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Creating Financial Statements - Best Practices to Know

Download the PDFFinancial statements sitting on a desk with glasses

Financial statements help businesses diagnose their health. They are documents of interest for business owners, board of directors, governments as well as possible investors. It takes a lot of calculation to come up with complete finance statements, but in the end, there are just three statements that are of interest:

  1. Income statement
  2. Balance Sheet
  3. Cash Flow Statement

The above statements will provide written records showing the business performance. Before creating financial statements you need to have good reporting and record practices and then, these best practices can follow.

Income Statement Best Practices

The income statement is the amount of money a business makes over a particular period. Usually, this is either annually or quarterly. It is an overview of revenue, earnings expenses, and net income per share. Here’s what must be compiled:

  • Sum of revenue over a given period
  • Sum of expenses including operation costs
  • Net income after subtracting expenses from revenue

Procedure to be Followed

Select a Period: Start by choosing the period that the income statement will cover. This can be 12 months or 3 months.

Create Trial Balance Report: This will show all end balances of accounts in the general ledger over the selected period.

Compile Revenue: Calculate the total sales for the period selected. This should include money expected, not just paid. Include the total amount of items in the trial balance report.

Cost of Goods Sold: This comes right under the revenue line. It includes all expenses incurred while selling goods.

Gross Margin: This is the revenue total minus the cost of goods sold.

Operating Expenses: This is the total amount of sales and administrative expenses and appears below the gross margin.

Pre-tax Income: This is the sum of the Gross margin minus selling and administrative costs.

Net Income: Calculate the income tax owed/paid and subtract that from the pre-tax income to get net income.

Presenting Income Statement

  • Add the title as (Name of Business) Income Statement and below that, include the period for which the statement covers.
  • Use tables with rows and columns to present the statement.
  • Highlight totals at the end of every report. For example totals for Sales, operating expenses, operating income, and net income.
  • Do not show calculations, just mention items and the cost.
  • Show Net Income at the end of the statement.

Use of Software

All companies today use accounting software to calculate these totals and document automation software can quickly enter the values into a template for quick and accurate income statements.

Balance Sheet

A balance sheet is quite similar to an income statement, however, it gives a bigger picture of a business’s health. Some experts describe it as the book value of a business. The document gives insight into liabilities, assets, and equity. The period of reporting may vary from business to business, ranging from monthly to yearly.

A well-presented balance sheet should show analysts the organization’s current performance predicted performance as well as past performance.

The basic equation for a balance sheet is Liabilities + Shareholders Equity = Assets.

Procedure to be Followed

Select Reporting Date: This is the final date of the reporting period. The balance sheet gives a picture of total equity, liabilities, and assets on the specific date. It is common practice to report after every 3 months. The reporting date would therefore be the last day of the third month.

Identify Assets: The assets selected will be as of the selected date. These will be listed as individual assets as well as total assets. They will have to be split into line items for easy comprehension.

Identify Liabilities: Just like the assets, the liabilities should be arranged in separate line items and as current and non-current liabilities.

Establish Shareholders Equity: This will take some calculation if there is more than one owner of the company, however, if it's sole ownership, then establishing the equity is straightforward. It will include the following items:

  • Treasury stock
  • Retained earnings
  • Common stock
  • Preferred stock

Compare Assets with Liabilities: This is where the balance sheet gets its name. Add the sum of liabilities to the sum of shareholder’s equity and compare it with assets.

Presenting Balance Sheet

  • Title the document with the name of the company followed by Balance Sheets.
  • Include the reporting period and the currency being used.
  • Create a block for assets and list non-current assets and current assets and their totals.
  • Create another block below the assets for liabilities and shareholders equity. Include non-current liabilities and current liabilities with the totals for each.
  • Calculate shareholders' equity. Indicate Total Liabilities and Shareholders Equity as the total.

Software Use

It is much faster to present the balance sheet if you use accounting software along with document automation software. This will ensure accurate calculations and avoid errors.

Cash Flow Statement

Businesses need a cash flow statement to understand how money is coming in and going out of the business. It can also help investors see how profitable a business is or how much needs to be added to make better profits. This document must be created without any errors. The following best practices can guide you:

What to Include

There are 3 main components of a cash flow statement. These are:

Operating Activities: This shows all that is involved in generating revenue from day to day. It is mainly about purchases or services delivered as well as outflow of cash.

Investment Activities: This section of the statement is for transactions that relate to the purchase or sale of property and any non-current assets that are part of the investment activities. This also should include any securities sold or bought in the stock market.

Financing Activities: This section has data about transactions like borrowing to finance the purchase of new equipment or property for the business, payments of dividends, as well as giving stock to employees and the public. Non-cash transactions can also be included here, for example, bad debts and conversion of debt to equity.

Presenting Cash Flow Statement

To save time and money, most businesses have accounting software as part of the best practices. This makes compiling the different figures much easier. Templates are also designed to ensure that the statement is presented according to an agreed design with nothing left out.

Document automation software is the best option for quick, easy and error-free statements. Of course, to do this, you need to digitize your records.

Windward offers the best automatic document generator that can help you create financial statements in a matter of few seconds by using well-designed templates, conditional logic, and dynamic data  from multiple datasources. Try Windward free before you buy for the next 14 days - download our free trial today.

Tags Start & End

Tags Can Start & End Anywhere

Appendix B

.NET code for multi-page image output

Appendix A

Java code for multi-page image output

Data Bin Search

The Data Bin can now be searched to find a table, column, node or other piece of data without scrolling through it all.

Shrink to Fit

This will shrink the contents of a cell until it fits the defined cell size.

Time Zone Conversion

A new Windward macro has been added to help with converting dates and times from UTC time to the local time zone.

Image Output Format

New image output formats added.

PostScript Output Format

PostScript, commonly used with printers and printing companies, has been added as an additional output format.

New and Improved Datasets (Designer, Java Engine, .NET Engine)

Datasets have been re-written from scratch to be more powerful and easier to use.

Stored Procedure Wizard (Designer)

This works for all tag types that are connected to a SQL-based data source (Microsoft SQL Server, Oracle, MySQL, or DB2).

Boolean Conditional Wizard (Designer)

Before, conditional statements could only be written manually. Now they can also be built using our intuitive Wizard interface.

Reorganized Ribbon

The ribbon menus have been re-organized and consolidated to improve the report design workflow.

XPath 2.0 as Data Source

Adds various capabilities such as inequalities,descending sort, joins, and other functions.

If you've just discovered us, we're excited. Learn more about Windward document automation software now.

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SQL Select Debugger

SQL Select  Debugger

  • The look and feel was improved
  • Stored Procedure Wizard
  • Improved Exceptions pane

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Tag Editor/Tag Selector

Added a Query tab as a field for typing or pasting in a select statement

  • Color Coding of Keywords
  • TypeAhead
  • Evaluate is now "Preview"

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Rename a Datasource

All tags using that Data source will be automatically updated with that name.

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Connecting to a Data Source

New single interface to replace 2 separate dialog boxes

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Tag Tree

Displays of all the tags in the template, structured as they are placed in the template. This provides a simple & intuitive way to see the structure of your template. Also provides the capability to go to any tag and/or see the properties of any tag.

Added Javelin into the RESTful Engine

If you've just discovered us, we're excited. Learn more about Windward document automation software now.

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Support for Google Application Engine Integration

The ability to integrate the Windward Engine into Google’s cloud computing platform for developing and hosting web applications dubbed Google Applications Engine (GAE).

If you've just discovered us, we're excited. Learn more about Windward document automation software now.

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Additional Refinement for HTML Output

  • Improved indentation for ordered and unordered lists
  • Better handling of template header and footer images
  • Better handling for background images and colors

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Redesigned PDF Output Support

This new  integration will allow for processing of complex scripts and bi-directional  text such as Arabic.  Your PDF output  will be much tighter and more closely match your template, and we’ll be able  to respond rapidly to PDF requests and fixes.

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PowerPoint Support

Includes support for new ForEach and slide break handling, table header row repeat across slide breaks, and native Microsoft support for charts and images.

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Tags are Color Coded

Tags are color coded in the template by type, making it easy to visually identify them.

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Increased Performance

Version 13’s core code has been reworked and optimized to offer a reduced memory footprint, faster PDF generation and full documentation of supported features and limitations in the specifications for DOCX, XLSX and PPTX.

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Advanced Image Properties

Documents can include advanced Word image properties such as shadows, borders, and styles.

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Improved HTML Output

Windward has updated HTML output to reflect changing HTML standards.

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Version 13 New Data Sources

Windward now works with a slew of new datasources: MongoDB, JSON, Cassandra, OData, Salesforce.com

If you've just discovered us, we're excited. Learn more about Windward document automation software now.

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Generate Code

The Generate Code tool in the designer allows you to open an existing template and, with a click of a button, automatically create a window with the code needed to run your current template with all data sources and variables. Simply copy this code and paste into your application's code in the appropriate place. You now have Windward integrated into your application.

You only need to do this once. You do not do this for each template. Instead, where it has explicit files for the template and output, change that to parameters you pass to this code. Same for the parameters passed to Windward. This example uses explicit values to show you what to substitute in where.

Pivot Tables Adjusted in Output

Any pivot tables in an XLSX template are carried over to the XLSX output. The ranges in the pivot ranges are adjusted to match the generated output. So your final XLSX will have pivot tables set as expected in the generated file.

This makes creating an XLSX workbook with pivot tables trivial.

Imported Template Can be Set to Match the Parent Styles

In an imported sub-template, if its properties for a style (ex. Normal) differ from the parent template's properties for the style, the use in the sub-template can be set to either use the properties in the sub-template, or the properties in the parent.

You set to retain when you don't want the child template's styling to change when imported. You set to use the parent when you want the styling of the imported template to match the styling in the parent.

Any explicit styling is always retained. This only impacts styling set by styles.

Tags can be Placed in Text Boxes

Tags can be placed in text boxes. Including linked text boxes. This gives you the ability to set the text in a textbox from your data.

Tags can be Placed in Shapes & Smart Art

Tags can be placed in shapes & smart art. This gives you the ability to set the text in a shape from your data.

HTML Output Supports Embedded Images

When generating HTML output, the engine can either write bitmaps as distinct files the generate HTML references, or it can embed the images in the HTML providing a single file for the output.

Footnotes & Endnotes can Have Tags

You can place tags in pretty much any part of a template, including in footnotes & endnotes.

Document Locking Supported in DOCX & XLSX

Any parts of a DOCX or XLSX (PowerPoint does not support this) file that are locked in the template, will be locked the same in the output.

Specify Font Substitution

If a font used in the template does not exist on the server generating a report, the font to substitute can be specified.
In addition, if a glyph to be rendered does not exist in the font specified, you can specify the replacement font. This can be set distinctly for European, Bi-Directional, and Far East fonts.

Process Multiple Datasources Simultaneously

If you need this - it's essential. And if you don't need it, it's irrelevant.

Windward enables you to build a document by applying multiple datasources to the template simultaneously. When Windward is merging the data into a template, it processes the template by handling each tag in order, and each tag pulls from different datasources. (As opposed to processing all of one datasource, then processing the next.)

This allows the select tag to use data from another datasource in its select. For example, if you are pulling customer information from one data source, you can then pull data from the sales datasource using the customer ID of the customer presently processing to pull the sales information for that customer. If you're interested in patching together your data from multiple datasources, read this post on our blog.

Written by:_
Genesis Abel

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