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What Are Financial Statements?

By August 14, 2025August 19th, 2025F, Glossary

The Short Version

Financial statements are reports that show how your business is doing with money. They tell you what you earned, what you spent, what you own, what you owe, and if you’re making or losing money.  The three primary financial statements are the income statement, balance sheet, and cash flow statement. In this article we will focus on the importance of financial statements for early-stage SaaS companies.

Real Example for SaaS

A software company finishes Q2. They pull their numbers:

  • Income statement: Says they made $2.4M in revenue.
  • Balance sheet: Shows $1.1M cash, $500k in deferred revenue.

Cash flow statement: Confirms they didn’t burn more than they brought in.

Why They Matter (Especially in SaaS)

If you run a SaaS company, these reports will be critical to growth and strategy. Board members, investors, and the management team will use the three financial statements to::

  • Understand the quarterly performance of the business – profit, cash flows
  • Compare the company’s performance with peers in the SaaS industry
  • Evaluate if changes are needed to the hiring, spending, and funding strategy

Bottom line: Clean, audited financials are a pre-requisite for scale and growth

The Big Three

  1. Income Statement (aka P&L): Shows money in, money out, and profit or loss over time.
  2. Balance Sheet: Shows what you own (assets), what you owe (liabilities), and what’s left (equity) — all at one moment.

Cash Flow Statement: Tracks where the cash went — operations, investing, and financing.

Why You Should Care

Financial statements aren’t just for investors and VCs. They’re how you know if your company’s growing in a healthy way or bleeding cash. They keep your story straight — and your board off your back.

Key Takeaway

Clean, audited, timely financial statements are a critical success factor for any business seeking to grow and raise capital.

Quick Q&A

What are the 3 key financial statements?

Income statement, balance sheet, cash flow statement.

How often should I do them?

 Quarterly, minimum. Monthly if you’re raising money or have investors watching.

Are they legally required?

If you’re public, yes. If not, they’re still expected by people who give you money or check your books.