As a business owner, you may have delegated various matters to the staff working for you. Nevertheless, there are several important things that you should know how to do yourself as well. One of which is creating financial reports. Although it is true that you can entrust this to your financial staff, it would be very beneficial if you also knew how to create financial reports and the various aspects that they relate to, because the ability to create and read financial reports closely relates to the growth of your business.
In a company of any size, the existence of financial reports is crucial, as they allow you to understand the inflow and outflow of money within a company in detail. By creating a company’s financial reports, you can assess the financial condition of your business over a specific period; ranging from the sources of income, expenditures, debts, receivables, and the overall assets of your company. Moreover, if you fully comprehend financial reports, as a business owner, you can gain a deeper understanding of the overall financial health of your company and acquire valuable insights to make better decisions for the future.
Now, to help you further understand the ins and outs of financial reports, let's delve into the discussion below.
The definition of financial reports
Financial reports are a collection of financial information from a company within a specific accounting period, which are aimed to depict the performance and financial situation of a business. As a highly important document for the continuity of a business, a financial report contains various relevant information about the financial performance of an organization or company. In this context, financial reports become the primary tool examined when analyzing financial stability, operational efficiency, and costs, as well as company growth.
Generally, financial reports typically consist of three main components: the income statement, the balance sheet, and the cash flow statement. These three elements provide a comprehensive overview of the financial health of a company. By examining the financial analysis outcomes generated by the company's financial reports, your company can take sustainable steps that will be beneficial to your business.
The functions and benefits of financial reports
So, what are the functions and benefits of financial reports for a company? See below for a few examples.
To evaluate financial performance
Through financial reports, you as a business owner and stakeholders, such as investors and management, can conduct in-depth evaluations or financial analyses of the company's performance. With the information contained within the financial reports, such as net profit reports, revenues, and financial ratios, you will possess a powerful tool that can be used to gauge whether the company has managed its finances effectively. From this financial analysis, you can gain a comprehensive perspective that can help to identify the successes and failures of the strategic steps taken and provide a foundation for better future business decisions.
Running an open and ethical business
Company financial reports play a crucial role in fulfilling business responsibilities openly and ethically. Through the presentation of accurate and transparent financial information, financial reports establish transparency and accountability in managing company resources. By providing access to stakeholders, financial reports build trust and offer an objective insight into the company's financial performance, while also helping to make sure management is responsible for decisions that are made and actions that are taken.
Fulfilling legal requirements
Did you know that financial reports are also crucial to meet legal requirements? There are numerous legal regulations that mandate companies and organizations to compile and submit financial reports in accordance with the applicable accounting standards. Conducting comprehensive financial analysis is also valuable for adhering to legal rules and regulations, particularly for companies aiming to go public on the stock exchange.
5 important terms related to financial reports
After understanding why financial reports are crucial, you also need to comprehend the meanings of various important terms within a financial report. Have you ever heard of the term "financial statement" or a "cash flow statement"? Perhaps these terms are not unfamiliar to you, but do you know what they actually mean? Check out the explanations below.
Bookkeeping
Bookkeeping is a systematic and useful series of records to gather financial information about a company. It includes assets, liabilities, equity, income, expenses, as well as the recorded value of goods or services.
General ledger
A general ledger is a record-keeping book used to record various financial transactions of a company within a specific period. Its purpose is to facilitate internal and external financial management. As a business owner, you need to oversee balances, as well as credit and debit transactions, which will later be useful in obtaining a comprehensive overview of all ongoing business activities.
Gross Profit & Net Profit
In financial reporting, the term "gross profit" refers to the income that has been from sales, which is the sales revenue before being deducted by costs such as production, employee salaries, taxes, and interest payments. Therefore, in a financial analysis, gross profit cannot yet be considered as the pure profit from sales, while "net profit" is the pure profit that already includes the company's costs and expenses.
Balance sheet
A balance sheet is a required report for a company to reflect its financial condition. Broadly speaking, a balance sheet consists of three components: equity, total assets or wealth, and liabilities or debts held by a company.
Cash flow statement
A cash flow statement refers to a type of financial report consisting of the inflows and outflows of cash within a company over a specific period. Its main purpose is to provide an overview of the sources of a company's income and how that money has been spent. A well-prepared cash flow statement also has other benefits, such as ensuring that your business has sufficient funds to carry out its operations.
Different types of financial reports that a company must have
From all the terms listed above, there are a few different types of financial reports and financial analyses that a company must generate. Let’s see a short description of each one below..
Income Statement
A report that details a company's revenues and expenses over a specific period, ultimately outlining the net profit or loss incurred.
Balance Sheet
A report depicting the financial position of a company at a specific point in time by comparing assets, liabilities, and equity.
Accounts Receivable Report
A report that records the amount of money a company is owed by customers or other parties for products or services provided.
Accounts Payable Report
A report that records the company's financial obligations that need to be paid to various parties, such as external vendors or other entities for goods or services received.
Financial ratio analysis and how to read a financial report
Now that you have learned several aspects that are related to a company's financial statements, the next step is to gain an understanding of a financial ratio analysis. Financial ratio analysis is an approach used to assess the financial performance of a company by comparing various figures in the financial statements. Some examples of financial ratios are:
- Liquidity Ratio: it is divided into three kinds, which includes Current Ratio, Quick Ratio/Acid Test Ratio, and Cash Ratio.
- Profitability Ratio: a ratio that shows the capability of a company to gain profit. The profitability ratio is measured by several ratios, such as Operating Income Ratio, Earning Power of Total Investment, Return on Equity, Return on Investment, and Return on Net Worth.
- Solvability Ratio: aimed to measure the level of fund management and a company's ability to meet its long-term obligations.
- Activity Ratio: measure whether the company has been effective in managing its resources or not.
- Investment Ratio: a ratio that measures the company's ability to provide returns to those who have invested funds in your company, particularly investors.
Meanwhile, financial statements will not fulfill their function properly if they cannot be read and interpreted correctly. Learn how to read two types of financial statements below.
How to read a balance sheet
When reading the Balance Sheet, you can assess the extent of a company's wealth. This includes the amount of cash, bank accounts, accounts receivable, and so on. When a company has sufficient funds to meet its day-to-day operational needs, fulfill its obligations such as paying debts to vendors and banks, provide dividends to shareholders, maintain inventory both as raw materials for production and finished goods for sales, and has adequate facilities and resources to support smooth company operations, then the company can be considered financially healthy.
How to read an income statement
When reading the income statement, there are a couple of things to pay close attention to:
- Comparison between revenue and Cost of Goods Sold (COGS)
- Pay attention to the expenses and revenues of the company. You can compare the data with data collected in previous periods — for example, in past months or years.
Aspire is here to help you with your financial reports
Creating financial reports is not an easy task. The numerous details that need to be recorded and processed meticulously can divert your focus from the actual business goals. In this regard, Aspire can be one of the tools that simplify and shorten the process of creating financial reports in your company. How can it be done? There's an accounts receivable management feature that helps you receive payments faster; you can easily create, send, and manage invoices, as well as send payment reminders to clients. You can also view all this with automatic reconciliation. Additionally, there's an accounts payable management feature that streamlines the bill payment process, allowing you to control and monitor cash flow transparently. All invoices can be consolidated in one place, making record-keeping easier and minimizing potential human errors.
What’s more, is that there's also an integration with various bookkeeping software such as Oracle, NetSuite, and Xero, which streamlines the closing process, enables intelligent categorization, and offers advanced synchronization for all expenses along with their receipts. This significantly shortens the financial reporting process.
Not only that, there are still more attractive features from Aspire that can simplify your business management. Starting from Aspire's corporate card which can be used to purchase various company needs, to the unlimited 1% cashback program, which is an additional benefit for companies that join Aspire. In this program, every time you or your employees make purchases at various leading merchants in the world, there will be a 1% cashback without transaction limits! This enables companies to be more cost-effective and can increase profits for your company.
Even though you now understand how to create financial reports, you can make the process even easier by using Aspire, where you will get a comprehensive and efficient financial solution to simplify your company's financial management in a quick, smart, and easy way. For those of you who want to gain interesting insights into business financial management and guidelines for running other companies, feel free to read more on the Aspire blog.
Frequently Asked Questions
How can Aspire support the unique financial needs and challenges of mid-sized businesses?
Aspire offers a comprehensive suite of expense management solutions tailored for mid-market companies. This includes sophisticated corporate cards, advanced budget controls, and streamlined claims and approval policies, all designed to enhance financial efficiency.
How quickly can a mid-market company integrate Aspire's solutions into existing systems and workflows?
Integration with Aspire's expense management solutions is swift and seamless. Mid-market companies can swiftly implement corporate cards with tailored features, set up nuanced budgets, and establish streamlined claims and approval processes, ensuring minimal disruption to existing workflows.
How does Aspire compare to competitors for international money transfers?
Aspire excels in international expense management with FX fees up to 2x cheaper than traditional banks.
Global payments are offered by various providers through business accounts. Read our article to know more about types of business accounts and how to choose the best one for your business. There are many banks and fintech companies offering business accounts to businesses in Singapore. We have covered them all in our blog, you can click the links to view accounts offered by various banks such as DBS, OCBC, Maybank etc.
However, if you are a start-up or a growing business, chances are you may not meet the eligibility criteria for most of these banks or find their charges to be expensive for your liking. You can consider opting for Aspire multi-currency account for global payments which offers you all the benefits, with eligibility criteria which are less stringent. Read our article on bank charges in Singapore for a quick and easy comparison.
What level of customization does Aspire offer to meet the specific financial requirements of mid-market clients?
Aspire understands the diverse financial needs of mid-market clients and provides a high level of customization to tailor solutions accordingly. This includes the ability to customize corporate cards with specific spending limits, rewards, and benefits that align with the unique requirements of each client.
Additionally, Aspire's budgeting features are adaptable to accommodate the distinct financial structures of mid-market enterprises. The platform also allows for fine-tuning approval policies, ensuring they align with the specific workflows and compliance standards of individual mid-market businesses. This commitment to customization empowers mid-market clients to optimize their expense management in a way that best suits their financial goals and operational preferences.
Is there a minimum balance required for Aspire Business Accounts?
No minimum balance is required to keep your SGD, USD, EUR, GBP and IDR Accounts activated.
Can Aspire's corporate cards be customized to cater to the specific needs of consulting teams on the go?
Yes, Aspire's corporate cards are highly customizable. Consulting teams can benefit from tailored spending limits, travel-centric perks, and real-time transaction tracking, ensuring that the cards meet the unique requirements of professionals on the move.
How does Aspire support budget management for consulting projects and travel expenses?
Aspire's platform offers sophisticated budget controls that consulting companies can adapt to project-specific needs. This includes setting project budgets, tracking expenditures, and receiving real-time insights to ensure that expenses align with project goals.
What are Aspire Corporate Card FX rates?
At Aspire, we want you to pay the lowest rates in the market.
- Zero card activation fees
- Zero card transaction fees
- Best FX rates, up to 2x cheaper than banks
How does Aspire help consulting companies enforce expense policies and approvals for travel expenses?
Aspire streamlines the claims and approval process, allowing consulting companies to establish and enforce expense policies seamlessly. Customizable approval workflows ensure compliance with company policies and industry regulations.
Is Aspire's platform scalable for consulting companies of varying sizes?
Yes, Aspire's platform is scalable and caters to consulting companies of all sizes. Whether you're a boutique consultancy or a larger firm, the platform's features can be adapted to meet your specific travel and expense management needs.
How can I open a business account in Singapore?
For a business account in Singapore, Aspire is an excellent choice. With a focus on startup and SME needs, Aspire offers a seamless and transparent banking experience.
Benefit from their user-friendly online platform, no minimum balance or account opening fees, and dedicated support for businesses of all sizes.
Aspire is designed to streamline your financial management, making it an ideal partner for entrepreneurs in Singapore.
How long does it take to open an Aspire business account?
Registration with Aspire takes less than 10 minutes which you can do via our website or mobile app.
Once registered, we will get back to you within 5 business days on whether your account has been activated or if we need further documents from you.
Our account verification process varies according to the nature of your business. In exceptional cases, it can take up to 7 days to process your documents.
How can Aspire's corporate cards benefit my startup?
Aspire's corporate cards offer a range of benefits for your startup. Earn 1% unlimited cashback on qualified spends, simplify expense management, enjoy streamlined transactions, and gain real-time insights into spending. With customizable limits, integration with accounting software, and enhanced security features, Aspire's corporate cards are designed to empower your startup's financial efficiency and provide added convenience for your team.
Is Aspire suitable for both early-stage and established startups?
Absolutely, Aspire caters to the needs of both early-stage and established startups. Whether you're just beginning your entrepreneurial journey or have an established business, Aspire offers tailored financial solutions to help streamline your operations.
From managing expenses and optimizing workflows to providing valuable financial insights, Aspire's platform is designed to adapt and scale with your business as it grows. The flexibility and scalability of Aspire make it a suitable choice for startups at various stages of development.
Is there a minimum balance required for Aspire Business Accounts?
No minimum balance is required to keep your SGD, USD and IDR* Accounts activated.
However, we recommend keeping your subscription plan amount available on your balance to ensure you're up to date with your payment every month.*
To create a recipient or make any transaction on your IDR Account, you'll need to have a minimum balance of IDR 10,000 on your account.