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What to check to find the difference between plan and budget

The year is over! We have rested. Most companies entered the new year with approved plans and budgets. After the holidays, all departments have to achieve goals, and the financial department track the performance. Let’s review what to compare to in time to notice abnormalities:

Structural or vertical: to determine the share of elements in the overall structure.

Dynamic (horizontal): to identify changes in the values over the calculation period in absolute and relative values.

Benchmarking - by industry, with its own best performance for the period etc. n.  

Factor analysis - to see the reasons for changes in qualitative and quantitative indicators.

Identify trends - to forecast future changes.

Calculate coefficients - to see adjustments for different conditions.

Detailed information about the methods of control over the execution of budget plans is provided in the full version of the article of Finoko web site.

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What is Cost of Goods Sold (COGS)?

When figuring out how much money a business has made from its products, COGS is a key factor. This is because COGS represents the total cost of all the items that a business sold, no matter how small the sale might have been. In other words, COGS includes the cost of everything that a business sells, even if the business only sells one unit of product. This includes the cost of materials, labor, and overhead expenses. It is easy to calculate direct material and labor cost but not that easy to properly allocate fixed costs such as production overheads, fixed salaries or rent.

As a result, COGS can be a very important part of a business's financial report. It can give a detailed overview of how much money a business has spent on different things, including inventory and real estate. 

Good management reporting software can help businesses track COGS and make sure that they are getting a fair price for their products. We recommend using the Finoko system for management reporting. This software allows businesses to track the costs of raw materials, labor, and other necessary expenses, as well as the cost of the end product in a number of different ways and can make more accurate reports than fiscal reporting systems.

Finoko can be very helpful in calculating a business’s gross margin. Gross margin is the percentage of revenue that a business generates after deducting the costs of goods sold and administrative expenses. A high gross margin indicates that a business is able to share a larger amount of revenue with its owners.

https://www.finoko.info/cost-of-goods-sold-cogs/

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If a department did not accomplish monthly plan, who is responsible?

When it comes to management accounting, performance is key. Companies need to ensure that their accounting methods and processes are effective in producing accurate financial information. 

As a business grows, it can often become difficult to keep track of all the costs involved in producing and selling goods and services. This is where responsibility accounting comes in. Responsibility accounting is a method of accounting that focuses on the individual or entity responsible for producing specific goods or services. By using responsibility accounting, businesses can more accurately track the costs associated with their products and services.

One of the benefits of responsibility accounting is that it can help businesses avoid double counting of costs. Double counting occurs when two or more parties claim ownership of the same item or service. By using responsibility accounting, businesses can avoid double counting of costs by tracking the costs of individual products and services. This can help businesses to more accurately budget their resources and make more informed decisions regarding their investments.

Traditional economies allocate economic costs in the form of economic benefits and losses based on the relative positions of different participants, or sectors, in the production process. In practice, business transactions are often conducted in a coordinated manner, in which allocating costs and benefits becomes complex. In such cases, business managers and controllers often use responsibility accounting to allocate costs and benefits among different business entities, or in the case of externalities, among different economic agents.

Finoko is a management accounting system that can help to setup a tree of metrics to track responsibility for current results reflecting business process of a company.

https://www.finoko.info/responsibility-accounting/

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Steps to prepare vertical analysis of your balance sheet

Vertical analysis is a method of breaking down your overall financial statement into different sections in order to better understand your business.

One of the most important aspects of preparing a vertical analysis is balancing your company's financial balance sheet. This involves identifying your company's assets, liabilities, and shareholders' equity. Once you have those figures, you can start to analyze your company's performance in different areas, such as profit, loss, revenue, and expenses.

Other important factors to consider when preparing a vertical analysis include your company's business model and competitive landscape. This information can help you determine how you can improve your Bottom Line Performance.

With all of this data in mind, you can then begin to make strategic decisions that will improve your company's bottom line. After all, a sound financial foundation is the foundation of a successful business.

https://www.finoko.info/balance-sheet-statement/

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The difference between horizontal and vertical analysis

In many ways, a financial balance sheet is a snapshot of a company's assets and liabilities at a specific point in time. A horizontal financial balance sheet shows assets and liabilities in dollars and cents on a net basis, while a vertical financial balance sheet puts assets and liabilities on an equal basis within each department or business area.

The difference between horizontal and vertical financial balance sheet analysis can be key to understanding how a company is performing and how vulnerable it may be to future business fluctuations. For example, a company's inventory may be more valuable standing alone on a horizontal balance sheet, but may be more risky if it belongs in the electronics department and is subject to price fluctuations in the electronics industry.

Understanding a company's financial structure and how it has been changing over time is an important part of investing. By understanding the different types of balance sheets and how they can be used to analyze a company's performance, investors can make better decisions and be more prepared for whatever comes next.

https://www.finoko.info/balance-sheet-statement/

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Analyzing a balance sheet with financial ratios

The financial statements are a snapshot of a company's financial condition at a certain point in time. In order to help make financial decisions and assess the company's health, it is essential to have a basic understanding of the company's balance sheet.

The table below summarizes some of the most important elements of a company's balance sheet.

ASSETS

Cash and Investible Funds

Property, Plant, and Equipment

Other Current Assets

Total Current Assets

LIABILITIES

Current Liabilities

Long-Term Debt

Other Liabilities

Total Liabilities

NET WORTH

Total Assets - Total Liabilities

A company's financial stability depends on its ability to generate income and repay its debts. The following financial ratios are commonly used to measure a company's financial performance.

The debt-to-equity ratio is a measure of a company's ability to debt financing. A high ratio indicates that a company is vulnerable to bankruptcy.

The interest coverage ratio is a measure of a company's ability to cover its interest costs by generating income.

https://www.finoko.info/balance-sheet-statement/

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P&L using cash method

For most startups and small size companies it is enough to use a cash method for management accounting. To make a profit and loss statement using this method the company records all money transactions in and out. Finoko app is a great tool to make this report automatically by loading bank transactions and registering cash income and payments.

The cash method of accounting is a way to record a business's financial transactions. The cash method of accounting is used when a business does not have to account for inventories. There are several benefits to using the cash basis accounting method in your business. First, it is simple and easy to use. Second, it is easy to track cash flow. Third, it allows you to better manage your business finances. Fourth, it is generally less costly to operate using the cash basis accounting method. Finally, it is a more accurate way to track your company's finances.

There are a few potential drawbacks to using the cash basis method of accounting. The first drawback is that the cash basis method could be misleading when it comes to accounting for business transactions. Transactions that take place over a period of several weeks or months could be reported on the basis of the cash received, even if a larger balance of cash was in fact available at the end of that period. 

Another potential drawback to using the cash basis method of accounting is that it can be difficult to reconstruct historical financial data using this method. Financial data that is reported on the basis of the total balance of cash at the end of a period will not reflect changes in that balance over the course of that period. In order to reconstruct historical financial data using the cash basis method, it will be necessary to reconstruct all of the individual transactions that took place during that period. This can be a time-consuming and cumbersome process.

https://www.finoko.info/profit-and-loss-statement/

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The Top 5 Benefits of Financial Planning

There are many benefits to having a financial plan or budget for your company, both for those who currently have one and for those who don’t. Here are five of the most important:

1. Better financial management. A financial plan will help you better track costs especially in times of economic turbulence.

2. Reduced risk. A financial plan can help you minimize your risks by providing a guideline. Although risk management is another topic for many issues it comes down to estimating and setting aside some reserves to cover potential risks.

3. Increased independence. Having a financial plan will help you manage your money and stay financially secure. Company without any debt is not a very common situation.Do you even consider such an approach to doing business?

4. Reach goals. The most important part of creating a financial plan is setting goals. You need to have specific, measurable goals in mind if you want to achieve them. Otherwise, it’s easy to get sidetracked and end up not reaching your goals.

5. Work as a team. Not many people think of the financial budget as a team building tool but it truly is. Clear understanding of planned incomes and expenses in a small team or between managers of departments in a big one is a key.

We consider Finoko as a “peacemaking” tool for shareholders in a small business. Countless times we encountered situations where shareholders have different opinions about the current company financial situation. Countless times shareholders take money from business at times when investments are needed or argue between each other about what should be done if a company has some cash in the accounts. Stay calm - use Finoko. 

https://www.finoko.info/features/corporate-budgeting/

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How to forecast cash flow?

Forecasting involves predicting future events, and can be used in any business. In order to forecast sales, cash, and cash flow for a business, you need to understand:

your customer base, 

you products dynamics, 

and pricing changes. 

You can use historical data to create a forecast, or you can use current market data to create a forecast. You can use financial statements, industry averages, and forecasts from other businesses to create a forecast. You can use a variety of analytical tools to create a forecast, such as prognostication software or market analysis software. Once you have created a forecast, you need to track it closely to make sure it is accurate.

By taking these steps, you can develop a cash flow forecast that will help you predict how much money your business will have available to generate sales.

Log your current sales and cash flow statistics for the past several months to get a sense of how your business is performing.

Create a cash flow forecast that projects how much money your business will have available to generate sales in the future. This forecast should include both gross and net income, and update monthly.

Use this cash flow forecast to help you plan your business’s sales strategies.

Finoko reporting system has a built-in forecasting tool that is using the Arima model. Using historical data it will identify trends, seasonal components and select the best regression model for your data automatically. The results of mathematical forecasts can be combined with any data that your company has and be used to adjust cash flows plans or budgets.

https://www.finoko.info/cash-flow-forecasting/

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USALI 12 What will be changed?

New version of Uniform System of Accounts for the Lodging Industry (USALI) expected at the end of 2022.

HFTP and  AHLA Sustainability Committee evaluated and enhances the Utilities-Schedule 9 in the USALI 11th version to turn into the brand new Energy, Water, and Waste (EWW) of the USALI 12th version. In the 12th version we expect to have a new Schedule 9 and new EWW metrics to align with present business metrics. 

The new metrics present improved monitoring and benchmarking of EWW cost and usage. Significant modifications from the 11th edition of USALI are reclassifying waste expenses from the Property Operations and Maintenance Schedule to the Energy, Water, and Waste (EWW) Schedule while also increasing Energy and Water with extra detailed accounts, descriptions and metrics.

Finoko reporting system using the ETL feature can help collect data from all software that is used in hotels and create reports according to USALI requirements.

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5 steps to prepare a sales budget

The first step is to identify the amount you need to achieve your desired sales results. Next, you need to estimate how much money your average sale will take and include that figure in your budget. Finally, you need to create a timeline to track your progress and make necessary adjustments as needed.

Example of steps that you’ll need to take in order to create a realistic budget:

Define your business’s goals. What do you want to achieve? Do you want to grow your business, increase sales, or reduce expenses?

Determine how much sales you expect to generate. This will help you understand how much money you’ll need to bring in to cover your costs.

Look at past sales results to get a sense of how much you need to bring in each month in order to achieve your goals.

Factor in potential out-of-pocket expenses – things like marketing expenses, product research, and product development – and factor those into your budget too.

Decide how much money you’ll want to set aside each month for expenses.

https://www.finoko.info/sales-budget/

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Restaurant Profit and Loss Statements (Restaurant P&L)

https://www.finoko.info/restaurant-profit-and-loss-statements-restaurant-pl/

What Is a Restaurant P&L?

A restaurant’s P&L statement summarizes the company’s financial performance over a given period of time. This document can reveal how much money a restaurant has made and lost, as well as show how profitable or unprofitable the business has been. It can be prepared according to USAR using Finoko web app.

Understanding and creating restaurant P&L statement can be a complex task, but with the right planning and execution, it can provide valuable insight into your performance. Here are a few tips to help you get started:

Chart your business’s overall performance over time. One key way to keep track of your performance is to create a chart or plot. This will help you visualize patterns in your sales and expenses, and make it easier to see how your business is performing over time.

Track your costs and revenues. In order to create a accurate P&L statement, you need to track your costs and revenues. This includes tracking your expenses for food, labor, and other supplies, as well as your sales of food and drinks.

Adjust your expenses as necessary. While it’s important to track costs and revenues, you’ll also need to make adjustments to your expenses as necessary. This includes making sure that your costs are appropriate for your  size and type, and that your revenues reflect your actual income.

Calculate your net.