Standardized Fiscal Reporting Requirements
Most public companies follow a standardized set of accounting principles. To make global fiscal reporting more consistent, transparent, and cross-functional, accounting standards like the IFRS (International Financial Reporting Standards) and GAAP in the USA (Generally Accepted Accounting Principles) were created.
This framework of international accounting rules keep the financial statements of public companies around the world objective and accountable.
How does fiscal reporting work?
Tracking and documenting financial activity consistently throughout the year is key to accurate fiscal reporting. Finance teams summarize this activity every quarter or year-end by consolidating all transactional data and preparing financial statements. Company stakeholders and leadership use these reports to analyze business performance and set new goals for the next fiscal period.
There are different methods to record and report the company’s financial information, from traditional bookkeeping (manual data entry) to accounting software (process automation).
Traditional double-entry bookkeeping is becoming an outdated practice, especially at larger and fast-growing companies. Manual processes in accounts payable and accounts receivable are error-prone and difficult to scale, making fiscal reporting slow and stressful.
Modern accounting software has helped finance teams of all sizes streamline their fiscal reporting and spend management processes. Accounting automation increases the efficiency and accuracy of the financial data being reported. Companies can save weeks of time every year with the automation of traditionally manual tasks like data entry, expense reconciliation, and budget approvals.
These solutions also enable businesses to customize their own expense policies and payment methods, while giving management greater visibility and control over company spend. With an automated reporting system, finance teams no longer need to redirect all their focus and efforts to closing the books and preparing statements at year-end.
Types of financial statements
The three types of financial statements used for fiscal reporting are: the P&L statement, balance sheet, and cash flow statement. They are prepared by finance teams for executive management, the board of directors, and company stakeholders.
These financial statements provide an in-depth assessment of the company's financial position and performance. They also give company leadership greater visibility in decision-making and developing business strategy for the next fiscal year.
Profit and loss statement (P&L)
Also known as an income statement, this document summarizes all the revenue, costs, and expenses the company made over the previous fiscal period. It reveals whether the business is able to generate a profit by adjusting its operating costs and expenses, and/or increasing its revenue.
This document details what the company currently owns and owes. It lists the company’s short-term and long-term liabilities, stockholder equity, and all current business assets and their values. The balance sheet calculates the company’s debt-to-equity ratio, giving investors an up-to-date assessment of their capital investment.
Cash flow statement
Like its name suggests, the cash flow statement records all company cash activity–from incoming revenue and operating expenses, to strategic investments made by the business. This financial statement provides a granular analysis of the company’s spending behavior across different business activities.
Why is fiscal reporting important?
Quarterly and annual financial reporting helps businesses better measure their financial performance. By providing an in-depth summary of the previous fiscal period, finance teams can identify spending patterns and opportunities for cost savings in their daily operations.
Insights from financial statements also enable company executives to make better business decisions, strengthening the company's financial management. Financial planning and analysis experts also use these metrics to forecast and model budgets for long-term business strategy.
Several other key benefits of fiscal reporting include:
Audit ready. Businesses are always audit-ready at fiscal close, mitigating the risk for penalties. Potential audit reports are exponentially more simple and stress-free when companies have all its transactions and financial data consolidated and ready for review. No need to spend time gathering missing information or paper receipts.
Smarter budget allocation. Finance teams can distribute team and department budgets more effectively. By measuring actual business performance based on previous budget allocation, managers can proactively adjust funds so teams can work more effectively in the next fiscal quarter or year.
Identify better opportunities. Financial reports help investors and stakeholders choose smarter business investments and stronger partnerships, based on the business's unique strengths and weaknesses. The more data and metrics a company has on its finances, the better it can optimize its financial position to boost growth.