How To Read Financial Statements
Financial Reporting Best Practices
Compare Periods in Reporting to Spot Trends and Averages
WorkingPoint offers a built-in a comparison feature on the Income Statement so you can see how your business is doing for one period, like a month, quarter or year, compared with a previous period. Comparing your expenses, for example, helps you gauge your average spending so you can see where you need to cut back or expand. Compare your revenue and see if you can find patterns or trends in your sales based on season or product line to see when to market your products and services.
“Close” your books to protect the integrity of your reports
At WorkingPoint, we think it should be easy to make necessary changes to the activity you have recorded in WorkingPoint. But, it’s a good practice to “close” your books once you have completed your year-end closing activities, like recording depreciation for the year. Once you have printed your final reports for a reporting period, like year-end, don’t enter any more data into that period. This way, your reports stay true.
Review Your Reports Often
If you keep your WorkingPoint account current, you’ll be able to run up-to-date financial reports whenever you want. Run them often to keep a close eye on your spending and sales so you can make decisions that have an immediate impact.
Learn More About Standard Financial Reports
If you aren’t familiar with how to read a financial report, check out our Online Help Center. Here you’ll find detailed information about the reports, including background information about the financial report, how to create the report and how to read financial statements in WorkingPoint.
What are Financial Reports?
Financial Reports organize your business activity details into categorized summaries, so you can see gain insight into your business. The top 3 most commonly used financial reports are the Balance Sheet, Income Statement and the Cash Flow Statement. They’re the most commonly used reports because they touch on all aspects of your finances, provide the most widely accepted view of your finances by accountants, lenders and creditors, and show investors how your cash is being used. The next sections explain how to read financial statements.
About the Balance Sheet report
The Balance Sheet report shows what your company’s worth (Equity), what you owe (Liabilities), and what you own (Assets) based on the fundamental accounting equation (Assets = Liabilities + Equity). You can see the financial health of your business as of specific date, for example, the last day of the month or the year.
About the Income Statement
The Income Statement, also referred to as the Profit and Loss Statement, compares your revenue to your expenses and calculates your Net Income (what is left of your revenue after expenses). This report will show you how you are earning and spending money by category so you can see how your business is doing, make projections on future earnings, and budget for future expenses.
About the Cash Flow Statement
The Cash Flow Statement shows you the changes in your cash as it flows in and out of your business over a given period of time. It helps you analyze the affects of your Balance Sheet and Income Statement activity on your cash by breaking out your spending into 3 main categories: Operations, Financing, and Investing. You can use the Cash Flow Statement to see where your cash is going and coming from and compare Net Income to Net Cash from Operating Expenses to measure quality of earnings.
Why Should I Run Financial Reports?
According to the International Accounting Standards Board, “The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions.”
Financial reports sum up your business activity and organize it in meaningful ways so you can see how your business is performing. Standard report formats eliminate ambiguity so you can see in black and white where you are exceeding your objectives so you can celebrate reaching important milestones and where you are getting off track so you can reel yourself back in.
In addition, financial reports help you perform critical business activities like filing your taxes and procuring a loan. Without good financial reports, completing your taxes would be a challenge and lenders would be less likely to loan you money.
By knowing where your business stands financially, you can make the best decisions to manage and grow your business.
How Do I Run Financial Reports in WorkingPoint?
While you’re running your business, WorkingPoint is keeping track of your business records so you can see how your business is doing at any given time. Generating reports with WorkingPoint couldn’t be easier. Once you have your business activity updated in WorkingPoint for the period you want to report on, you’ll be able to see what is happening in your business from a financial perspective with the click of a button.
With WorkingPoint financial reporting, you can generate standard financial statements including:
- A Balance Sheet as of a specific date to see your overall business position
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An Income Statement for the month, quarter, or year and compare it with other periods so you can:
- Evaluate how much you are spending on expenses month-to-month
- Make projections for future earnings
- Budget for future expenses
- A Cash Flow Statement for a given period so you can see how your cash is being used
Customize your reports by selecting a predefined or custom date range, print as a PDF, export your data to Open Office or Microsoft Excel® with formulas and formatting intact and expand and collapse categories to get more or less detailed.