Modifying Financial Statements
Financial Statements are a quick way for management, auditors, and investors to analyze how a company is performing. Each different financial statement has its own purpose. For example, an income statement is a financial report that shows an entity's financial results over a specific period of time. In addition, generating multiple income statements over time allows users to analyze trends of the company's operations. On the other hand, a balance sheet is a report that summarizes all of an entity's assets, liabilities, and equity as of a given point in time. Both reports are used by the financial department and community to determine a business’ health.
In DEACOM, Financial Statements are not restricted to printing classic Balance Sheets or Profit and Loss Statements. Although that is their typical use, they can be used much more broadly for any reporting based on General Ledger data. In standard cost mode, for example, it is often desirable to monitor variance accounts, such as Purchase Price Variance, Material Expense compared to Job Standard Material Cost, and Production Variance accounts. A financial statement can be designed that just reports on those accounts, in addition to the classic profit and loss report where those numbers are possibly overlooked when contained in the larger report. If desired, Financial Statements may be published via the Publish Data feature in the system. More information on that option can be found via Building BI Pages.
A financial statement is composed of rows, where groups of GL accounts are summed, and columns, where certain time periods of actual data, budgets, or comparisons are made. Rows and columns are controlled separately when generating financial statements, so that the rows for a detailed profit and loss report can be used first with a set of columns comparing the current period and year to the same period last year, and then with a different set of columns comparing the current period and year to the budget figures. All transactions related to Sales, Purchases, and Jobs, as well as Journal Entries posted to General Ledger supply the numbers seen on a Financial Statement.
The design and maintenance of financial statements is handled within the main DEACOM application via a separate transaction from the generation process. Financial Statement Groups and Financial Statement Group Security work together to define which User Groups can modify and generate Financial Statements. Each Financial Statement that is created is assigned to a Financial Statement Group. Financial Group Security is where those groups are assigned to User Groups. More information on assigning security to users and User Groups is covered in Managing Users and User Security. Information on creating and running financial statements is available via this page and the Generating Financial Statements page.
GAAP and SOX requirements
DEACOM is configurable in a way that supports IFRS, GAAP, and SOX audit requirements. From inventory valuation, foreign exchange gain/loss consolidation, revenue recognition and beyond, DEACOM’s functionality enables companies to comply with these accounting rules and regulations.
Transactions made within DEACOM are directed to GL accounts based on the configuration of the business utilizing the ERP system. These transactions can be reported on through configured Financial Statement reports including Balance Sheets, Income Statements, Cash Flow Statements, and Statements of Retained Earnings. With multiple Financial Statements available, DEACOM has the capability to report in both IFRS and GAAP standards, if required. The Deacom implementation team will work with the company to ensure the required accounting compliance is met.
For publicly traded US companies that need to pass SOX audit requirements, DEACOM supports the audit trail, database-level security, and application-level security required to pass the accounting audit. The Deacom implementation team can work with the company to ensure that it meets the SOX audit requirements through the configuration of DEACOM.
Configuration
Chart of Accounts, Financial Statement Groups, and Financial Statement Group Security must be configured prior to attempting to design or modify Financial Statements. Financial Statement Groups and Financial Statement Group Security work together to define which User Groups can run Financial Statements. Additionally, transactions will have to be booked against several different accounts so that the financial statement has data to report on. Separate security settings exist to control which users can edit financial statement designs and which users can only print existing financial statements. The Understanding GAAP Principles page may be referenced for Deacom recommended best practices for financial statements.
Users should also reference the "Configuration" section of the Managing Report Layouts page prior to creating any report.
Process
Setting up Financial Statements
Who uses Financial Statements and what are they interested in?
- Managers, Owners, Shareholders - These individuals use Financial Statements to review company performance, review investments, and assess risk. They are primarily interested in expenses as a percent of sales and/or the budget. Owners and shareholders will more likely use the Balance Sheet and may be more focused on payables rather than receivables.
- Prospective Investors - Potential investors in a company usually review the Cash Flow Statement to get a quick overview of the company's risk and solvency.
- Financial Institutions - Institutions such as banks also review Cash Flow Statements to get a quick overview of the company's risk and solvency, as well as Balance Sheets and Income Statements. They are mainly interested in Balance Sheets since a company is usually audited a minimum once per year (or more often depending on liquidity and risk factor).
- Vendors - Vendors may request to review a company's Balance Sheet to determine if doing business with the company is in their best interest.
- Competitors - If a company is publicly held, competitors will often look at their Financial Statements to get a high-level understanding of how they are performing relative to the competitor.
- Government Agencies - Agencies like the IRS use Financial Statements to audit companies and ensure they comply with regulatory requirements including GAAP and SOX.
In addition to the above list, Financial Statements can be created for and used by different teams within an organization, such as a Production department, so that those employees can access and generate expense information related specifically to their position and how it affects expenses.
What setup is necessary prior to configuring the actual Financial Statement layout?
Financial Statement Groups - These are useful when a company wants to limit who can see financial statements. For example, creating a Production Financial Statement group and assigning the Production department to this group allows only those employees to be able to see those statements. Creating a new group is accomplished by navigating to Accounting > Maintenance > Financial Statement Groups. Click "Add New", enter a name for the group, then save the record.
Additionally, using the above information, companies need to determine how many different Financial Statements will be needed based on how they are used. Once a list of the different required Financial Statements is created, employees can be granted access to view and generate the reports via Chart Group Security. More information on assigning security to users is covered in Managing Users and User Security.
Designing and Formatting new Financial Statements
Where do the numbers on a Financial Statement come from?
All transactions related to Sales, Purchases, and Jobs, as well as Journal Entries posted to General Ledger supply the numbers seen on a Financial Statement.
How should Financial Statements be formatted?
Generally, the most liquid assets and the most recent liabilities (what has to be paid quickest) are listed first. The format for the main financials is based off of the Ernst & Young year-end reporting structure. As such, it goes from Financial Statement (Balance Sheet or Income Statement), to Financial Section (Assets, Liabilities, Expenses, SG&A), to Section Header (Current Assets, Current Liabilities, Long-term Liabilities), to Financial Detail (Cash, Accounts Payable). To further specify the nature of the transactions for internal reporting purposes, Groups are then added (these are the first three digits of every GL account) to provide sums of the several accounts to comprise each. The accounts in turn are then also shown when reporting to Accounting.
All GL accounts should be added to the statements as a child to the aforementioned GL structure. Note that at the bottom, there should be a grand total that ensures all accounts have been added to the financials and each group adds correctly by Financial Detail, Financial Group, and GL Account. This ensures that as new accounts are added the Financial Detail and Group, lines are increased accordingly, but if the individual account is not added, the totals will not match. In the event a user attempts to add a GL account outside the range of existing Groups, the matter should be carefully considered, a new proper Group chosen (falls within the pre-existing ranges and their meanings), and then the GL account number added.
What design and functional tips should be taken into consideration?
The Edit Statement Line form contains a “Next” button that can be used to add lines to the statement without having to save and exit the Edit Statement Line form each time. After the necessary information has been entered, click the “Next” button to automatically save the information/statement line and present a blank Edit Statement Line form to allow the continuation of adding lines.
It is a good practice to include accounts up to XX99 so that if/when new accounts are added to the Chart of Accounts, they are automatically included in existing Financial Statement reports therefore eliminating the need to modify any reports.
The “Sort” button can be used to rearrange existing lines on the form. Note that users should make note of any “Sum Lines” that may be affected when sorting.
Users may create MS Excel spreadsheets containing the necessary line detail for Financial Statements and then import this information into DEACOM.
The design of Financial Statements in DEACOM will most likely include the decision on what type of financial report column sets will be included on the report. These column sets may only be added to the statements after they have been generated. Note that once these column sets are added to the report they will be available for future use whenever financial statements are generated. Information on the financial report column sets is included further down on this page.
Totals for a given line may be reversed. In DEACOM, Financial Statements display credits as negative values by default. Reversing totals will ensure all values on the statement display as absolute values. Then, calculations can be used in the statement logic to get the net of various debits and credits as desired.
What is the setup process?
- Navigate to Accounting > Maintenance > Financial Statement Layouts.
- Click "Add New" and enter a Name.
- Select a Financial Statement Group from the pick list.
- Enter a header that will appear at the top of the report.
- Choose the Default Report, Statement Type, and Display from the pick lists. Note:
- Enter an Input Mask if desired. Generating a financial report will use the Input Mask if one is entered but still perform the same calculations as before based on the option selected in the Display field. Input Masks may also be defined on individual Financial Statement lines. In this case, the Input Mask on the statement line will override the Input Mask defined on the statement header.
- Click "Add" and enter a Title.
- Choose a Format.
- Standard - used when entering the accounts.
- Sum Lines - used when adding lines, i.e. total assets.
- Title - used only to enter text.
- Make a selection for Underline.
- Enter the Accounts (Base account only). If using the "Sum Lines" Format; enter the lines being added together.
- Choose a Balance Type, which should default from the header screen. Note:
- Enter a Position (optional). Where the Chart of Accounts structure contains company, division, or departmental dash codes, which position to filter on for this line. If set to 0, no filtering is done on the line and all accounts matching the base accounts requested will be summed to the line, unless filtered during report generation.
- Enter a Position Value, Extra lines (the number of extra lines desired after the line), and Indent (the number of spaces desired to indent the line).
- Enter an Expression. This field offers the ability to add, subtract, multiply, and divide by other line's calc names. For instance, when reporting percentage of this line, relative to another, what Calc. name should this line be divided by?
- Check off flags as desired. For information on the options available, refer to the Financial Statement Lines section of the Financial Statement Layouts Encyclopedia page.
- Click "Next" to add more accounts.
- Once all accounts have been added, click "Save" then "Exit" to exit the Edit Financial Statement Line form.
- Back on the Edit Financial Statement form, click "Save".
Users have the option to generate a copy of the statement just created by clicking "Generate Statement". Note that users can also copy previous financial statements and then make modifications, using the "Same As" button. Financial statements can also be imported.
Adding Financial report column sets
There are seventeen sets of columns that can be used with any of the designed Financial Statements. These column sets may only be added to the statements after they have been generated on the screen. Like any other DEACOM grid, these columns sets are user-definable and can be added to reports by using the "Modify Layout" button on the Financial Statement toolbar. Security settings exist to control access to the "Modify Layout" button on the toolbar.
When creating and modifying statements, users have the option to generate a copy of the statement just created by clicking "Generate Statement". Statements can also be generated outside of the modifying process via Accounting > Financial Statements. Refer to the Generating Financial Statements Best Practice page for more information.
The first five column sets are for use with the typical monthly Financial Statements, and can contain results for the current month, the previous month, the year-to-date, and last year’s figures for the same periods. Some of the columns that are available for selection are:
- startbal – current period results, as selected when generating the report.
- currper – current period results, as selected when generating the report.
- currper_calc – current period results, displayed as a percentage of another line.
- pctlast – current period results as a percentage of last year’s current period results.
- pctytd – current period results as a percentage of year-to-date results.
- lastcurrper – last year’s results for the current period, as selected.
- lastcurrper_calc – last year’s results for current period, displayed as percentage.
- priorper – results for the period immediately before current period.
- priorper_calc – prior period results, displayed as percentage of another line.
- lastpriorper – last year’s prior period results.
- lastpriorper_calc – last year’s prior period results, displayed as percentage.
- ytd – year-to-date results, back to the beginning of the current fiscal year.
- ytd_calc – year-to-date results, displayed as percentage of another line.
- priorytd – year-to-date results for the prior period, back to the beginning of the current fiscal year.
- priorytd_calc – year-to-date results for the prior period, back to the beginning of the current fiscal year, displayed as percentage of another line.
- lastpriorytd – last year’s prior period year-to-date results.
- lastpriorytd_calc – last year’s prior period year-to-date results, displayed as percentage of another line.
- lastytd – last year’s results for the current year-to-date.
- lastytd_calc – last year’s year-to-date, displayed as percentage of another line.
- budbal – remaining balance of the budget.
- budget – annual budget.
- budper – period budget.
- budperrev - reversible of period budget. The "Reverse Totals" flag must be checked on the Edit Statement Line form when using this column.
- budytd – year-to-date budget.
- budytdrev - reversible of year-to-date budget. The "Reverse Totals" flag must be checked on the Edit Statement Line form when using this column.
- pctcurrbud – current period results as a percentage of the current period budget (currper/budper*100).
- pctytdbud – year-to-date results as a percentage of the year-to-date budget (ytd/budytd*100).
- budper_calc - period budget, displayed as a percentage of another line, generally 'budytd'
- budperrev_calc - reversible of period budget, displayed as a percentage of another line, generally 'budytd.' The "Reverse Totals" flag must be checked on the Edit Statement Line form when using this column.
- budytd_calc - year-to-date budget, displayed as a percentage of another line, generally 'budytd'
- budytdrev_calc - reversible of year-to-date budget, displayed as a percentage of another line, generally 'budytd.' The "Reverse Totals" flag must be checked on the Edit Statement Line form when using this column.
The second group of five column sets are period-type columns, where the columns are the fiscal period amounts for the selected fiscal year. The data available to the columns are either the period values or budget values. User-Defined columns may be added for, as an example, actual vs. budget amount.
The third group of five column sets are position-type columns, where the columns are all the existing values for the selected segment position (the first position- account- is not available for selection).
The original names of the fifteen column sets are "Standard", "User1", "User2", "User3", "User4", "Period", "Period2", "Period3", "Period4", "Period5", "Position1", "Position2", "Position3", "Position4", and "Position5". The names of the column sets can be changed via System > Maintenance > Captions to indicate what the column set is designed to display, such as "Current vs. Last Year" or "Current vs. Budget".
When modifying Financial Statement grids, use the pre-defined numeric mask, "go.finmask", when setting the Input Mask for numeric results other than percentages. This mask is controlled by the "Display" selection, and displays actual values, dollars only, or thousands, as requested, and currency signs when indicated by the line definition. If a fixed mask is used instead, like "999,999.99", then the "Display" selection and currency sign requests will have no effect. Percentage columns (pctlast, pctytd, etc.) and calculation columns (currper_calc, priorper_calc) can be displayed with fixed masks like "999,999.99%", as they don’t need to respond to the "Display" selection or currency sign request.
Importing Financial Statements
DEACOM offers the option to import financial statements. The process involves the use of the Import Data Tool. This tool is not provided by default with the DEACOM application and must be requested from the Data Conversion Team for implementation customers or from the DEACOM Support Team for post implementation customers.
Validating Financial Statement designs
One of the key strengths of DEACOM Financial Statement Design is also a source of potential problems. The ability to design a financial statement that focuses, for example, only on manufacturing expense codes, to be used by the manufacturing manager in controlling expenses, also provides the possibility of having a financial statement (income statement or balance sheet) that does not include all available income statement or balance sheet accounts with balances, and has total lines that are not the sum of the detail lines being totaled. The process of designing and validating financial statements protects against these possibilities. The below methods of designing and validating financial statements help protect against these possibilities.
Use the Export/Import process to generate detail reports - The process of exporting the existing Chart of Accounts and importing the unique base accounts to become the detail lines of a financial statement ensures that no existing base accounts will be left out of the design.
Add new accounts to financial statement designs as they are added to the Chart of Accounts or make sure for lines defined as ranges of accounts, all possible account numbers in that range are included (ex: XX00-XX99).
Use a range of accounts for total and sub-total lines. As an example, if account numbering for current assets would include any account number from 10000 to 11000, use Standard, and that range as the sub-total vs. using Sum Lines.
Add a temporary Standard line that calculates, for example total assets as a range of all possible asset accounts (ex: 10000-19999) and ensure that agrees to the Total Assets line. This line can then be un-flagged as "Visible" once validation is complete.
Validate total and sub-total lines by exporting the report to Excel and calculating the totals - A period-type report is a very good way to check a wide variety of data.
Another useful tip for validating the design and/or information in the financial statement reports is to use the Accounting Reporting Trial Balance. As an example, a Trial Balance is run for Fiscal 2017 and then a standard income statement for Fiscal 2017. A "Sales" line on the income statement is designed to report activity in a short account range (4000-4009) and lists a value of 2,300,000. The Trial Balance shows activity in the 4000-1 (Sales - Philadelphia) and 4000-2 (Sales - Denver) accounts and lists corresponding Credits of 2,225,000 and 75,000. The Trial Balance total supports the income statement's "Sales" total.
Leveraging Projects in Financial Reporting
Projects in Deacom allow you to create a project, whether it be for a construction project, a customer project or any other possible use. The project function enables you to track budget versus actual costs and profitability by assigning sales order and purchase orders to the project. This enables you to track revenues and costs associated and see which sales/purchase orders resulted in these figures.
Projects can be created under Sales > Sales Order Maintenance > Projects. When you create a new project, you will associate a name and note the date that the Project started in the Created field. Notes and Budget are optional fields, but they can be useful in giving more information about the purpose of the project, what the project entails and giving a monetary figure to measure actual revenues/expenses against.
Assigning Projects to Sales Orders
Sales Orders can be assigned to projects in order to associate the revenue to the project. This is done when creating a new or editing an existing sales order. On the Misc 1 tab of the sales order you are able to select the Project that this sales order revenue should be attributed to. If a certain Ship-To customer’s sales orders are always attached to the same project then the project can be assigned to the Ship To record on the Order Defaults tab.
Assigning Projects to Purchase Orders
Similar to how sales orders can be assigned to projects to attribute the revenue, purchase orders can be assigned to assign the expense values to projects. When creating or modifying a purchase order the project can be assigned at either the header level to associate all of the line items to the project or at an individual line level to associate different lines to different projects. Having the ability to enter the project at the line level enables you to buy from the same vendor on the same purchase order for multiple projects for minimal transactions and potential volume discounts. If purchase orders for a specific vendor are always, or almost always, attributed to the same project then the project can be specified on the Vendor’s Order Defaults tab, so that it will default into the purchase order.
Reconciling the Project budget
The Project Reconciliation report can be found under Accounting > Accounting Reporting as one of the Report Types. This report shows a summary by project of the budgeted amount, Sales, Purchases, Profit and Margin. The budget allows you a visual representation to compare your actual revenue, expense and profit numbers to. The sales are a result of the sales orders that are tied to the project and the purchases result from the purchase order/purchase order lines that are tied to the project. This gives a quick summary of the monetary value that is associated with the project to know how the project is tracking in comparison to the original budget.
Sales numbers will show in the sales column when the sales order is saved, so that there is an accurate forecast of sales to compare to the budget. The purchases will also show up when the purchase order is saved to show what the profit will be when both the open sales orders and purchase orders are fulfilled. If the purchase order is received short or the sales order is short shipped without a backorder, then the numbers will adjust to show the lower purchase cost/sales revenue. The inverse will happen if the order is over-received/over-shipped. If a backorder was created then the number will not be adjusted because an open backorder will be factored into the total purchases/costs.
If further research needs to be done to see which orders are related to the project, users have the option to generate order summary reports without leaving the Project Reconciliation report output.
FAQ & Diagnostic Tips
How do I add Net Income (Current year’s earnings) to my Balance Sheet?
Add a line to your Balance Sheet that totals all of the Income statement (P&L) accounts for the year.
How do I get a report that shows me quarters?
Using a period report, you will need to create user-defined fields. For example, quarter 1 field User Expression would be period1 + period2 + period3. Budget quarter 1 field User Expression would be budget1 + budget2 + budget3.
I am receiving a message stating that I do not have security access to edit Financial Statements in a particular group. How do I fix this?
Please verify your User Group through System > Maintenance > Users > highlight your name and click "Modify" > make note of your User Group. Then go to System > Maintenance > Financial Statement Group Security > Change the setting to Yes for your User Group.
What happened to the "Divide By" field on the Edit Financial Statement Line form?
This field was replaced by the "Expression" field
Can sales forecasts be displayed in Financial Statements?
Yes,