Financial reporting
Learn what financial reporting is, the key report types, and how it helps you run your business.
Published Thursday 23 July 2026
Table of contents
Key takeaways
- Financial reporting is how you record and share your business's financial performance, giving you and others a clear view of its health.
- The four core reports are the balance sheet, profit and loss statement, cash flow statement, and statement of changes in equity.
- Both internal people, like owners and managers, and external parties, like investors, lenders, and Inland Revenue, rely on these reports.
- In New Zealand, reporting standards are set by the External Reporting Board and issued as NZ IFRS under a tiered framework, so smaller businesses can use simpler reporting.
What is financial reporting?
Financial reporting is the process of recording, summarising, and presenting your business's financial activity in a set of standard reports. It gives you and others an accurate picture of how your business is performing over a set period.
Why financial reporting matters
Good financial reporting turns raw numbers into information you can act on. It supports four goals that keep your business accountable and moving forward.
- Informing investors: reports show how capital is being used, so investors can judge whether your business is a good place for their money.
- Tracking cash flow: reports reveal where money comes from and where it goes, so you can see whether you can cover costs and keep growing.
- Meeting compliance obligations: accurate reports help you meet tax and filing requirements set by Inland Revenue and other bodies.
- Supporting decisions: clear reports help you spot trends, plan ahead, and make confident choices about your next steps.
Types of financial reports
Most businesses rely on four core reports, each showing a different part of your financial position. Here's what each one covers.
- Balance sheet: a snapshot of what your business owns and owes at a single point in time, along with owner's equity.
- Profit and loss statement: also called an income statement, it shows your revenue, costs, and profit or loss over a set period.
- Cash flow statement: it tracks the cash moving in and out of your business across operating, investing, and financing activities.
- Statement of changes in equity: it explains how owner's equity has changed over the period, including profits kept in the business and money drawn out.
Who uses financial reports
Financial reports serve a wide range of readers, both inside and outside your business. They generally fall into two groups.
- Internal users: owners and managers who use reports to run daily operations, set budgets, and plan for growth
- External users: investors, lenders, and Inland Revenue who use reports to assess risk, decide on funding, and check that you're meeting your obligations
Financial reporting standards in New Zealand
Financial reports follow set standards so the numbers are consistent and comparable. In New Zealand, those standards shape how you prepare and present your reports.
Accounting standards in New Zealand are set by the External Reporting Board (XRB) and issued as New Zealand equivalents to the International Financial Reporting Standards (NZ IFRS). These sit within a tiered framework, so larger entities apply full NZ IFRS while smaller businesses can use reduced or simpler reporting. Inland Revenue (IRD) also sets minimum financial reporting requirements for companies.
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Aligning with international standards means your finances can be understood beyond New Zealand, which matters when you work with overseas shareholders or trade across borders. The United States is an exception, as companies there report under the Generally Accepted Accounting Principles (GAAP).
How to prepare financial reports
Preparing reports is far simpler when your records are accurate and up to date. Follow these steps to pull your reports together.
- Gather and reconcile your records: match your bank transactions, invoices, and bills so your figures are complete and accurate.
- Use accounting software to generate your reports: tools like Xero build your balance sheet, profit and loss statement, and cash flow statement from data you've already entered.
- Review the results and set a regular schedule: check the figures make sense, then report on a consistent monthly or quarterly cycle so you always know where you stand.
For a closer look at building reports each month, read our guide to creating monthly financial reports.
Simplify financial reporting with Xero
Xero brings your finances together in one place and builds your key reports from data you've already entered, so you spend less time in the books. Try Xero and get one month free to see how simple reporting can be.
FAQs on financial reporting
Here are answers to some frequently asked questions about financial reporting.
What are the four basic financial statements?
The four basic financial statements are the balance sheet, profit and loss statement, cash flow statement, and statement of changes in equity. Together they show your financial position, performance, and cash movement.
What is the difference between a balance sheet and an income statement?
A balance sheet shows what you own and owe at a single point in time, while an income statement shows your revenue and profit or loss over a period. One is a snapshot; the other covers a stretch of time.
What is a cash flow statement?
A cash flow statement tracks the actual cash moving in and out of your business across operating, investing, and financing activities. It shows whether you have enough cash to cover your commitments.
How often should you prepare financial reports?
Many small businesses prepare reports monthly or quarterly, with a full set produced at the end of the financial year. A regular schedule helps you catch issues early and plan ahead.
Can accounting software create financial reports?
Yes, accounting software like Xero generates your core reports automatically from the transactions you've recorded. This saves time and reduces the risk of manual errors.
Related terms
Learn more about financial reporting
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Keep track of your performance with accounting reports
Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.