What is financial reporting?
It is the process by which organizations provide an accurate picture of their financial status and financial health by following standard practices prescribed by a governing body and the government. The key performance indicators that financial reports capture include revenues, expenses, cashflow/ liquidity, capital and profits. These reports are used by a wide range of stakeholders and parties to make informed decisions about the business ranging from investment decisions by potential investors, lending decisions by banks or credit institutions, measures to maintain a cashflow by finance managers, costing by business managers and so on. It is also used by Governments, employees, owners, etc. too. Some of the most important financial reports include the Profit and Loss Statement, Income Statement, Balance Sheet, Cash Flow Statement, etc.
Why is it important?
The first reason is that it is a legal requirement for organizations to prepare financial reports for tax and statutory auditing purposes. The government and tax department will be able to ensure that the organization is paying its fair share of taxes. For listed companies, it is essential to include financial reports in their quarterly and annual reports to be published and filed with the stock exchange.
As mentioned earlier, it accurately captures the financial health, integrity and creditworthiness of the organization. Banks, financial institutions and investors use the financial reports to decide whether or not the company can deliver on repayments/ dividends and other payouts. The public itself can analyze the financial performance of the organization and its management using these reports. These reports are mandatory while applying for bidding, contracts, government supplies and so on.
Financial reports form the backbone of the organization’s planning, strategizing and decision-making process. The financial reports provide the database for the management team to analyze various indicators and accordingly, forecast and plan for the future.
Financial management courses for professionals to prepare financial reports
Financial report preparation is an indispensable part of organizational functions. Organizations will have a steady demand for professionals who can perform this function. So, taking a professional course in finance will provide you with the necessary skills to do this and thereby, give you a competitive advantage. These professional courses in finance are available in online and on-campus modes of varying levels and duration. Some of the top-notch institutions across the globe offer such courses. Most of these courses are best-suited for practicing Chartered Accountants, CMAs, Corporate Secretaries as well as mid and senior level finance and accounting executives and managers. These professional courses in finance will teach you the basic concepts, principles and processes involved in the preparation of financial reports and statements. It will also impart lessons on standard accounting practices, concepts in financial analysis and audit, capital budgeting, valuation, etc. among others.