Financial Reports Explained

Two kinds of reports
Start from the question

Financial reports are the summaries a business uses to see how it's doing. They come in two kinds: the financial statements (the income statement, statement of owner's equity, balance sheet and statement of cash flows), which OpenStax says are "typically generated quarterly and annually", and quicker management reports, such as a list of unpaid invoices or a comparison of income and expenses. Using them well means starting from the question you need answered, picking the report that answers it, and comparing the same report across periods. This page covers using reports. For what each statement contains, see small business financial statements; for preparing them, see how to make an accounting report.

Billed publishes this page. Quotes are from the open textbooks OpenStax Principles of Accounting, Volume 2: Managerial Accounting, section 1.2, and Principles of Accounting, Volume 1: Financial Accounting, Appendix A, and from billed.app, opened on October 30, 2026.

Two kinds of reports

Financial statements. OpenStax, section 1.2: "The financial statements are typically generated quarterly and annually, although some entities also require monthly statements. Much work is involved in creating the financial statements, and any adjustments to accounts must be made before the statements can be produced." The same section says: "Financial accounting provides information to enable stockholders, creditors, and other stakeholders to make informed decisions."

Management reports. These are for running the business between statements. OpenStax contrasts the two: "However, the information provided by financial accounting is primarily historical and therefore is not sufficient and is often synthesized too late to be overly useful to management. Managerial accounting has a more specific focus, and the information is more detailed and timelier."

The tradeoff, in OpenStax's words: "Managers should understand that in order to obtain information quickly, they must accept less precision in the reporting." A management report is good for spotting a change early; the financial statements are the adjusted, more precise version.

Start from the question

OpenStax lists questions an owner needs answered, including: "Are my profits higher this quarter over last quarter? Do I have enough cash flow to pay my employees? Are my jobs priced correctly?" Each points to a different report:

Are profits up or down? The income statement for each period. See what is a profit and loss statement. Between statements, a report comparing income and expenses for the same dates gives an early read.
Is there enough cash for payroll and bills? The statement of cash flows (see what is a cash flow statement), plus a list of which invoices are unpaid or past due.
Are jobs priced correctly? Compare the time and costs each job took with what you billed for it. See what is cost accounting.
What does the business own and owe? The balance sheet. See what is a balance sheet.

Compare the same report across periods

One report on its own shows a position; two periods side by side show a direction. OpenStax, Appendix A, gives the basic case: "For example, a company may compare sales from their current year to sales from the prior year." Compare periods of the same length, and look at both the dollar change and the percentage change. For trend analysis, line-item comparisons and ratios, see what is financial ratio analysis.

Sample: a quarterly review

These are sample figures for a fictional design studio comparing its first and second quarters, using an income and expense report for each quarter.

Income: $42,000 in Q1 and $45,000 in Q2, up $3,000. $3,000 ÷ $42,000 = 7.1% up.
Expenses: $30,000 in Q1 and $36,000 in Q2, up $6,000. $6,000 ÷ $30,000 = 20% up.
Income minus expenses: $42,000 - $30,000 = $12,000 in Q1, and $45,000 - $36,000 = $9,000 in Q2, down $3,000. $3,000 ÷ $12,000 = 25% down.
Where the extra expenses went: the expense report shows contractors up $3,500 and software up $2,500. $3,500 + $2,500 = $6,000, the whole increase.
Cash: the invoice report shows $8,000 past due at the end of Q2, against $3,000 at the end of Q1.

Read together: income grew, but expenses grew faster, and more of the studio's earned income is waiting in past-due invoices. The questions for next quarter are whether contractor costs are priced into its quotes, and which past-due invoices to follow up first. An income statement prepared by the studio's accountant would include adjustments, such as depreciation, so its figures can differ from these.

Where Billed fits

Billed's financial reporting page says: "Billed offers several built-in reports: Invoice Reports (paid, partially paid, and overdue), Expense Reports, Income vs Expense Reports, Top Selling Products, and Time Tracking Reports. Each report can be filtered by date range and exported."

On the same page:

"See how profitable your business is with Income vs Expense report."
"See your partially paid, past due and paid invoices in a glance with Invoice reports."
"All reports in Billed can be exported for use with your accountant, bookkeeper, or tax software."
"If you manage multiple businesses in Billed, each business has its own set of financial reports."

When this guide isn't for you

If a lender, investor or government agency asks for financial statements, ask your accountant which statements it needs and whether they must be reviewed or audited. OpenStax, section 1.2: "For companies that are privately held, an audit is not normally required. However, potential lenders might require an independent audit."

Frequently Asked Questions

What are financial reports?

Summaries of a business's finances. They include the financial statements (income statement, statement of owner's equity, balance sheet and statement of cash flows) and management reports such as lists of unpaid invoices or income and expense comparisons.

How often are financial statements prepared?

OpenStax says: "The financial statements are typically generated quarterly and annually, although some entities also require monthly statements." Management reports can be run whenever you need them.

What is the difference between financial statements and management reports?

Financial statements are prepared after the accounts are adjusted, and OpenStax says financial accounting "provides information to enable stockholders, creditors, and other stakeholders to make informed decisions." Management reports are quicker and more detailed but less precise. OpenStax says managers who want information quickly must accept less precision.

How do I compare two periods?

Put the same report for two periods of the same length side by side, and look at the dollar change and the percentage change for each line. In the sample on this page, income rose 7.1% while expenses rose 20%.

Does a private small business need audited financial statements?

OpenStax says: "For companies that are privately held, an audit is not normally required. However, potential lenders might require an independent audit." Ask your accountant what yours needs.

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Financial Reports: What They Are and How to Use Them