Automating Financial Reports with FreshBooks

Financial Report 2021

Financial reports are a crucial tool for businesses. They provide a panoramic view of an organization’s core financing activities over a monthly period and offer data geared towards developing sustainable improvements and growth.

Automating these documents can save professionals a significant amount of time, money, and margin for error. To make this process easier, FreshBooks provides a cloud-based accounting platform that allows professionals to generate these important documents with just a click.

Income Statement

One of the three main financial statements, the income statement displays a company’s revenue and expenses, including gains and losses, over a specific accounting period. It also reports a company’s net income, which equals revenues minus costs and expenses.

The income statement begins with total revenue, also known as the top line, which includes money earned from selling a company’s products or services. It then moves down through operating income, or EBIT, which is the profit earned from a company’s core business activities, before adding in non-operating income and subtracting interest expense to arrive at net income applicable to common shares.

By analyzing each item on the income statement, a company can gain insights into its overall profitability, which is a vital component of a thriving business. For instance, by comparing each expense to revenue, a company can zero in on areas where they could save money. Also, by analyzing earnings per share, a company can see how its profits are being distributed among stockholders.

Balance Sheet

The Balance Sheet is one of the core financial statements that is used to evaluate a business. It provides a snapshot of the company’s assets, liabilities, and shareholder equity at a given point in time. It adheres to the basic equation of Assets = Liabilities + Equity.

The report is broken down into sections that detail the various types of assets your business holds, such as cash and accounts receivable. It also includes long-term assets, such as furniture and equipment. Liabilities include short-term debt, such as accounts payable and wages payable, as well as long-term debt, such as property, plant and equipment loans. Equity is the remaining value of your business after it pays off its liabilities. It is increased by net income and by issuance of new shares, and decreased by losses and dividend payments.

As a snapshot of your financial position, a balance sheet can help you determine risk and make informed business decisions. It can also be useful when analyzing trends in working capital, asset performance, and capitalization.

Statement of Cash Flows

Like the income statement and the balance sheet, a company’s cash flow statement summarizes all of its real hard-dollar cash inflows and outflows for a year. There are two widespread ways to build a cash flow statement: the direct method and the indirect method. The direct method is more straightforward and relies on actual cash inflows and outflows to build the statement, rather than using P&L or balance sheet accounts.

The cash flow statement includes three sections: operating activities, investing activities and financing activities. The sum of these three items is the company’s net increase or decrease in cash over the year.

For example, a company’s cash flow statement might show that its accounts receivable decreased by $2,050 because clients paid invoices early. This improved the company’s cash position. Its cash flow statement might also show that it spent $86 million repurchasing its own stock, which reduced the number of shares outstanding. This improved the company’s earnings per share.

Statement of Retained Earnings

A statement of retained earnings is an important document that a business should prepare each financial period. It can help lenders and creditors understand the company’s ability to repay debt or make credit repayments. It also helps shareholders understand the strength of their investment. A financial expert can help a company create a statement of retained earnings that meets industry standards and follows regulations.

The statement of retained earnings is a condensed version of the Income Statement and Balance Sheet, as it only reports the amount of money the company has left over after all expenses have been paid. It shows how a company’s profits are distributed between shareholders and the business itself, and how that changes year after year.

The statement of retained earnings starts with the beginning retained earnings balance from the previous period, adds net income or loss, and subtracts any dividend payouts. The resulting figure is the end of period retained earnings balance that should appear on the balance sheet in the stockholders’ equity section.

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