Essential Financial Reports for Mid-Size Businesses: What You Need to Know

Financial reporting is crucial for mid-sized professional services firms, because it provides direct insights into profitability, cash flow, and resource utilization. Monitoring these financial metrics makes it easier to track billable vs non-billable hours, manage client invoicing, and forecast cash flow.

This guide will look at the most important financial reports for businesses, including cash flow statements, balance sheets, income statements, and accounts payable reports. We’ll also provide tips for keeping your business profitable and tax compliant.

What is financial reporting?

Financial reporting is the process of documenting, analyzing, and presenting a business’ financial performance over a specific period. It involves compiling statements and reports that offer a clear picture of income, expenses, assets, and liabilities.

In service-based professions where people are the primary asset, financial reporting goes beyond just the numbers. Specifically, it captures the financial impact of billable hours, resource allocation, and operational efficiency. This is how these types of businesses monitor the profitability of services delivered.

Why is financial reporting important?

For businesses who offer professional services, financial reporting goes beyond meeting regulatory obligations—it’s a critical tool for maintaining profitability and planning for the future. Here’s why financial reporting matters:

• Budgeting and forecasting: Professional services firms must predict cash flow fluctuations due to project-based billing or retainer cycles. Accurate financial reports help firms anticipate revenue gaps and plan expenses accordingly.
• Decision-making: Reports help firms allocate resources effectively across clients and projects. Whether it's hiring new staff or scaling back a service line, financial data guides these strategic choices.
• Tax compliance and audit readiness: Firms need precise reports for GST, payroll tax, and income tax. Having well-organized records reduces stress at tax time and supports compliance during audits.
• Identifying risks and opportunities: Financial reporting enables visibility into underperforming service lines or unbilled work. Spotting these issues early allows firms to act quickly and capitalize on growth areas.

What are the most important financial reports?

Here, we’ll explore the different kinds of reports that help businesses stay agile and competitive in a dynamic environment:

Income statement:

An income statement (also known as a profit and loss statement, or a statement of operations) is a financial report that shows a business’ revenues, expenses, and profit or loss over a specific period. It’s a valuable tool for assessing overall profitability.

For professional services firms, income can be segmented by client, project, or service line. By comparing the revenue generated from each client or service against its direct and indirect costs (such as staff time, software, or subcontractors), your business can identify which areas are most profitable and which may be underperforming.

Balance sheet:

A balance sheet provides a snapshot of a company’s financial position at a specific point in time by listing its assets, liabilities, and equity. It shows what the business owns (such as cash, equipment, and accounts receivable), what it owes (like loans, unpaid bills, or accrued expenses), and the owner’s equity—essentially the net worth of the business. This snapshot is essential for understanding overall financial stability.

In service-based businesses, the balance sheet is especially useful for monitoring key liabilities such as payroll obligations and client receivables. Since much of a service firm’s work is time-based and may be invoiced after delivery, tracking accounts receivable helps ensure that income is collected promptly and cash flow remains healthy. Likewise, understanding current liabilities, including upcoming payroll and tax obligations, allows firms to manage working capital more effectively and avoid financial strain.

Cash flow statement:

A cash flow statement tracks the movement of cash into and out of a business over a specific period, providing insights into how money is being generated and spent. It breaks down cash activity into three categories:

• Operating cash flow: Daily business activities like client payments and payroll.
• Investing cash flow: The money spent on or received from long-term assets like equipment, property, or investments, as shown in the cash flow statement.
• Financing cash flow: Financing cash flow represents the cash moving in and out of a business from borrowing, repaying debt, or equity transactions like issuing shares or paying dividends.

For professional services firms, where income is often tied to project milestones or client billing cycles, the cash flow statement is key to understanding actual liquidity—not just profitability on paper.

Because many service firms deal with delayed client payments and irregular income, the cash flow statement is essential for ensuring there’s enough cash on hand to cover expenses like salaries, rent, and taxes. This kind of financial visibility can help your business remain resilient, even in periods of fluctuating revenue.

Visit our guide to cash flow statements to download a free cash flow statement template.

Accounts receivable and accounts payable reports:

Accounts receivable and accounts payable reports offer a detailed view of the money owed to your business by clients and the payments your business owes to suppliers or vendors. These reports are essential for understanding your short-term cash position, as they highlight which invoices are overdue, how much is outstanding, and when payments are due—helping service firms stay on top of their financial obligations.

By regularly reviewing these reports, professional services firms can reduce the risk of cash flow gaps caused by late-paying clients or unexpected vendor bills. Monitoring receivables ensures timely follow-up on unpaid invoices, while keeping an eye on payables helps businesses plan outgoing expenses and maintain good supplier relationships.

How often should I run financial reports?

When it comes to running financial reports, consistency is crucial, especially when managing billable hours, payroll, and client invoicing.

Here are the key differences between monthly, quarterly, and yearly financial reporting:

• Monthly reports: Generating monthly financial reports is a good practice for businesses to monitor their cash flow, income, and expenses regularly. Monthly reviews help track billable hours versus overheads and ensure you’re staying on top of operating costs.
• Quarterly reports: These reports provide more insight into longer-term trends, helping businesses track growth and adjust forecasts. They’re also useful for reviewing client profitability and planning upcoming investments.
• Yearly reports: Essential for tax filing, audits, and end-of-year analysis to evaluate overall business performance. Annual reporting ensures you're well-prepared for tax lodgements and strategic planning.

Regular financial reporting also helps you monitor client payments, reduce outstanding receivables, and maintain compliance with tax and payroll obligations—making it a cornerstone of sustainable business management.

How to choose the best software for financial reporting

Cloud-based accounting software such as QuickBooks Online Advanced provides a flexible solution to grow with your business. With people and time as your most valuable assets, QuickBooks can help you track performance and manage cash flow faster and with greater accuracy. This will free you up to make faster, more informed decisions and steer your professional services firm towards success.

Here are some key features to look for when choosing financial reporting software:

• Automated report generation: Streamlines the reporting process by eliminating manual data entry and reducing the risk of errors.
• Customisable reporting: Lets firms break down financial data by service line, team, client, or project—making it easier to monitor profitability where it matters most.
• Cloud-based accessibility: Offers secure, anytime access to financial dashboards and reports—ideal for remote teams or firms with multiple office locations.
• Time tracking and billing integration: Essential for firms that bill by the hour, this feature links time entries directly to invoices and reports, improving accuracy and billing efficiency.

QuickBooks Online Advanced includes all these capabilities and more, with powerful custom reporting tools and project-level insights that let you drill down into the financials of specific clients or services. It’s a smart solution for service businesses that want deeper visibility without the manual overhead.