Financial Reporting is the practice of creating financial reports specifically designed to track the financial progress of the project, which can then be used by project members to aid the project. Financial reports are typically part of time or event driven progress reports and are created using financial software programs provided to the project by financial departments.
A Project Balance Sheet provides the project with a statement of estimated assets and liabilities at a point in time versus the actuals. A Project Profit & Loss Statement provides the project with a statement of estimated profit and losses at a point in time versus the actuals.
Cash flow is the movement of money into or out of the project. Cash flow measures determines the level of project liquidity. In simple terms, the project cannot spend money it does not have. So the project needs to know what is can spend at any moment in time. This is called calculating the project cash flow. Having a positive cash flow is important in any project.