Structural and analytical management method
As practice has shown, a significant part of the entrepreneurs who attended my regular seminars “Management Accounting and Budgeting. A new look at the management of business economics ”, when meeting with me, they say something like this:“ Everything is clear, everything is simple, but for some reason it’s impossible to organize accounting and planning in your organization ”.
It does not work out for various reasons: someone cannot separate us from current expenses, someone confuses basic staff with administrative ones, and someone is still not “friendly” with very convenient Excel program. Today’s conversation is for those who would like to independently “put” management accounting, budgeting and planning systems in their spreadsheets at their enterprise. Recall that the “Rule of Five Wallets” recommends that we bear the costs of the resources we attract in the following forks:
So, open, clean Excel sheet and start working. I recommend doing this as follows. In the columns we “go”:
a) the names of our products / services and the various incomes and expenses for these products / services;
b) we need this column to calculate various coefficients;
c) a column summarizing all monthly figures;
d-o) actual (or planned) data by months.
That is approximately as follows:
It turns out that the tables “Sales volume”, “Price”, “Revenue”, etc., are formed one after another according to the necessary calculations. The names of the tables I have indicated are not always (not in every business) will correspond to the given example. I said earlier and remind you again: every business, every organization is unique, and the construction of all economic systems is individual. It depends on many factors:
goals and objectives of the business;
goals and objectives of business owners (Yes! These can be different goals and objectives!);
organization age, etc.
In the example above, the first table lists the quantitative sales data for our products, then the prices for these products, and the third table calculates the gross revenue from sales (the quantity multiplied by the price). According to the “Five Wallets Rule”, we need to highlight what we did not produce ourselves — someone else’s value or, as I call it, impotence. This may be one table, as in our example, or maybe more if the cost is made up of several components, for example, raw materials and “star” labor.
In any case, our task is to form as a result the value created by our business (in the table – gross income). Already at this stage, you can use the second column to calculate some coefficients, in particular – product margins and sales profitability. Once we have formed a gross income, it is necessary to calculate the expenses of our wallets. In the first place – the current spending wallet and the wage spending wallet.
In our conditional example, we saw that after all the expenses incurred on development and on the income of the owner (BR + BS), 23% remained, instead of the minimum 30%. This happened primarily due to overspending on the wages of the AUP (at least 7%, the maximum of the AUP wallet – 17%). And if we recall that the total cost of managers is recommended to “keep” at the level of 50% of the cost of core staff, the cost overrun is more than 10%. In addition, the current spending budget of 26% also leaves room for optimization.
It is clear that this example is conditional, the figures are made-up, but you can build your economic model using the same algorithm and calculate your coefficients. If you still have questions in the process of working on the model, you can ask me personally at firstname.lastname@example.org or sign up for my training seminar by writing a letter to the same e-mail.