About Personal Financial Reports
- Personal financial reports state an individual's net worth by detailing all income, assets and liabilities. They are often used when applying for loans from banks and lending institutions as a means to show solvency and credit worthiness. The reports provide a detailed financial overview containing all of the details that institutions need to know when making a credit inquiry. These items include: cash on hand, income, liability payment schedules, household expenses, and assets.
- There are three main types of personal financial reports: credit, small business and personal budgets.
Lending and financial institutions usually require personal financial reports to be included in a credit package from individuals seeking personal loans, car loans or business start-up loans. The company uses the report to determine the financial solvency of the individual. Besides an individual's assets and liabilities, these reports also include any information regarding past bankruptcies and lawsuits.
Business personal finance reports are often required from individuals seeking small business loans from federal and state government agencies. The reports are included in the loan presentation package and are used to determine the financial status of the loan seeker.
Many people use financial reports to create a personal budget. The reports clearly show an individual's financial situation, indicate any potential cash flow problems and allow users to track financial changes. Many personal money management software programs include financial report templates. - There are four basic sections in a report: income statement, cash flow statement, asset statement, and a balance sheet.
The income statement should state the actual amount of money that an individual has on hand and include all forms of income that an individual received during the time period covered by the report. Besides salary, other forms of income to be included are any proceeds from stocks, annuities or income from rental properties. It is important to remember to include the net amount of these income sources and not the gross amount.
The cash flow statement is used to show a person's expenses for the report time period. All outgoing cash needs to be included in this section of the report. Rent or mortgage payments, car payments, insurance, utilities, credit card bills, money owed to individuals, and any other liabilities are entered into this section. When preparing the report for a bank or lending institution, you will also need to include creditor names, addresses, types of loans, and detailed payment schedules.
The asset statement includes anything of value that the person owns that is not included in the income statement. This includes property, jewelry, automobiles, retirement accounts, and all other forms of personal property. The asset statement should include all relevant information regarding the assets such as amount, assessed or estimated value and location.
The balance sheet is a summary of the income, cash flow and asset statement. It indicates the individual's net worth. It includes sections like a basic listing of income sources, liabilities and asset equity. This is followed by the summary that states the total income assets, liabilities and equity assets. - There are a few things to consider when putting together a personal financial report. Each of the four report sections needs to be filled out as completely as possible in order to present an accurate financial picture. Often, people fail to include all incoming and outgoing financial transactions, which can make a personal financial statement inconclusive. Daily personal expenses--such as food and transportation costs--can really add up over a period of time and really throw any budget off-balance. Try keeping a daily journal of all out-of-pocket expenses and include this in the liabilities section under miscellaneous expenses.
Another thing to consider is whom the financial report is being prepared for. That information will allow you to emphasize the sections that will be of importance. For instance, if the report is prepared for a lending institution, the emphasis should be on assets and income and contain a detailed accounting of proof of income. Lenders will also want complete information regarding any debts in the liabilities section. If the report is for personal use, the emphasis should be placed on liabilities; that allows outgoing cash flow to be tracked and analyzed. - The main benefit of a financial statement is that it allows you to keep track of your personal finances, which is the key element in financial planning. A financial report allows you to organize your assets and liabilities in a clear, concise manner. You can easily monitor your financial growth, identify potential problems before they arise and make any adjustments necessary to reach your financial goals. By maintaining a current financial report, you will save a lot of time when it is time to fill out taxes or when seeking credit from a lending institution.
