Financial Reporting

Numbers paint a picture, tell a story, reveal the truth. As such, it's critically important that your financial reporting is accurate, thorough, and up to date. As one of the minds leveraging those numbers, it’s your job, as part of the finance team, to tell that story and paint a picture that helps everyone better understand your company’s financial performance—all to get to the truth behind your organization’s total health. And one of the most important tools you’ll draw on to achieve that is your financial reporting. Financial Reporting Paints a Comprehensive Picture Built around three foundational documents—your income statement, balance sheet and cash flow statement—financial reporting provides a comprehensive picture of your business’s financial results and trends. Doing so helps you deliver insights and informs the decisions made throughout your company and beyond. Everyone from your executives, board members and department-level staff, as well as the regulators, creditors and stakeholders with a vested interest in your organization, rely on the numbers revealed within your financial reporting.  There’s a lot you can learn from the numbers in your financial statements. You just need to know how to look at them. And that starts with the following: What Is Financial Reporting? Financial reporting is a formalized view into your organization’s financial performance. The three most important financial statements for running your business are your income statement, balance sheet and cash flow statement. For public companies, financial reporting is a regulatory requirement with set deadlines in place, but both private and public companies also use it to keep key stakeholders informed as to a company’s current and future financial status. It empowers investors, executives and boards of directors as they assess their ongoing strategy and goals, make investment decisions and decide on any adjustments to the company’s ongoing trajectory. Your Core Financial Statements Three core statements make up the foundation of your financial reporting. Your income statement, balance sheet and cash flow statement provide a key piece of your organization’s story. They’ll become the base of the reporting you file for tax purposes and creditors, the documents you provide to regulatory bodies like the U.S. Securities and Exchange Commission (SEC) and the data you draw on for your Annual Report and internal documents, dashboards and reporting. The income statement, balance sheet and cash flow statement fit together to reveal a big picture view of your business. Here’s a brief description of each: What Is the Income Statement?  Your income statement, otherwise known as your profit and loss (P&L) statement or statement of earnings, tells you exactly what it purports—how much income you’ve got coming in or not. In other words, it shows you how profitable your business is based on the relationship between revenues and expenses. Your income statement outlines revenues and expenses and is used to measure your organization’s profits and losses during the reporting timeframe. In doing so, it helps measure the profitability of your business. What Is the Balance Sheet? Also known as your statement of net worth or statement of financial position, your balance sheet looks at your business’s total assets, liabilities and shareholders’ equity. It allows you to measure rates of return and demonstrates how your assets are financed—whether through debt or equity. Your balance sheet is a key document for shareholders, regulators and tax authorities looking to determine the health of your organization. What Is the Cash Flow Statement? Your cash flow statement provides critical data on how your money is being spent, where it’s coming from and whether there’s enough available to keep up with operating expenses and ongoing debt repayment. It tracks cash movement for stakeholders of all kinds—including investors and creditors, as well as your own team—and must eventually be reconciled to the bank to make sure you’ve covered all your cash transactions. Your cash flow statement can be prepared in two ways: the direct or indirect cash flow methods. Both calculate your net cash flow from operating activities. The main distinctions are the starting point, the types of calculations you use, and the level of detail in the information you disclose.   The 5 Types of Financial Ratios  Those three foundational financial statements provide you with the numbers you need to tell the story of your financial health, empowering you with key data both your internal and external stakeholders will draw on to establish critical insights about your business. But the numbers themselves are just the start—developing true insight starts with some basic calculations, otherwise known as financial ratios. Financial ratios enable you to perform quantitative analysis that lets you understand your organization better. There’s an entire list you can draw from to tell the story of your business better. All of them fall under one of five main categories: 1. Profitability Ratios determine your organization’s ability to generate profit relative to revenue, operating costs, balance sheet assets and shareholder equity. They do this by showcasing how much profit your company can gain from those assets. For example, return On Assets (ROA) measures your company’s efficiency in generating earnings from assets. 2. Liquidity Ratios measure your company’s ability to pay off its current debt without raising extra capital. Your Current Ratio, for example, looks at current assets in relation to current liabilities. This helps investors better understand your organization’s ability to pay off short-term debt obligations. 3. Efficiency Ratios calculate how well your business manages its assets and liabilities internally. Your Inventory Turnover Ratio, for instance, measures the rate at which your company turns over inventory in a specified period. Ultimately helping you better determine pricing and when to purchase new inventory. (Read more about boosting the efficiency of financial reporting in this post) 4. Leverage Ratios determine how much of your organization’s capital is assumed through debt and evaluate how reliant you are on debt for growth. Your Debt-to-Equity (D/E) Ratio, for example, calculates how much your equity is leveraged against your outstanding debt to determine how much of your business is financed through debt. 5. Market Value Ratios calculate your publicly held company’s current share price, helping investors evaluate whether those shares are overpriced or underpriced. For example, your Earnings Per Share Ratio looks at your company’s profit in relation to outstanding shares to let you and your investors know how much money your company earns from each share of its stock. Learn more about Vena Financial, Operational and Managerial Reporting  Of course, your financial reporting isn’t the only type of reporting happening in your organization. Management reporting (or managerial reporting) and operational reporting are just as important for building your business, moving your organization towards its goals and providing an up-to-the-moment picture of your day-to-day operations. They’ll help you better understand the root causes of your organization’s financial health. Let’s look at each in turn: Financial reporting As outlined above, your financial reporting looks at your financial results and supporting information. In doing so, it provides you with key data that informs your internal business decisions and is shared externally with shareholders, regulators, creditors and investors. As such, it needs to meet certain regulatory requirements and follow a specific format.  Management Reporting This isn’t regulated in the same way. That’s because, for the most part, your managerial reports are only used internally, for everything from your day-to-day decision making to Board of Directors reporting. You may choose to include forecasting or predictive data, segment down to different parts of the business or departments and incorporate an operational view for a fuller, more integrated picture of your business. Operational Reporting This shares the details of your organization’s day-to-day operations with data around such things as production costs, resource expenditures and the processes you have in place. How often you choose to report on each will depend on your organization. But the point is to concentrate on the short term and drill down into the areas that will provide the insights your company needs to operate day to day. Together, this reporting will tell a fuller story of your business and its needs. But keeping pace with those reporting requirements can be a challenge, especially when you consider standards such as the generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS), which regulate your financial reporting and can be time-consuming for your team to maintain. GAAP and IFRS: The Financial Reporting Standards  Depending on the industry you work in, you may have unique reporting requirements you’ll need to adhere to—but two main sets of standards continue to regulate financial reports across industries. Whether you adhere to GAAP or IFRS will depend on where your company is listed and where your stakeholders operate. GAAP and IFRS are both designed to offer a set of general rules and guidelines for reporting and ensure everyone is working by a standard set of methods and definitions. Organizations working across borders or handling international mergers and acquisitions may be required to keep up with both. What is GAAP? GAAP stands for Generally Accepted Accounting Principles. GAAP is the standard set of rules for financial reporting in the U.S., GAAP, is adhered to by the U.S. Securities and Exchange Commission (SEC) and issued by the Financial Accounting Standards Board (FASB). GAAP covers topics such as retained earnings, revenue recognition, financial statement presentation, balance sheet classification, liabilities, foreign currency, transactions and so on. What is IFRS? IFRS stands for International Financial Reporting Standards. The IFRS Foundation and International Accounting Standards Board (IASB) is currently used in over 140 countries worldwide, including the European Union. It establishes a common language and standardized definitions across countries and continents, covering topics such as the presentation of financial statements, revenue recognition, employee benefits, fixed and intangible assets, etc.  Your Financial Reporting Timeline  Of course, the timing of your operational reporting and managerial reporting is up to you. And it will depend on your goals, processes, and the resources you have to draw from—financial reporting has a cadence of its own. For public companies, the timing of some filings are regulated by bodies such as the U.S. Securities and Exchange Commission (SEC). For others, they are set internally and will depend on your organization and stakeholder demands. Here’s a rundown of some of the key dates in your financial reporting timeline: Annual Reporting  What Is Form 10-K?  Produced annually, Form 10-K is an SEC filing required of all publicly held companies and designed to comply with specified guidelines. In addition to your audited financial reports, it includes detailed information on operations. It provides discussion points that help investors assess your business performance and the risks facing your company. When is Form 10-K Due? Due within 60 to 90 days of the closing of your fiscal year. What is an Annual Report? Your Annual Report is designed largely for shareholders and is often featured on your corporate website. It can be glossy, colored and dynamically designed and is usually an abbreviated version of what’s included in your Form 10-K. It features information on company activity and finances, including your balance sheet and income statement. When is an Annual Report Due? Usually published within three to four months from the end of your fiscal year. Quarterly Reporting What is Form 10-Q? Your 10-Q is filed quarterly to the SEC and is another standard requirement for publicly held companies. It offers a view of performance over the quarter that’s passed, with fewer details than Form 10-K and financial statements that are usually unaudited. It can offer insight into the changes your organization is experiencing and provide a timely sense of any legal risks that might be forming. When is Form 10-Q Due? Due within 45 days from the end of each quarter. What Is A Quarterly Report? Your Quarterly Report collects your ongoing, unaudited financial statements on a three-month cycle—including your balance sheet, income statement and cash flow statement. In addition to giving stakeholders a sense of your quarterly figures, it may also include year-to-date information and comparative data from past quarters. When Is A Quarterly Report Due? Usually shared a few weeks after the end of each quarter. Monthly Reporting What Is A Month-End Report? Your month-end reports help you stay on top of your financial performance and ensure everything continues to run smoothly. Done largely for internal use, monthly reporting doesn’t have the same external uses as the reporting above. This means the form and timeline it takes will vary based on your company’s needs. You’ll usually want to include your balance sheet, income statement and cash flow statement. But depending on your business may choose to supplement those with additional reporting, such as a bank covenant report, an analysis of inventory, your debt/EBITDA ratio, working capital analysis and so on. This monthly reporting helps facilitate ongoing decision-making and ensures you’re working towards your company goals. When Is A Month-End Report Due? Produced anywhere between a few days and a few weeks after the end of each month. Financial Reporting Challenges and Examples  Financial reporting is a basic requirement of your finance team. At the same time, it's clearly a critical part of business activities such as strategic planning, investor relations, taxes and SEC filings. But just because it’s so critical and pervasive doesn’t mean it isn’t without its challenges. Here are a few examples of common issues your team may be facing as you work to meet your financial reporting needs. Time It can be manual and time-consuming. Reporting can take a lot from your team, both in terms of time and effort. This is true even if you’re using software like Excel. As you push beyond what Excel was meant to be used for—from sourcing and manipulating your data to sharing your reports with applicable stakeholders in a variety of formats—it can start to get tedious for your team. It also drains the resources you have. More scalable technology and automation will help you get more value from your finance team. At the same time, cut down on the work spent on repetitive, manual tasks. Inaccurate There’s potential for inaccuracies. With all of that manual labor comes the chance for— even the inevitability of—mistakes. Those could come in the form of information that gets lost in translation. Or, they could be the result of data that is entered incorrectly. Whatever the reason, those mistakes can be more than just a nuisance. They can have serious repercussions on your final published results and the accuracy of your regulatory and stakeholder reporting. Incompatible Yes, the data your financial reporting offers will be integral to your organization’s success. But when it exists in a silo, it’s harder to apply to the deeper analysis you need. It can be incompatible with deeper analysis. By bridging your different types of reporting—and using technology that allows you to drill down into deeper levels of detail, apply real-time forecasting and visualize your data in various ways—you can start to build more powerful insights from your numbers. The right tools can help you improve your financial governance to build a more efficient and accurate process for your financial reporting—and ensure it’s offering you the chance to dive into the insights you need. Find out how Vena customer PRGX Global overcame their reporting hurdles.  Exploring the Numbers With Financial Dashboards Better tools can help you build a more efficient financial reporting process. At the same time, they will enable you to share your results organization-wide, so everyone is working towards the same goals. One such popular tool is the dashboard. Dashboards are a powerful snapshot of your business, made by tracking holistic metrics and KPIs—from financial and operational metrics to those that look at sales and marketing, HR and customer success. They communicate your performance against your strategies and values and track the ongoing health of your organization. They do this by pulling from many data sources—including your financial reporting data—to offer a single view. In doing so, dashboards help you leverage your data to drive your business forward, facilitate collaboration and transparency and communicate performance to your executive team and organization as a whole. They also empower finance teams to focus on key company metrics and help your entire organization better understand how those metrics affect its bottom line. When produced effectively and efficiently using the right technology, dashboards can provide transparency and access to your entire organization. What are the three key dashboards? The right dashboards will help you track and evaluate your entire organization’s financial performance—giving you more relevant and reliable visibility into the business’s health as a whole. And for many companies, that visibility starts with three key dashboards: 1. Business Health Dashboards: Business health dashboards evaluate both short- and long-term financial metrics based on your company’s short- and long-term goals. For full transparency and visibility, they should also include budget to actual variance analysis. 2. Employee Health Dashboards: Employee trends and behavior affect a company’s bottom line and, as such, are a vital measurement for finance teams. Effectively tracking and acting on employee health findings means working closely with HR and syncing HR data with financial data to determine what the numbers mean for your business. 3. Customer Health Dashboards: Measuring how existing customer relationships impact your bottom line can help sales and customer success teams understand where they should focus their efforts and resources. Customer health data also provide insight into the stability of your company’s customer service function. Read more about these three critical dashboards. Essential Financial Dashboard Metrics By offering ongoing financial data, dashboards help you keep on top of your organizational performance. They let you dig deeper into that data and connect it with your operational and management reporting, so you have a holistic, connected view of your business. At the same time, they make sure everyone is working off the same information and building towards the same business goals. So what financial metrics should you focus on as you populate those dashboards? These five: 1. Operating cash flow: This is a measurement of how much money your business brings in from its daily operations. Your operating cash flow offers insights into whether your organization is in a good position for growth. It also tells you whether you’ll be able to maintain a positive cash flow. 2. Operating expenses: These are the expenses your organization incurs through standard operations. They include rent, inventory costs, payroll, insurance, inventory costs, etc. Your operating expenses (OPEX) help determine where you might be able to make cuts during tighter times. 3. Net profit margin: This shows you how well your business is building profit compared to revenue and what percentage of each dollar earned is actually profit. Ultimately, your net profit margin determines how fast your organization is growing and how well it’s meeting long-term goals. 4. Working capital: By tracking available cash, short-term investments and accounts receivable, your working capital tells you how well your business can generate cash quickly. They also tell you whether you’re able to meet your short-term financial obligations. 5. Sales growth: By measuring your sales team’s ability to increase revenue over a certain period, sales growth offers insight into your organization’s profitability. It also offers insight into whether your business is growing or stagnating. Just as important as choosing the right metrics for your business is ensuring everyone has a clear definition of each and knows why you measure it. By putting everyone on the same page, you’ll keep everyone working towards the same goals. Learn more about how to use your financial reporting data to fuel operational success. The Benefits of Automating Financial Reporting  The right tools can help your team streamline your financial reporting and your managerial and operational reporting—and bring everything together through effective and meaningful dashboards. By automating repetitive manual tasks, you’ll also get more done in less time and free up your team to focus on analyzing the numbers, uncovering new information and shaping the strategic direction of your business. In doing so, automation can help you: 1. Better ensure accuracy and data integrity. You’ll be able to ensure your data is sourced accurately and nothing gets lost in translation or gets missed due to human error. 2. Make better, faster decisions. You’ll be able to turn your data into insights—and put those insights into action—faster. 3. Boost stakeholder satisfaction. Automation will help you get more accurate data and more powerful insights in front of your stakeholders more quickly. 4. Turn information into action. By automating the repeatable tasks, you’ll be able to spend more time developing actionable insights for your business. Automation can also help you build a better audit trail by creating a log of your data, workflows and processes. This gives stakeholders a lens into the data you pulled from and the calculations you performed and helps identify any potential errors that might have happened along the way. You’ll be able to highlight any red flags early and deal with them before they become more serious problems. All of which can help you up your financial reporting game. And, of course, getting to the truth behind the numbers faster and more effectively. Find out what other benefits you can gain by automating your financial reporting. Recap The Ultimate Guide to the New Corporate Budgeting Your corporate budget is the tactical side of your business plan, ensuring resources are allocated in a way that sets your business up to operate effectively, meet its growth goals and keep up with ongoing market demands. Aligning your budget with your business strategy and KPI and goal setting is critical to its success. Most budgeting processes take either a top-down or bottom-up approach, either beginning with a set amount and allocating resources across departments (top-down budgeting), or having departments prepare budgets and request funds based on their needs (bottom-up budgeting). Zero-based budgeting, driver-based budgeting and predictive budgeting can help facilitate and drive your budgeting process, depending on your business demands and the goals you want to achieve. Rolling forecasts can help maintain visibility into recent performance while better projecting future needs—allowing you to remain agile to new trends and requirements while continuing to move the planning horizon forward.

In 2021, Tesla Inc. invested $1.5 billion into bitcoin, only to exchange 75% of it for fiat currency a year later.  Whether cryptocurrency is a good investment for your business is a question only time can answer. But one thing is for certain: you need to know how to account for it. Whether you accept crypto as payment, buy and sell crypto as a core part of your operations or simply use crypto as a way to store value, crypto is different and more complicated than cash. In this guide, you’ll learn what makes crypto unique, why it’s not a cash equivalent, how different types of businesses should record crypto assets differently on their balance sheets, and how the type of asset can impact your income statements and your bottom line. 💡Key Takeaways: While cryptocurrency shares some similarities with cash, it is not a cash equivalent. The way you record crypto as an asset depends on your business model. Most companies should record crypto as an intangible asset, but some companies record crypto as an investment or inventory. Cryptocurrency has its benefits, but one downside is that most businesses can only recognize losses on crypto until they sell it.                                                                                                              Source: YouTube What Is Different About Crypto? Although many people use cryptocurrency as a form of digital money—and despite having “currency” in its name—cryptocurrency is not cash or a cash equivalent. While some companies accept crypto as payment, your digital assets have more in common with investments such as stocks and bonds, and less in common with cash equivalents such as treasury bills or certificates of deposit. To help make this distinction clear, the International Accounting Standard has a clear definition of cash equivalents that excludes cryptocurrency: “short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.” As such, your financial reports can’t account for crypto assets as if they were just another form of currency or cash equivalent. The way you account for crypto assets should change based on your business model. Another significant difference between crypto and cash is that crypto is not issued by a government and isn’t regulated by any institution. That means that unlike a fiat currency, the government does not designate crypto as legal tender and crypto losses or theft are not protected by the FDIC.                                                                                                    Source: Fidelity.com Crypto on the Balance Sheet Since cryptocurrency is not cash or a cash equivalent, you must account for crypto differently than other types of currency. While the logic is straightforward, the way you account for crypto on the balance sheet depends on your industry. 1. Non-Crypto Companies For most businesses that neither invest in crypto as a core part of their operations nor mine, buy or sell crypto in the ordinary course of business, crypto is an intangible asset. While the company may intend to eventually sell crypto, since it is not a fiat currency, cryptocurrencies don’t have any tangible value until they are sold. In other words, unlike a financial instrument such as a certificate of deposit, cryptocurrency has no value until somebody buys it. Since crypto has no tangible value, you should account for it on the balance sheet as an intangible asset. This means that you should document crypto at its purchase price, and not as its fair market value. In the section on Income Statement below, we’ll explore how you should record changes to the market value of your crypto. 2. Financial Firms For a financial firm, crypto is a little bit different than it is for the average company. Rather than simply being an intangible asset, financial firms should account for crypto as an investment. While this may seem contradictory, the logic is simple: for most companies, crypto is simply another type of asset. For a financial firm, crypto is a component of its core business. Since the role of crypto within a financial firm is to generate income, you should record crypto as an investment on your balance sheet. This means that unlike an intangible asset, you should record crypto at its fair value, separate from its purchase price. 3. Crypto Miners For crypto miners—companies who mine and sell crypto in the ordinary course of business—you should record crypto on the balance sheet as inventory. While crypto doesn’t have a physical form, the International Accounting Standard allows you to record crypto as inventory if your company’s business model involves mining, buying or selling crypto during the ordinary course of business. In this case, you should record crypto at the lower of the cost and net realizable value.                                                                                       Source: The Motley Fool Crypto on the Income Statement Just as companies can record crypto on their balance sheet in different ways based on their business model, the way you record crypto as an asset has implications for revenue planning and reporting as well. 1. Non-Crypto Companies The biggest downside to accounting for crypto as an intangible asset is that you can record impairment, but not unrealized gain. What this means in practical terms is that until you sell your crypto, its value can only go down, but never up. If your company purchases $100,000 of a cryptocurrency, you would account for it as an intangible asset worth $100,000 on the balance sheet. If after a period of time, the price of that cryptocurrency had fallen by 40%, you could record the $40,000 impairment, revaluing your intangible asset at $60,000. However, if the value of the cryptocurrency had doubled, you could not revalue your intangible asset to reflect the $200,000 you might sell it for on the market because until you’ve sold it, this gain is entirely unrealized. In short: most companies’ cryptocurrency values can only decrease and never increase until they actually sell the crypto and realize a net gain. 2. Financial Firms For companies investing in crypto as a core part of their business, the investment asset gives them more flexibility on the income statement. You should record crypto, like other forms of investment, at its fair value. This means that financial firms can report the income or expense generated from their cryptocurrency, whether it’s been realized or not, and whether it’s a net loss or gain. 3. Crypto Miners As a crypto miner, you want to record crypto as an inventory asset at the lower end of the cost or net realizable value. What that means for your income statement is that you can record unrealized loss (if the net realizable value goes down), but not unrealized gain. Once you realize a gain by selling the coins or tokens, then you can report it as income, but until then, you can’t report an unrealized gain on your income statement. Crypto Versus Cash After so many years, experts agree that crypto is here to stay. As more and more high-profile companies become invested in crypto, it’s important that you understand how to account for crypto as an asset and how that impacts your other financial statements. All You Need To Know About Crypto Asset Accounting Does your future include crypto? Plan for it with Vena.

Accounting allows us to comprehend an organization's historical financial statements. However, forecasts based on those financial statements let us analyze how a firm will perform under various assumption types. We can do this using a three-statement financial model. These statements enable financial experts and industry insiders to visualize an organization's operational and financial decisions. That includes: FP&A professionals Corporate development professionals Investment bankers Institutional investors Sell-side equity research Private equity  Well-built three-statement financial models enable these professionals to see how various business activities work together to impact the future bottom line. That makes it easier to see how these corporate financial decisions affect overall business performance. 💡Key Takeaways: A three-statement financial model is an integrated model that forecasts an organization's income statements, balance sheets and cash flow statements. The three core elements (income statements, balance sheets and cash flow statements) require that you gather data ahead of performing any financial modeling. There are several steps to building a three-statement financial model, including key steps like inputting historical data, defining parameters and conducting your forecasting. What Is a Three-Statement Model? A three-statement financial model is an integrated model that forecasts an organization's income statements, balance sheets and cash flow statements. It is the foundation on which we can build additional (and more advanced) models. These include merger models, DCF models, leveraged buyout (LBO) models and various other financial model types, including those seen in the chart below.  Source: Corporate Finance Institute 3 Core Elements of a Three-Statement Finance Model These integrated models are powerful tools because they allow you to modify assumptions in one part of the model to see how it accurately and consistently influences the other areas of the model. Yet, before you begin, you must gather the necessary data points before conducting financial modeling. At a minimum, you must gather an organization's most current SEC filings, equity research reports and possibly press releases. Information can be more difficult to locate for private companies than for public ones. Financial reporting requirements differ in other countries.  A three-statement model includes various outputs and schedules. Yet, these three key elements accurately capture the association of the multiple line items across the financial statements. 1. Income Statement Income statements depict a business's profitability. These statements are formatted from left to right, with no less than three years of historical results. That provides historical ratios and growth rates based on our forecasts.  Inputting data from historical income statements is the first step in creating three-statement financial models. The process includes manual data entry from either a press release or the 10K. You can also use an Excel plugin to drop historical data directly into your program. Financial planning and forecasting normally start with a revenue forecast preceded by various expense forecasting. The net result predicts the company's earnings per share and overall income.  These statements cover a specified segment, such as a quarterly or annual period. For more information, check out how we can help income statement forecasting with our revenue planning software, or try creating one yourself with our free income statement template. Unify your departments Move your team from different spreadsheets to the same page with all revenue data in one place. 2. Balance Sheet Income statements display operating results over a specified time. However, the balance sheet is unlike the income statement. It is a company snapshot after any given reporting period. This sheet exhibits the organization's assets and resources and the funding for those resources, such as a shareholder's equity and liabilities. Entering historical balance sheet data is like inputting income statement data. You do this either manually or using a plugin for Excel. Revenues are what drive the operating assumptions. The operating assumptions drive the balance sheet you make based on the income statement. Furthermore, operating and revenue forecasts drive capital expenditures, working capital items and various other items. Think of the balance sheet as the cart and the income statement as the mule. In this sample below, see a financial statement model for Apple, formatted using a standard Excel document. Excel is an excellent tool for creating reports. However, there are better solutions to assist organizations with their FP&A processes. We recommend integrating a system powered by Excel but with additional features that ensure accurate forecasting. Source: Wall Street Prep Agile Scenario Modeling Mitigates Risk See how the decisions you make today will affect your bottom line tomorrow, with Vena. 3. Cash Flow Statement Lastly, we will look at the three-statement financial model's final core element: the cash flow statement. Entering results from historical cash flow statements is unnecessary before forecasting. That is due to a year-over-year pure reconciliation of the changes in the balance sheet from the cash flow statement. We should reference each individual line item of the cash flow statement from elsewhere within the financial model. When we construct the cash flow statement correctly, the balance sheet will balance. To generate a forecasted cash flow statement, a cash flow proof should be created. You can create this by using the change between the current and forecasted balance sheet accounts. The ending cash flow statement balance should reconcile with the forecasted cash balance on the balance sheet. How To Create a Three-Statement Financial Model In 7 Easy Steps   You must take several steps to build a three-statement financial model. Some experts argue which steps are a top priority. A few industry leaders will claim there are only five steps in this process.  However, we recommend that you take these seven steps: 1. Enter historical financial data into an Excel-formatted platform 2. Define the predictions that drive forecasting 3. Predict the income statement 4. Predict capital investments and assets 5. Predict financing activity 6. Predict the balance sheet 7. Complete a cash flow statement Your Best Source for Three-Statement Modeling Plan for any scenario.  At Vena, we offer an entire FP&A ecosystem that allows you to create three-statement financial models you can run daily, weekly, monthly, quarterly and annually. We use Excel to format our platform, making it user-friendly and easy to integrate. Our financial modeling software allows you to quickly analyze the impact of your business decisions to help you plan with confidence.  We offer the best source for three-statement modeling at Vena. Our software includes a Power BI integration, ad-hoc reporting tools, and executive-level reporting templates so that you can drive real-life growth by creating real-time reports. 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Numbers tell a story. We already know that: we’re all experienced data-driven storytellers here. But raw data, even after it’s been summarized in your reports, does not a full story make. Like the words of a novel, you’ll get more out of the values you report on when you start putting them together in new and meaningful ways.  That’s where financial ratios come in. By tracking changes over time, your financial ratios enable you:  See how performance shifts from one period to the next. Identify trends that could be in the works and set goals to track progress towards them. Allow your investors to compare your business to those of your competitors  Enable you to see how you're faring compared to market norms.  Find new lenders, set stock prices and demonstrate the overall health of your organization.  So what are the ratios you should be paying attention to—and what plot twists will they add to the story your reporting tells? Let’s take a look. Quick Links The Five Types of Financial Ratios Financial ratios enable you to perform quantitative analysis to understand your organization better. There’s an entire list of financial ratios you can draw from to better tell the story of your business—all of them falling under one of five main categories. Profitability Ratios Profitability ratios determine your organizations ability to generate profit relative to revenue, operating costs, balance sheet assets and shareholder equity.  Liquidity Ratios Measure your company's ability to pay off its current deby without raising extra capital. Efficiency Ratios Calculate how well your business manages its assets and liabilities internally.  Leverage Ratios Determine how much of your organization's capital is assumed through debt and evaluate how reliant you are on debt for growth.  Market Value Ratios Calculate your publicly held company's current share price, helping investors evaluate whether those shares are overpriced or underpriced.  Each category incorporates a range of different ratios designed to help finance teams, like yours, get to the information needed, and for investors and analysts to better understand the health of your business. Together, these ratios can begin to offer a fuller picture of your company’s performance. Explore our guide to financial reporting to help get a better understanding of your company's financial performance. Examples, Formulas and Use Cases The most popular financial ratios aren’t necessarily complicated to compute—in fact, what are often deceptively simple calculations can offer a wealth of meaningful information. Just look at these examples: Financial Ratio Example Formula Use Cases Profitability Ratios Profit Margin Gross Profit Margin = Gross Income / Revenue  Operating Profit Margin = Operating Income / Revenue  Net Profit Margin = Net Income / Revenue  By demonstrating what percentage of sales has turned into profits, your Profit Margin showcases the degree to which a business activity makes money. The numbers you plug in will vary depending on the type of profit margin being measured (i.e., Gross Profit Margin, Operating Profit Margin, Net Profit Margin). Return On Assets (ROA) ROA = Net Income / Average Total Assets ROA measures your company’s efficiency in generating earnings from assets by showcasing how much profit your company can gain from those assets. Return On Equity (ROE) ROE = Annual Net Income / Shareholders’ Equity ROE demonstrates how well your organization is handling shareholder contributions. It measures the profitability of your organization as it relates to stockholders’ equity. Liquidity Ratios Current Ratio Current Ratio = Current Assets / Current Liabilities By looking at current assets in relation to current liabilities, your Current Ratio helps investors better understand your organization’s ability to pay off short-term debt obligations. Quick Ratio Quick Ratio = (Current Assets - Inventory - Prepaid Expenses) / Current Liabilities  By examining how easily your organization can use near-cash assets to pay down its current liabilities, your Quick Ratio measures your organization’s ability to meet its short-term debt obligations using its most liquid assets. Days Sales Outstanding (DSO) DSO = (Accounts Receivable / Net Credit Sales) x Number of Days Your DSO provides valuable information on your cash conversion cycle by measuring the average number of days it takes for your business to collect payment from a sale.  Efficiency Ratios Asset Turnover Ratio Asset Turnover Ratio = Net Sales / Average Total Assets The Asset Turnover Ratio demonstrates how efficient your company is at using assets to generate revenue. It examines the value of your company’s sales or revenue in relation to the value of its assets. Inventory Turnover Ratio Inventory Turnover = Cost of Goods Sold / Average Inventory By measuring how often a company has replaced inventory during a specified period, the Inventory Turnover Ratio helps you better determine pricing and know when to purchase new inventory. Receivables Turnover Ratio Receivables Turnover = Net Credit Sales / Average Accounts Receivable By measuring your business’s ability to collect the money you owe, your Receivables Turnover Ratio helps investors and analysts understand how quickly your short-term debt is collected and paid. Leverage Ratios Debt Ratio Debt Ratio = Total Debt / Total Assets Your Debt Ratio measures the ratio of total debt to total assets, which determines the extent of your business’s leverage or the percentage of assets financed by debt. Debt-to-Equity (D/E) Ratio D/E = Total Liabilities / Total Shareholders’ Equity By calculating how well shareholder equity can cover outstanding debt, your D/E Ratio helps determine how much of your business is financed through debt—and how prepared you are for a crisis. Interest Coverage Ratio Interest Coverage = Earnings Before Interest and Taxes (EBIT)  / Interest Expense Your Interest Coverage Ratio lets creditors, investors and analysts know whether your company is a good risk for future lending by measuring how easily your organization can pay interest on its outstanding debt. Debt-Service Coverage Ratio (DSCR) DSCR = Net Operating Income / Debt Service By looking at the cash flow your organization has available to pay your existing debt obligations, your DSCR lets investors know whether you have the income available to pay off your debts.  Market Value Ratios Book Value Per Share (BVPS)  Ratio  BVPS = (Shareholders’ Equity - Preferred Stock) / Average Shares Outstanding Your BVPS Ratio helps investors evaluate your business’s stock price by measuring the ratio between your shareholders’ equity and outstanding shares.  Dividend Yield Ratio Dividend Yield = Annual Dividends Per Share / Current Share Price By calculating, in the form of a percentage, how much your business pays out annually in dividends in relation to its stock price, the Dividend Yield Ratio enables investors to calculate how much they’ll earn from dividends. Earnings Per Share (EPS) Ratio Earnings Per Share = (Net Income - Preferred Dividends) / Average Shares Outstanding By looking at your company’s profit in relation to outstanding shares, your EPS Ratio lets you and your investors know how much money your company earns from each share of its stock, helping to create an estimate of your overall organizational value. What Else You Need To Know About Financial Ratios If you’re a finance professional tasked with reporting, you’re probably using financial ratios in some capacity already—and it’s exactly because they are so widely used that they’re so useful.  Financial ratios provide a common language. By trending your ratios over time, you and your investors can compare your company’s performance from one period to another, and against market norms and competitors. And by using the reported values already available in three key financial statements - balance sheet, income statement and cash flow statement, ratios also provide a relatively quick way to analyze your financial health. The richest stories come not from using a single financial ratio, though, but rather by applying a mix of ratios and using them alongside the other information available to you. That might include insights from your KPI dashboards or the information you gather from non-financial metrics across sales, marketing, operations and the rest of your organization. Either way, in doing so, you’ll reveal truths about your company’s performance—as well as the potential value your business might have for investors, creditors and lenders.  loading="lazy" Tools to Drive Your Business Forward Vena automates financial reporting processes so you can collect and analyze data to make smart, data-driven business decisions.

Leverage the power of data to find new revenue streams from your analytics.  Data is the lifeblood of your business. Without it, you lack the information and insights you need to not only create financial reporting to analyze revenue, but also to find additional channels from which to create cash flow. Incomplete or inaccurate data is equivalent to having no information to pull analytical data from and is equally detrimental to revenue streams. When evaluating analytics, you can’t expect to be accurate when your data is not.  Improved analytical data is the only solution. Let’s discuss how fully automating your FP&A processes will help you find new ways to generate revenue using the insights you glean from better data.  💡 Key Takeaways: You may discover you need to rewrite a portion of your “playbook” to address changes in the market and find new revenue streams by analyzing past results. Keep data secure while still empowering employees. Give only those who need access the power to obtain the data they need for revenue-generating ideas. Inspire new revenue streams, such as creating innovative ways to convert leads and sell products and services on social media or any other channel your organization uses. Solve pain points to specific issues using customer segmentation. See what buying behaviors require unique solutions. Also, fix leaks in your funnel to ensure no data gets left out. Follow the money. Use data insights to see what customers are doing and how you can begin providing those services or products. 5 Ways To Find New Revenue Streams Many organizations have had to rewrite portions of their “playbooks” to accommodate market changes and this isn’t necessarily a bad thing. It’s time to reevaluate your current systems and see if updating processes, equipment and systems is necessary.    Source: YouTube It will help you determine which revenue streams are fruitful and which aren’t. It’s also an opportunity to check your data for resources or to identify if a new revenue opportunity exists should you change your products and services.   Here’s how you can harness the power of data to create new revenue streams:  1. Empower Employees to Access Data Over one-third, (34%) of companies worldwide say they have dealt with an insider threat involving a data breach. Employee access to data can be a security risk and not because they intend to be malicious. Source: TBG Security However, with the right FP&A software solution, you get a central database of information and the power to decide who can see what by granting permissions. If your marketing leaders need data about the marketing budget, they only see that data.  With the power to know which campaigns were more profitable, marketing teams can find ways to generate new revenue streams. They can follow trends and focus the budget on them. 2. Get the Maximum Benefit of Omnichannel Flexibility   One way to create new revenue streams is to tap into insights from previous marketing campaigns. Analyze data from the various channels you use to reach your audience.  Do social media posts perform well for lead conversion? Do you know which campaign worked best? When you can see the numbers in front of you, you can make better decisions about moving forward with new campaigns. It ensures that no dollar of your organization’s marketing budget goes unspent, including finding new ways to generate revenue.  For example, if your finance team reports that there is still room in the budget for additional marketing campaigns, teams are free to follow trends. They could start a TikTok channel and create content for the platform to generate sales. 3. Solve Specific Pain Points With Customer Segmentation One way to generate new revenue streams is to follow buying trends centered around solving specific pain points. Your CRM should allow you to segment customer data to glean insights on how to build campaigns addressing these pain points. For example, we noticed that 84% of customers with an FP&A solution still used their Excel spreadsheets and not the integrated software. So we developed our software for the Excel natives who manage accounting departments. 4. Fix Any Leaks in Your Funnel Almost every company has a “leaky funnel.” By streamlining and automating processes to improve your business performance, sales and marketing teams can be more successful.  By implementing fixes, looking at your data and then taking action, your teams can be more effective and efficient.                                                                                 Source: Backbone Media 5. Follow the Money It doesn’t have to be all about the pain points consumers feel. No matter what happens, some parts of the economy are growing and even booming. Your analytics will tell you who is buying what.    See where people spend their money, then figure out the best way to reach those customers. These can be necessary products and services or affordable indulgences.  The rise of companies such as DoorDash and Post Mates is why Uber expanded operations from ride shares to food delivery. Uber followed the money, used insights from competitor financial data and developed a new revenue stream. Unlock the Value of Actional Data Insights With Vena Companies are constantly looking for solutions that will provide useful data insights faster. However, many people don’t have the resources or the time to easily and quickly develop a solution that scales independently.  Additionally, even companies capable of building their services often struggle with the time it takes to prepare data for analysis. Vena can help you overcome these obstacles. Our FP&A platform seamlessly integrates with your existing tech stack providing data and simplifying analysis using visualizations and interactive dashboards. We make understanding your data easier so that you can leverage that information to create new revenue streams.   Excel at Data Analysis Find ways to generate new streams of revenue with powerful insights you get from better data. Try one of our free Excel templates and see what we mean.

You want your investors to see your business positively. To view the gains you’re making across the globe. But the question is: Do you use constant currency reporting to do it?  For many, the constant currency approach to reporting is a controversial one. While there are those who sit in the “for” camp, others are solidly “against” it. Yet many of the world’s largest companies still use it, clearly seeing it as a useful tool that gives investors a more positive view of performance by removing some of the factors organizations have no control over.  So what exactly is constant currency? And what makes it so controversial? 💡Key Takeaways: Used by many organizations with a global presence, constant currency reporting helps finance teams demonstrate to investors their company’s performance and earning potential by removing the effects of fluctuating foreign currency rates. Constant currency is calculated in a variety of ways—for instance, by using the average exchange rate from a prior year or by adjusting previous numbers based on the current year’s exchange rate. While a constant currency approach is not allowed in GAAP reporting, it has its supporters as well as its detractors. Many global companies see the benefits of removing the effects of fluctuating exchange rates, but others think it’s misleading or that it makes it easy to miss important information about the viability of global markets. What Is Constant Currency? Constant currency is the application of a fixed exchange rate to, according to the Wall Street Journal, “strip away the negative impact of foreign-currency rates.” In doing so, it provides a way for businesses to correct for those fluctuating global exchange rates and report performance to investors independent of the fluctuations. But even when fluctuations have positive impacts, it can let you make more clear comparisons year over year. “Such figures show what a company’s financials would have been if the company didn’t experience currency fluctuations,” the Wall Street Journal reported. For global companies, then, constant currency is a way to provide a picture of what the business would look like without the foreign currency movements that are so out of any organization’s control. While many businesses choose to apply a constant currency approach, though, there are plenty of financial leaders who don’t agree with it.  We’ll look at both the pros and cons—but first, let’s dig a bit deeper into how constant currency actually works. How Does Constant Currency Work? So how do you calculate constant currencies? That depends. Some businesses use the average exchange rate from a prior year. Others take previous numbers and adjust them based on the current year’s exchange rate. Whatever approach you take, the idea is to be able to demonstrate global performance in a way that compares apples with apples, rather than the apples of one currency with the oranges of another.  If you sell 15% more widgets in India than you did last year, for example, that’s a good thing. If the Indian rupee isn’t having a good year, though, and you report in U.S. dollars, it may look like you barely came out ahead after you make the conversion. Constant currency helps you calm investors by demonstrating actual operating performance without the impact of currency fluctuations. Examples of Constant Currency Let’s look at an example that shows a constant currency approach versus one that doesn’t employ it.  Company A is based in the U.S. and sells products in the U.K.  In year one, they earned GBP 1,000,000  with a net profit of 10%. At the end of the year, the GBP to USD exchange rate is 1.30.  In the second year, the company earned GBP 1,200,000 with a net profit of 10%. The GBP to USD exchange rate is 1.20.  This example does not show constant currency. It shows that despite 20% higher revenue in year two, due to currency fluctuation of 8%, growth is only showing as 11%. Here’s an overview of what that looks like:   Year One Year Two GBP Revenue 1,000,000 1,200,000 GBP Net Profit 100,000 120,000 GBP/ USD Exchange Rate 1.30 1.20 USD Revenue 1,300,000 1,440,000 USD Net Profit 130,000 144,000 The decline in revenue was purely down to the currency exchange rate, though. To prevent this issue from occurring in the future, constant currency can be used. Here’s what the numbers look like if it is:   Year One Year Two GBP Revenue 1,000,000 1,200,000 GBP Net Profit 100,000 120,000 GBP/ USD Exchange Rate 1.30 1.30 USD Revenue 1,300,000 1,560,000 USD Net Profit 130,000 156,000 Using constant currency helps to portray the actual underlying growth or change and mitigates the impact of foreign exchange fluctuations. The Benefits of Constant Currency It’s clear what the main benefit of a constant currency approach is from the example above. Constant currency figures “can help companies communicate to investors that their underlying business is strong, even if exchange rates crimped revenue,” the Wall Street Journal article points out. It can also help with long-term planning, as it means you don’t have to accommodate for unpredictable fluctuations in exchange rates. And many companies—including Salesforce, Adobe and Ralph Lauren—use a constant currency approach, presumably for exactly that reason. It helps calm their investors down and demonstrates the earning power that exists. Especially when businesses, for example, report their profits in U.S. dollars but are making a significant portion of their revenue outside of the United States.  But just as constant currency has its advocates, it has its detractors too. The Problems With Constant Currency So why don’t some finance leaders like constant currency reporting? There are several reasons why it’s unpopular with certain finance experts, including these three: Adjusted figures like constant currency can’t be included in reporting done to Generally Acceptable Accounting Principles (GAAP), including public or U.S. Securities and Exchange (SEC) reporting. That means a constant currency approach must be applied separately.   For some, constant currency feels misleading. After all, global currencies do fluctuate and that does affect global profits. Pretending like that’s not the case in order to build investor confidence doesn’t change the fact that it’s true.  Finally, companies that use a constant currency approach may actually be losing out on important information. For global companies, after all, fluctuating currencies and changing exchange rates may offer important information about the international markets they’re investing in. Including whether it’s a viable place to continue doing business. Of course, those who take a middle-ground approach to constant currency will approach it with these cons in mind—while still understanding its value. By being careful with their calculations and doing all they can to not be misleading—and by reporting separately according to GAAP where required—they can benefit from constant currency while still keeping an eye on their actual numbers. Conclusion There will always likely be proponents and detractors of constant currency reporting. But whatever your stance, it’s not going anywhere soon—at least not for any number of global companies. So understanding what it offers—and where it falls short—is key to knowing how (or if) you want to apply it in your own business’s reporting. Strategic Planning at Every Level of Your Organization Empower your reporting and analysis with strategic planning solutions from Vena. 

Flux analysis accounting, also known as variance analysis, provides insights that help decision makers and department leads understand a company's financial position. As a company grows, it is essential to compare data not only for revenue and expenses, but also for a deeper understanding on an accounting level. Flux analysis, short for fluctuation analysis, is how executives obtain accounting insights to compare statements, balance, and accounts across a specific period. This data indicates how an organization is doing and what it could do better.   According to the intended analysis, these reports could be monthly, quarterly or annually. Most analysts run these horizontal analyses for income statement accounts, but they are more valuable when conducting balance sheet forecasting and analyzing balance sheets.  Read on to get a better understanding of your cash position from high-level analysis across the company payroll to what it spends on particular vendors.  💡Key Takeaways: Flux analysis in accounting provides various insights that help decision makers be more informed about the changing financial position of an organization. To conduct a flux analysis, you will first find the differences. Do this by deducting the current period from the previous period or the timeframe you are analyzing. Note any significant differences and how they vary from regular fluctuations, such as seasonal fluxes. Be careful not to omit or misstate data in your report that could influence decisions. Explain the differences in the report by telling exactly what changed and why. Be sure to include all the reasons for the fluctuations. Why Flux Analysis in Accounting Is Important A flux analysis is a powerful tool for financial analysts that support a company's financial planning. An effective flux analysis does not stop at reporting numeric differences.  The data is more valuable when you deliver insights into why these variances occur month over month. Therefore, these flux analysis reports should include a brief yet thorough explanation of the material variations.                                                                                                                  Source: YouTube An organization's financials are critical indicators of its overall health. Flux analysis is especially useful for CFOs, finance managers and business heads. Unfortunately, this can be a time-consuming process to conduct regularly.  Flux analysis in accounting can deliver various insights that enable a company to make more informed decisions, such as cash flow allocations or whether it's time to apply for lending services.  Get a sense of how things are operating and a level of operational visibility necessary for driving a successful enterprise. Once you've concluded month-end closing processes, flux analysis reports deliver quality assurance and data accuracy.  These analyses can help flag accounting errors, such as incorrect or missing data. They can also catch inaccurate recorded revenue and expenses and identify potential frauds or losses.  How To Conduct a Flux Analysis A standard flux analysis compares data, line for line, in a horizontal table or spreadsheet, depending on the length of time. Every column depicts a different week, month, quarter or year (see the example below).                                                                                                                      Source: Vena It takes three distinct steps to conduct flux analysis for accounting. Let's evaluate each step in the process and the importance of each one.  From there, discover how to compare the data, pinpoint the essential insights and get tips on how to report this data most effectively.  1. Find the Difference  Identify the differences between the selected period by subtracting that period from the previous one. If you're trying to understand changes regardless of scale, we recommend finding the percentage change. The formula for this is: Current Period - Prior Period  / Prior Period Amount 2. Note Significant Variance The account you are analyzing isn't likely to be the same every month. Therefore, you’ll need to identify which fluctuations are substantial from those norms.  Consider materiality, whether omitted, misstated or obscured, materials could influence decisions. The significance of these fluxes depends on which accounts it pertains to.  The common materiality threshold is as little as 0.5% to as much as 10%. However, there is no single agreed-upon number.                                                                                                         Source: CFA Journal Since there is no rule regarding setting a materiality threshold, we recommend using your judgment on which material changes to consider. Account for your organization's overall revenue and the potential risks or significance of the amounts you are analyzing.   3. Provide an Explanation The most critical part of flux analysis accounting is the actual analysis. Explaining fluctuations should do more than determine where they come from. We recommend writing them without industry jargon.  Include details necessary for understanding changes without referencing spreadsheets. This is essential because investors and non-expert business leaders may reference the following: What Information Changed: We recommend including the accounts you referenced during the change and by how much. That guarantees all data needed to comprehend the flux explanation without examining the data set directly. Reasons for the Changes: You have many interlinked accounts at your company, so many factors could be affecting the fluctuation. Note the causes of these fluxes in detail. If you can only attribute a portion of the fluctuation as the specific causes, ensure you include all causes and note the extent of each factor to explain the variance. Diving deeper into your analysis is critical to identify every contributing factor. Why You Should Automate the Flux Analysis Accounting Process  Every business should run flux analysis accounting reports for improved business insights and decision making. However, as we stated before, it's a time-consuming process that you must do regularly. Automating this process will save time, money and your most precious resource, the availability of human capital. At Vena, we offer budget variance analysis software that consolidates spreadsheets to eliminate manually aggregating data. Automatically roll actuals with dynamic Excel templates whether you need to perform actual versus budget or forecast analyses.  Automate Your Flux Analysis Accounting Process Plan with confidence using Vena Variance Analysis Software and give management the insights they need to make timely and informed decisions.

Bank reconciliation is one of the most critical tasks of every finance and accounting department in a company. It compares the bank account balance on the company's books with your company's account balance on the bank books.  Every company reconciles its books. It's done periodically, depending on the volume of transactions. If transaction volume is high, bank reconciliation should be done monthly, bimonthly or daily. If the trading volume is lower, it can be done quarterly, semiannually or annually. Using a standardized template will ensure accuracy and eliminate errors. If you plan to use Excel to create your bank reconciliation template, we've prepared this guide to help you configure your spreadsheet for bank reconciliation. A bank reconciliation template in Excel helps speed up report preparation, especially for your organization's bank accounts. For visualization, the template directs all connected data to the model for immediate analysis. Without a template, reconciliation often requires a lot of effort due to a lack of format consistency.   💡Key Takeaways:  To create a bank reconciliation template, you must first label all fields and set formulas accordingly. Next, choose the function for each row to ensure that you have calculated the totals properly.  Prepare reports by sorting rows. This allows you to compare transactions entered into the accounting system and to check off each one as they appear on the bank statement.  You can automate bank reconciliations in Excel with functions such as VLOOKUP, SUMIF and COUNTIF to match transactions, check deposits and identify duplicate records. Source: YouTube Steps To Create Bank Reconciliation Templates in Excel Several programs offer templates you can pay for and use to reconcile your bank statements.   However, they are often quite generic and time-consuming to personalize for your organization's needs, which is why so many companies look for SaaS solutions. They offer pre-configured templates for various accounting functions and finance tasks.  Image Source: Addictionary If you still want to create a template in Excel, we have some suggestions for creating a bank reconciliation template.  Step 1: Label Fields The first thing you will need to do is label all fields in the rows and columns. These should correlate with the fields on your bank statement.  If you are downloading the CSV version of your bank statement from your financial institution, it will automatically convert it into a spreadsheet document you can open with Excel. You can use this to help set the template fields.  Unfortunately, these CSV versions will offer more fields than you need to include in your template. Make sure you capture and extract only the data you need. Step 2: Set Formulas and Choose Functions Once you have labeled your fields, you need to set them—using formulas—to ensure accurate data collation.  Accounting professionals use formulas or functions to find transactions, such as outstanding checks. VLOOKUP, SUMIF and COUNTIF are the three reconciliation Excel formulas.  First, VLOOKUP can locate values in a table and return the value based on the number of columns. It is useful if you reconcile an amount recorded in two financial registers.  Then SUMIF adds the amount from found values in a range. It's helpful when calculating the deposit in transit. Additionally, COUNTIF adds the number of times values exist in any given range. That is especially useful for catching duplicates.   Step 3: Prepare the Report Finally, you are ready to prepare your report and begin reconciling your bank statement with your accounting records. Sort each row from the spreadsheet through unmatched transaction columns. This allows you to list the reconciling items. Compare the data to ensure you account for every transaction and finalize your report. Save the data and store a copy in the company's central database to ensure those who need it can access your reconciliation. Automating Reconciliation in Excel You can set functions in your Excel template to automatically reconcile banks with functions such as VLOOKUP, SUMIF and COUNTIF. VLOOKUP checks bank records and quickly matches them against bank statement debits to alert you of any unchecked records. Image Source: Vena You can then identify all unmatched transactions as reconciliation entries in depositor records and bank statements. The SUMIF function can match all deposits to bank statements for account reconciliation using a deposit lot reference.  Companies usually deposit all collections in bulk with banks as it isn't feasible to deposit them into the bank individually. The SUMIF function will quickly match and add up all bank transactions using batch numbers to match depositor records and bank statements.  Lastly, the COUNTIF function recognizes multiple or duplicate records of the same transaction. It does this by counting every transaction that meets the criterion. It helps uncover accounting and banking errors. Reconcile Your Bank Statements With Templates From Vena Increase the speed of bank reconciliation by using a Vena Bank Reconciliation Template. We designed our templates to streamline accounting tasks and ensure report accuracy.  Whether it's time to close out the week, month, quarter or year, Vena's Account Reconciliation Software will make the process easier. Get a central database that integrates with your ERP, GL systems and the rest of your existing tech stack.  Streamline workflows with our pre-configured solutions for all your standard and specialized reconciliations. Our software tracks every submission and times stamps them for improved accuracy. Provide your auditors with the detailed audit trail reports they need.  Save time, increase transparency and track all reconciliations with a central template. Make sure that submitters and reviewers are on the same page. See which accounts need review and reconciling, track account balances and reconcile amounts.     Master Reconciliation With Vena Eliminate common reconciliation errors with templates designed by finance professionals for finance professionals. Download any of our free Excel templates to see how Vena can help streamline your entire finance department. .

  Your recent budgets had significantly high variances—higher than 10%. Your management team will want to know why and they’ll be asking questions such as: How much did we budget Production Volume Costs for in December? What was the difference between what we budgeted and the actuals? 17%—why is it so high? What happened in December? You’re the strategic advisor. To answer their questions and to provide possible causes, you need to know how to create a variance analysis report in Excel. Your report should be quick to create, easy to read and visualizes the data to tell a story, providing insights to your management team to inform their analysis and decision making. In this blog, we’ll cover: Understanding a Variance report 4 best practices for writing a variance report in Excel 3 common problems in variance analysis and reporting What is a Variance Report? A variance report compares planned financial outcomes with the actual financial outcome that occurred - it's the difference between what was budgeted and planned vs what actually happened.   How To Write A Variance Report: 4 Best Practices For Visualizing Variance Data in Excel 1. Vertically Align Variance Amounts With Budgets and Actuals Your management needs to see variance amounts with their respective budgets and actuals—alongside other variance amounts and those respective budgets and actuals. Only when these variances are analyzed comparatively, can they gain insights to inform their decision making. Some examples of insights they may glean include: Which expenses have the highest cost increases Which product lines have the lowest sales increases Which territories have the highest employee tenure decreases To vertically align variance amounts with budgets and actuals: With your two charts (one for variance amounts, the other for budgets and actuals) completed, hold the alt (shift on Mac) key to align your variance amount chart underneath your budgets and actuals chart. Delete the title and x axis labels from your variance amount chart. Your two charts are now one—one chart that tells one story, and one story that provides multiple insights for your management. Watch the video to learn from Excel nerd Chandoo how to vertically align variance amounts with their respective budgets and actuals to gain decision-making insights.   To watch the full Advanced Excel Charts for Finance Professionals workshop on demand, become a Plan To Grow member and join the community. Don’t miss out on mastering data storytelling. 2. Apply Conditional Formatting Now that you’ve aligned your two charts together to tell one story, apply conditional formatting so that your management can quickly view which variances in your chart are adverse and which are favorable. To apply conditional formatting: Select your variance amount chart to open the Format Data Series menu. Check off the Invert If Negative box (located under the Fill heading). You now have the option to select your two colors—one for negative values—to fill the bars in your chart so your management won’t lose time to guessing which are adverse and which are favorable. Notice how you can apply conditional formatting to quickly distinguish adverse variances from favorable variances.   Bonus Time-Saving Tip: Watch how you can use this "secret" Excel menu to replicate the style of formatting from one chart to another. 3. Insert Comments After applying conditional formatting, answer your management’s questions about what’s caused these variances by inserting comments. They’ll have questions—you know they’re coming—so be ready with answers in your report. Some questions they may ask include: What’s causing our insurance costs to rise much quicker than projected? What’s causing our electronics line to sell significantly fewer than planned? What’s causing our employees in Australia to resign so much faster than predicted? To provide possible answers, add comments by right-clicking the cell and then select ‘Insert Comment.’ Your comments should address: What you think has caused the variance. Whether you predict it’s a trend or an anomaly. Whether you believe it’s positively or negatively impacted your company. While some organizations analyze only adverse variances, it’s important to evaluate favorable variances as well. That’s because not all adverse variances negatively impact a business and not all favorable variances have a positive impact. While you may already know this, don’t assume your management does. Example: If your Total Production Volume Costs for December saw an adverse variance—17% higher than planned—perhaps your sales were higher than forecasted. Simply, it cost your company more to manufacture that month because your customers were buying more. Conversely, if your Total Production Volume Costs saw a favorable variance—13% lower than planned—perhaps your sales were lower than forecasted. Insert your comments to get ahead of your management’s incoming questions. Meet All of Your Regulatory Deadlines With Time to Spare Our software consolidates your financial, HR and operational data into one central location so it’s easy to find the data that matters. 4. Track Forecasts With Thermometer Charts After addressing your management’s possible questions, they’ll want to know: Your company’s performance up-to-date performance Whether or not your company’s on pace to meet year-end goals Example: If an expense item saw a favorable variance—22% lower than planned—does that mean your company found efficiencies to save on costs, or is a project behind schedule? The answer is in your forecasts. To illustrate progress and monitor performance, create a thermometer chart out of your budgets vs actuals chart to overlap your budget and actual numbers. To do this in Excel: Right-click on your budgets and actuals chart. Open the Format Data Series menu. Drag the Series Overlap slider to 100% (Note: Ensure that your chart has multiple series within one category. Your bars won’t overlap correctly if your chart is plotting multiple categories within one series. To verify this, right-click on your chart and select Select Data. Select Switch Row/Column to toggle and ensure that your Budgets and Actuals are correctly listed as Legend entries.) Select the Budget portion of the overlapped bar. Select the Format menu tab at the top.  Select ‘Shape Fill’ and then select ‘No Fill’ to remove the color. Select the Format menu tab at the top. Select ‘Shape Outline’ and then select the color that matches the color of the Actual bar. Thermometer charts effectively and quickly visualize performance and progress to track your forecasts. Now your management can see—instantly—the company’s up-to-date performance and whether your company is on track to meet year-end goals or not. Notice how you can create a thermometer chart to track forecasts and quickly illustrate progress.   You’ve learned four best practices for creating a variance analysis report in Excel, so now it’s time to find out which common problems may occur when analyzing and reporting variances. 3 Common Problems in Variance Analysis and Reporting 1. Time Delay If last month’s books still haven’t closed, you can’t create a report with only fresh numbers. You’ll send an outdated report to your management, from which they’ll analyze and then make decisions—but it’s already too late. Your company needs to close last month’s books faster so you can create a timely report that allows your leadership to make timely decisions. 2. Disparate Data Sources Without data integration, you can’t identify causes of high variances through a big-picture lens. Sure, your management may analyze your report, but neither you nor your leadership will feel confident that data isn’t missing. You’ll need to integrate your data sources—such as your ERPs, GLs and HRISs—before you can create a complete variance analysis report to get the full picture. 3. Historical Budgeting Logic If you don’t know how previous budgets were set, you can’t deliver a report with any value to your management. Your variance analysis report derives its logic from the budget, so if each budget evolved from previous versions, you need to know the historical budgeting logic and your company needs to be able to retain budget calculations. Looking at and understanding the progression of budgets and variances will help you create a historically informed report which your management can trust. Variance Analysis Visualization Every variance analysis report should provoke questions. If your leadership doesn’t ask questions about your report, that’s a sign that it’s not well visualized. As a strategic advisor, how you illustrate your variance data and create your report—in a clear and easy-to-read presentation—should provide value to your organization, by spotlighting areas of improvement and subsequent actions to take. Variance Analysis Software When you’re inevitably asked, “What happened in December?” by using vertical alignment, conditional formatting, comments and thermometer charts in Excel, you’ll be able to answer your management team’s questions and provide them with the decision-making insights they need. With Vena’s Excel-based Variance Analysis software, you can automate your variance reporting. By consolidating your spreadsheet data and automating the addition of your actuals at the end of every period, your company can eliminate user errors, retain your calculations and distribute your variance analysis reports faster. Ready to start your own growth journey?