How to Create Monthly Financial Statements and Reports

Any business, whether big or small, public or private, for-profit or nonprofit, needs to have a good handle on its finances. This is where monthly financial statements come in. Monthly financial statements are reports that show a company's financial performance and position over a period of time, typically one month. They can give business owners and managers a snapshot of how the company is doing and help them make informed decisions about where to allocate resources.

While monthly financial statements are not required by law, they are essential for any business that wants to stay financially healthy. Therefore, to discuss this further, let us take you through a step by step process to create monthly financial statements without a fuss.

What Are Financial Reports?

Financial reports are used to track the financial performance of a company over a specific period of time. **Monthly reports for small business **provide insights into a company's overall financial health and can be used to make decisions about investments, lending, and other strategic decisions.

Financial reports typically include

(link: https://fincent.com/glossary/balance-sheet text: balance sheets),
(link: https://fincent.com/glossary/income-statement text: income statements),
(link: https://fincent.com/glossary/cash-flow-statement text: cash flow statements), and
(link: https://fincent.com/glossary/stockholders-equity text: statement of shareholder equity)

Each of these reports provides different information about a company's financials, and can be used in conjunction with each other to get a comprehensive understanding of a company's finances. But then the big question appears, how do you make financial reports? So let's dig in more below to understand what these four financial reports stand for and how they contribute to the essentiality of our finances.

Balance Sheet / Statement Of Financial Position

The balance sheet, also called the statement of financial position, is a snapshot of a company's assets, liabilities, and equity at a specific point in time. It provides information about a company's ability to pay its debts and finance its operations.

Assets: Anything that a company owns and can use to generate income. This can include cash, investments, property, equipment, and inventory.
**Liabilities: **Anything that a company owes to others. This can include loans, accounts payable, and taxes payable.
Equity: It** **is the difference between assets and liabilities. It represents the ownership stake that shareholders have in a company.

Income Statement

The income statement, also called the profit and loss statement, is a report that shows a company's revenue, expenses, and net income over a specific period of time. It provides information about a company's ability to generate profits and finance its operations.

Revenue: The total amount of money that a company brings in from sales and other sources.
Expenses: The costs associated with running a business, including the cost of goods sold, operating expenses, and interest expense.
Net income: The difference between revenue and expenses. It represents a company's profitability during a specific period of time.

Cash Flow Statement

The cash flow statement is a report that shows how much cash a company has generated or used over a specific period of time. It provides information about a company's ability to pay its bills and finance its operations.

Operating activities: The activities that generate or use cash in the course of a company's normal business operations. This can include sales, expenses, and investments.
Investing activities: The activities that generate or use cash in the course of investing in something for the long-term growth of the company. This can include purchasing property, equipment, or investing in securities.
Financing activities: The activities that generate or use cash in the course of financing a company's operations. This can include issuing debt, repaying debt, and paying dividends.

Aged Receivables Report

The aged receivables report is a report that shows how much money is owed to a company by its customers. It provides information about a company's ability to collect payments from its customers. Accounts receivable are the amounts of money that are owed to a company by its customers.

Aging of accounts receivable: The process of classifying accounts receivable by the length of time they have been outstanding.
Days sales outstanding (DSO): A metric that measures the average number of days it takes for a company to collect payment from its customers.

Aged Payables Report

The aged payables report is a report that shows how much money a company owes to its suppliers. It provides information about a company's ability to make payments to its suppliers. Accounts payable are the amounts of money that are owed by a company to its suppliers.

Aging of accounts payable: The process of classifying accounts payable by the length of time they have been outstanding.
Days payables: Outstanding (DPO) is a metric that measures the average number of days it takes for a company to pay its suppliers.

Statement Of Shareholders' Equity

The statement of shareholders' equity is a report that shows the changes in a company's equity during a specific period of time. It provides information about a company's ability to generate profits and finance its operations. Shareholders' equity is the difference between a company's assets and liabilities. It represents the ownership stake that shareholders have in a company.

Retained earnings are the portion of a company's net income that is not paid out as dividends.
Common stock is the type of stock that represents ownership in a company.
Additional paid-in capital is the amount of money that shareholders have invested in a company above and beyond the par value of the stock.
Treasury stock is the shares of stock that a company has repurchased from its shareholders.

Financial Reporting is the lifeline of any business’ monthly finances. Therefore, how to do a financial report is one often asked question that makes people take it as a critical job. Let’s move ahead in this article to decipher the many facets of financial reportings and records, their purpose and the challenges one may face on the way.

What Is The Purpose Of Financial Reporting?

The purpose of financial reporting is to provide transparency about a company's financial activities and to give insights into its overall performance. These reports provide essential information about a company's revenue, expenses, assets, liabilities, and cash flow. Financial reporting can be tricky, but it is an essential tool for ensuring that investors have the information they need to make informed decisions about their investments.

Communicate Essential Data To Shareholders

It is the role of financial reporting to communicate essential data to shareholders, creditors, and other interested parties. Financial statements provide an overview of a company's financial position, performance, and cash flow. They can be used to make informed investment decisions and assess a company's creditworthiness. Additionally, financial statements can be used to compare a company's financial performance to that of its peers.

Monitors Income And Expenses

The process of monitoring and recording a company's income and expenses is important for two main reasons:

it helps businesses to track their progress, and
it provides information that can be used to make decisions about future operations.

Financial reporting is typically carried out on a monthly or quarterly basis, but it can also be done on an annual or even daily basis, depending on the needs of the business. The most important element of financial reporting is accuracy; companies must make sure that their records are accurate in order to make sound decisions about their finances.

Provides Insight Into A Company's Overall Performance

A company's financial report is a comprehensive summary of its financial performance over a period of time, typically one fiscal year. The report includes detailed information about the company's income, expenses, and cash flow. It also provides insights into the company's overall financial health. Financial reports are an essential tool for investors, creditors, and other stakeholders to assess a company's financial strength and identify potential risks. By understanding a company's financial report, stakeholders can make more informed decisions about whether to invest in or lend to the company.

Enables investors to make informed decisions about their investments

By providing information about a company's financial performance, it enables investors to make informed decisions about their investments. In addition, financial reporting helps to ensure that companies are operating in a transparent and accountable manner. Without financial reporting, it would be very difficult for investors to make informed investment decisions. As a result, financial reporting plays a vital role in ensuring that the capital markets function efficiently.

Supports Financial Analysis And Decision-Making

By regularly assessing the financial health of a company, analysts and investors are able to make more informed decisions about where to allocate their resources. Financial reporting provides critical information about a company's revenue, expenses, assets, liabilities, and equity. This information can be used to identify trends and assess risk. Additionally, financial reporting can help companies to benchmark their performance against their competitors.

Compliance With Regulations

Financial reporting helps in the compliance with regulations by providing transparency about the financial health of a company. This information is important for investors, creditors, and other interested parties to make informed decisions about their involvement with the company. Financial reports can also help to ensure that a company is adhering to generally accepted accounting principles. By providing clear and concise financial information, companies can avoid potential penalties for violating regulations. Financial reporting is therefore an essential tool for compliance with various regulations.

Simplify Your Taxes

By keeping track of your income and expenses on a regular basis, you can ensure that all of your deductible expenses are properly documented. This can save you a significant amount of money come tax time, as you will no longer have to waste time and effort searching for receipts and documentation. In addition, your tax return will be much easier to prepare if all of the relevant information is already organized and readily available. Therefore, if you are looking for a way to save money and reduce stress during tax season, financial reporting is definitely worth considering.

How To Prepare A Monthly Financial Report?

A monthly financial report is an important tool for business owners and managers. It can help you track your progress, identify trends, and make informed decisions about where to allocate resources. Preparing a financial report can seem daunting, but it doesn't have to be. With a little planning and attention to detail, you can produce a clear and concise report that will give you the information you need to make sound financial decisions.

So, let's understand how step by step you can create a precise financial report.

Step 1: Prepare A Balance Sheet

To prepare a balance sheet, you will need to gather information about your company's cash, accounts receivable, inventory, fixed assets, and other items. This information can be found in your company's financial records. Once you have gathered all of the relevant information, you will need to categorize it into three categories:

assets
liabilities
equity

The total value of your assets should equal the sum of your liabilities and equity.

Step 2: Prepare An Income Statement

To prepare an income statement, you will need to gather information about your company's revenue and expenses. This information can be found in your company's financial records. Once you have gathered the information, you will need to categorize it into two categories:

operating expenses
non-operating expenses.

Operating expenses are those that are directly related to the operation of your business, such as rent, utilities, and payroll. Non-operating expenses are those that are not directly related to the operation of your business, such as interest expense and taxes. The total value of your expenses should equal your revenue.

Step 3: Prepare Closing Entries To Go Forward For The Next Monthly Accounting Report

After you have prepared your balance sheet and income statement, you will need to make some closing entries in order to move forward with the next monthly accounting report. To do this, you will need to find your company's net income or loss. This information can be found on your income statement. Once you have found your company's net income or loss, you will need to make two entries:

a debit entry for net income, which will increase your equity; or
a credit entry for net loss, which will decrease your equity.

After you have made the appropriate entries, you will be ready to move on to the next monthly accounting report.

Step 4: Consolidate All The Above Financial Data and Visualize It

Consolidating all the financial statements data and visualizing it will give you a clear overview of your business's monthly financial performance. This will help you track your progress, identify trends, and make informed decisions about where to allocate resources. There are many different ways to consolidate and visualize your data, but one of the most popular methods is to use a financial dashboard.

A financial dashboard is a tool that allows you to see all of your company's financial data in one place. It can be customized to show only the information that you want to see, and it can be updated in real-time as new data becomes available. Dashboards are an incredibly valuable tool for business owners and managers, and they can help you make better financial decisions.

Once all the aforementioned steps are taken care of, you'd be then done with your monthly financial statements. This will help you have a clear understanding of your business's financial health and performance. And, you can use this information to make informed decisions about where to allocate resources.

5 Financial Stats From Your Reports To Assist Businesses

It is important to know where you stand financially as a company. In regard to this, the below suggested 5 financial stats from your reports can help your business assess their progress and make changes if needed. Let's take a look!

**P&L Statement **

A P&L Statement aka Profit & Loss Statement, is a financial report that shows a company's revenue, expenses, and profitability over a period of time. This statement can be used to assess a company's financial health and performance.

Expense Trends

By tracking expenses, businesses can identify areas where they are spending too much money. Expense tracking is necessary to be used to make changes in order to save money. Such financial activities help businesses become more efficient and improve their bottom line.

Accounts Receivable

Accounts receivable is the money that a company is owed by its customers. This information can be used to assess a company's financial health and performance. Accounts Receivable is an important metric to track because it can indicate whether a company is having difficulty collecting payments from its customers.

Profit Per Customer

This is a metric that shows how much profit a company makes per customer. This information can be used to assess a company's financial performance and make changes if needed. Profit per Customer helps in evaluating pricing strategies and making changes to improve the profitability of a company.

Number Of Client Prospects

This metric shows the number of potential customers that a company has. This information can be used to assess a company's sales pipeline and make changes if needed. Having full-fledged knowledge of the Number of Client Prospects essentially helps in understanding whether the current marketing strategy is working or not.

By tracking these financial stats from your reports, businesses can get a better understanding of their progress and make changes if needed. Doing so will help them improve their overall financial health and performance.

How To Make Your Financial Report Better?

Your financial report is a key element in conveying the health and status of your business to investors, creditors, and other interested parties. An effective report will be clear, concise, and easy to understand, with all relevant information prominently displayed. Here are some tips on how to make your financial report better:

Define Your Mission And Audience

To create a compelling financial report, you can start by defining your mission and audience. What is the purpose of your report? Who will be reading it? Once you have a clear understanding of your goals and audience, you can begin to gather the relevant information.

Identify Your Metrics

Once you have defined your mission and audience, you'll have to next identify the metrics of your financial report. You can do this by analyzing your financial statements and determining which metrics will be most informative to your audience. Some common metrics include revenue, expenses, profit margin, cash flow, accounts receivable, and inventory turnover.

Choose The Right Visualizations

After you have gathered all the relevant information and identified your key metrics, it's time to choose the right visualizations for your data. The goal is to create visuals that are easy to understand and interpret, while still conveying all the necessary information. Some common visualization types include charts, graphs, tables, and infographics.

Use Modern Software & Tools

To create a truly effective financial report, it's important to use modern software and tools. There are many great options available that can help you automate the process of data entry, analysis, and visualization. Using these tools will save you time and allow you to focus on more important aspects of your business.

Automate Your Financial Management Report

Automating your financial management report can save you a lot of time and hassle. There are many software programs available that can help you automate the process of creating and updating your report. Automating your report will allow you to focus on more important aspects of your business.

By following these tips, you can create a financial report that is clear, concise, and easy to understand. Your report will be an invaluable tool in conveying the health and status of your business to investors, creditors, and other interested parties.

Common Challenges Of Financial Statements

Preparing financial statements can be a complex and challenging task, especially for businesses with a lot of data to track. There are several common problems that can occur, making it difficult to produce accurate and meaningful statements. Here are some common challenges of financial statements that one may often come across while dealing with the same. Have a look:

Manual Work

The process of preparing financial statements is often done manually, which can lead to errors and inaccuracies. This is because it's difficult to keep track of all the data points manually. Such errs can often be cumbersome and troubling when it comes to presenting the statements to investors or other interested parties.

Lack of Standardization

There is often a lack of standardization when it comes to financial statements. This can make it difficult to compare and contrast different businesses. Each business may have their own unique way of tracking data, which can make it difficult to get an accurate picture of the company's financial health.

Manage Various Data Sources

Another challenge of financial statements is managing various data sources. This is because businesses often have data spread out across different departments and software programs. It can be difficult to consolidate all this data into one place, making it hard to get a clear picture of the company's finances.

Accessibility And Collaboration

It can often be difficult to share and collaborate on financial statements. This is because the statements are usually stored in one central location, making it hard for others to access and contribute. This can make it difficult to get input from different team members, which can lead to inaccuracies in the final report.

Adapt To Regulatory Changes

Financial statements must be adapted to regulatory changes. This can be a challenge, as businesses must ensure that their statements comply with the latest rules and regulations. Failure to do so can lead to penalties or other problems.

By understanding these common challenges, you can be better prepared to overcome them when preparing your own financial statements. By using modern software and tools, you can automate the process and make it easier to produce accurate and meaningful statements.

How Can Fincent Automate Your Monthly Financial Report Creation Process?

There's no denying that creating a financial report can be a time-consuming and tedious task. Between compiling all the necessary data and ensuring that everything is accurate, it's easy to see how the process can quickly become overwhelming. Fortunately, there is a way to streamline the entire process: by using Fincent. So, let's dive into the deep, comprehensive help that Fincent has to offer to aid you seamlessly automate and organize your monthly financial reports. Take a look:

Importing Your Financial Data

Fincent can help in importing your financial data in a number of ways.It is your advanced monthly bookkeeper that can be of aid to you in handful of ways and forms. Like:

First, it can help to automatically import data from your bank accounts, credit cards, and investment accounts. This can save you a lot of time and effort, as you won't have to manually enter all of your transactions.
Second, Fincent can help to categorize your transactions, making it easier to track your spending and budget accordingly.
Finally, Fincent can also help to generate reports on your finances, providing you with valuable insights into your spending patterns and overall financial health.

In short, Fincent financial software can be a valuable tool for anyone looking to better manage their finances.

Automatic Calculation Of Key Ratios And Trends

Fincent can help you track and analyze your company's financial performance over time, identify key areas of improvement, and generate customized reports. In addition, it is also equipped with built-in tools for forecasting future trends and analyzing past data, making it an ideal solution for businesses that need to make informed decisions about their financial future.

Customizable Formatting For Your Report

With Fincent, you'll be able to easily format your reports in a way that's easy to understand and presentable. Not only that, but it also allows you to export your reports into a variety of different formats, so you can share them with clients or colleagues with ease. Plus, it is constantly being updated with new features and functionality, so you can be sure that you're always using the most up-to-date version. Overall, Fincent is an excellent choice for anyone who needs customizable financial reporting.

Automated Delivery Of Your Report

By setting up an automated delivery schedule, you can save time and ensure that your reports are always up-to-date. This can be especially helpful if you need to generate reports on a regular basis, such as monthly or quarterly financial statements.

Automated report delivery can also help to improve communication with clients or shareholders. By sending reports automatically, you can avoid the risk of forgetting to send them manually. In addition, automated report delivery can help to streamline your workflow by eliminating the need to print and mail reports yourself. As a result, Fincent can save you time and improve your efficiency.

Saving Time And Improving Accuracy

Fincent as a tool can help you save time and improve accuracy in your accounting and finance tasks. Its state-of-the-art interface and concept is designed in such a fashion that can help you streamline your accounting processes and improve financial reporting. It can also aid you with budgeting, forecasting, and other financial planning tasks.

With Fincent, you can be sure that your financial reports are accurate and up-to-date. The software can also help you save time by automating many of your accounting tasks. Fincent is an essential tool for any business or individual who wants to save time and improve accuracy in their accounting and finance tasks.

The Final Wisdom

Monthly financial reports are an important part of any business. They help you track your expenses, profits and losses, and give you a snapshot of how your business is doing. Knowing what to look for in your monthly reports can help you make informed decisions about the future of your business.

At Fincent, we want to make it easy for you to manage your finances and keep your business on track. We provide hassle-free financial reporting that makes understanding your numbers a breeze. We are your go-to monthly bookkeeper. Try us today to get a free demo!

FAQs:

Who is responsible for creating monthly financial statements? Typically, the accounting department or financial controller of a business is responsible for compiling monthly financial statements. In small businesses, this may be the owner or an outsourced accountant.

Can I create financial statements if I use cash basis accounting? Yes, you can create financial statements on a cash basis by recording revenues and expenses when cash is received or paid. However, the accrual basis provides a more accurate financial picture for most businesses.

What common mistakes should I avoid when creating financial statements?**** Common mistakes include incorrect categorization of expenses and income, overlooking outstanding invoices, not reconciling bank accounts, and failing to review for accuracy.

How can I ensure the accuracy of my monthly financial statements? Ensure accuracy by regularly reconciling all accounts, reviewing transaction classifications, and double-checking all entries against source documents.

Should I share my monthly financial statements with anyone? Yes, it’s often beneficial to share your monthly financial statements with key stakeholders such as investors, lenders, and sometimes employees to maintain transparency and trust.

How do I customize my financial statements for different audiences? Customize financial statements by highlighting the most relevant information for each audience. For example, investors may be interested in profitability and growth potential, while lenders might focus on liquidity and solvency.

You can reach out to your bookkeeper anytime if you need anything sorted out with your Financial reports. Your bookkeeper reviews these statements and sends you a tax-filing package every tax season, but you can ask them to download a copy for you at any time too.

Not sure yet? Watch a short demo of Fincent