Checking in with this KPI frequently will give you the intelligence you need to sharpen your AP strategy and make yourself more attractive to potential investors.
7. Accounts Receivable Turnover
Accounts receivable turnover will give you a razor-sharp appraisal of how quickly and consistently you collect your payments. Not only will tracking this KPI help you maintain financial stability throughout the year, but it will also give you a clear gauge of how effective you are in extending credits. If you notice any dips in your AR figures or ratios, you will be able to get to the heart of the issue with pinpoint precision and revise your processes to increase the rate at which your company can transform credit sales into cash—an essential element of any accounting analytics dashboard.
How To Create Modern Accounting Reports
Now that we’ve explored our definitive list of accounting reports and covered all of the fundamentals of visual account-based analytics, we’re going to consider how to create them in a way that ensures ongoing financial success.
- Outline your accounting objectives: Before you start developing your reports, it’s important to drill down deeper into the specific fiscal objectives that extend beyond essentials like AP, AR, tax information, and balance sheets. Do you, for instance, want to stabilize your short-term liquidity or find more efficient ways of balancing your working capital? Set your goals, and you will give your report creation efforts a definitive direction.
- Set your accounting KPIs: Armed with your specific goals and objectives, you will be able to set the financial KPIs that will help your business get to where it needs to be. Matching your metrics to your goals will ensure that you have all of the visual intelligence you need to keep meeting or even exceeding your company’s most essential accounting-based benchmarks.
- Get your design right: With your visual KPIs in place, you will now need to make sure that your report is clear, clutter-free, and 100% accessible to every user. When you’re designing your accounting report format, prioritizing substance over style is essential. It’s vital that every visualization is arranged in a way that is easy to navigate while avoiding visual clutter where possible. Our guide to dashboard design best practices will help you with your efforts.
- Label with consistency: Expanding on our previous point, when creating a successful accounting business report, you should label all of your visuals and informational elements consistently. Ensure your labeling follows a uniform format (using the same punctuation, numeric style, or abbreviations, for example) to ensure everything is clear, fluent, and easy to digest. Following a clear and consistent labeling format is essential to making sure every relevant stakeholder can use your reports to their full potential while avoiding any confusion that could lead to error.
- Train and empower: Without providing adequate support and training, your reports will offer limited value to members of your financial team. By taking the time to master every function or feature of your reports’ dashboard software, you will benefit from filters, drill down options, and analytical automation capabilities. Armed with this knowledge, you can run regular internal training workshops to give everyone the tools they need to succeed with the power of visual reporting. Taking the time to roll out training and developing a data-driven culture across the business means that you will see the best possible return on investment (ROI) for your analytical efforts.
Tip: In addition to following these essential tips, gathering regular feedback from all relevant users will give you the intelligence you need to continually evolve and improve your reporting efforts for ongoing financial success.
Why Does Data Visualization Matter For Your Accounting Report?
Like in any business area today, managers are confronted with a growing amount of data to assimilate and from which they have to make sound decisions. Visualizing all this data by creating managerial accounting reports addresses informational overload and improves the quality of decision-making.
However, introducing visualization to the accounting world doesn’t come as easy as we would think at first. In a field obsessed with calculating every dollar to the precise cent, it can be easy to end up trapped in a maze of detailed numbers and tables. Yet, there are more than tables to visualize the results of an accounting report.
Let's take a real-life example. If you are a food company, for instance, with several subsidiaries spread across the country: you need to have an accurate and easy-to-grasp view of the cash that goes in and out of each store and its evolution. To do so, dashboard software comes in handy, as it lets you see which unit runs out of cash and the criticality of the situation in relation to profits or losses from other stores. The same goes if you have several suppliers to pay while your customers delay their liability: with real-time visualization of what’s in and what’s out, you are in a better position to avoid being in the red for too long. Indeed, you won’t need to wait for the next report to be produced: the dashboard is automatically updated every time you perform a change in the source. Besides, the possibility of adding data alerts will always keep you safe, as you will be notified as soon as something changes in your insights.
As we see, DataViz isn’t just eye candy to please managers. It is a powerful way to exceed your reporting process and communicate all your work in a comprehensible and accessible way to anyone. It will help you analyze your potential problems or pain points and explain them better. Trying to present these reports in the least detail and you will end up creating a visualization more impenetrable than the table you first tried to replace.
So, let’s take a step back and see what can be done. Excel tables are extremely powerful and essential for any accountant, and so are Lexware and Infor. Yet, they lack data visualization that could really make sense and help get the full understanding of the balance sheet and income statement they hold in store. As seen with our list of examples, a modern online data analysis tool provides you with a mix of advanced analytical features as well as intuitive visualization options that can be easily accessed and shared for a collaborative data-driven approach.
Accounting reports are not just visuals of your organization’s revenue and expenses. They also provide insights into cash flow management and a snapshot of its financial health. These reports are great for identifying potential issues and opportunities within your business and communicating them to internal stakeholders, insurance carriers, and lenders alike, provided you use the right tools.
Implementing dashboard reporting software to make sense of all the info you handle will help you greatly in communicating your insights. Dataviz helps accountants tell better data stories in an accessible way to everyone.
In summary, here are the main types of accounting reports:
- General Ledger
- Profit & Loss
- Balance Sheet
- Cash Flow Statement
- Statement Of Retained Earnings
- Accounts Receivable Aging
- Accounts Payable Aging
To start your financial visualization journey now and see how much your reports could benefit from it, why not start our free 14-day trial?