1-1 HOW DOES THE SYSTEM OF INTERLOCKING BUDGETS WORK?
A final point is that the budget must address any changes in the type of customer to whom sales will be made. Thus, direct labor must be shown in the budget as a fixed production cost, within certain production volume parameters.
1-2 WHAT DOES A SAMPLE BUDGET LOOK LIKE?
A third option is shown at the bottom of the display that summarizes all purchases by commodity type. The statistics at the bottom of the page attempt to compare marketing costs with sales; however, it should be treated as only Exhibit 1.8 Sales Department budget for the fiscal year ending xx/xx/07.
1-3 HOW DOES FLEX BUDGETING WORK?
The fourth and final part of the budget calculates any changes in the cost of capital that will occur if one of the three financing options is selected. Accordingly, a reduction in the cost of capital will mean that projects with marginal cash flows will become more acceptable, while the reverse will be true for higher capital costs.
1-4 WHAT BEST PRACTICES CAN I APPLY TO THE BUDGETING PROCESS?
These flags can be added to the front of the budget model so that problems will be readily apparent to the reader. Many expenses in the budget will vary in accordance with changes in various activities within the firm.
1-5 HOW CAN I INTEGRATE THE BUDGET INTO THE CORPORATE CONTROL SYSTEM?
However, there is also a problem with linking employee compensation to the performance levels set out in the budget. The solution is to link the budget to a sliding performance scale that contains no 'hard'.
1-6 HOW DO THROUGHPUT CONCEPTS IMPACT THE BUDGET?
This interpretation of the budget model results in a change to the budgeting format, which is shown in appendix 1.22. It is entirely possible that the limited resource is not in the production area or the marketplace at all (the two most common areas), but rather in the sales department.
2-1 HOW DOES A CONSTRAINED RESOURCE IMPACT CAPITAL BUDGETING DECISIONS?
Of the four work centers, the capacity of center C is the smallest, namely 80 units per hour. The company cannot produce more than 300 tables per day because this maximizes the capacity of the paint shop.
2-2 WHAT IS THE TRUE COST OF A CAPACITY CONSTRAINT?
According to the theory of constraints, all management activities focus on managing the operation of bottlenecks, or limited resources. Despite subsequent efficiency improvements at work centers A and B, total system output remains at 80 units per hour, due to the constraint imposed by work center C.
2-3 HOW DO I IDENTIFY A CONSTRAINED RESOURCE?
Conversely, if we intentionally reduce the capacity of the target work center (not recommended as a testing technique!), overall throughput decreases. If the true constraint is upstream of the false constraint, the inventory buffer before the false constraint will disappear.
2-4 WHEN SHOULD I INVEST IN A CONSTRAINED RESOURCE?
Using this proactive approach is most useful when a work center requires significant additional investment or highly skilled personnel to increase capacity. By requiring the constraint to be focused in this area, management can profitably spend their time ensuring that the work center is fully utilized.
2-5 SHOULD I INCREASE SPRINT CAPACITY?
If surge capacity declines to an excessive degree, it is likely that occasional upstream production problems will eventually lead to shortages at the cap and a reduction in throughput. This may well require additional capital investments to maintain an adequate level of sprint capacity.
2-6 HOW CLOSELY SHOULD I LINK CAPITAL EXPENDITURES TO STRATEGY?
If this phenomenon continues for some time, management may be blindsided by a sudden drop in sprint performance. To guard against the onset of this creeping capacity reduction, the accountant should monitor uncapped usage levels and alert management when there is a prolonged sprint capacity reduction that does not subside.
2-7 WHAT FORMAT SHOULD I USE FOR A CAPITAL REQUEST FORM?
2-8 SHOULD I JUDGE CAPITAL PROPOSALS BASED ON THEIR DISCOUNTED CASH FLOWS?
First and foremost, there is no consideration of how each requested project fits into the entire production system—instead, most requests involve the local optimization of specific work centers that may not contribute to the overall throughput of the company. Second, there is no consideration of the limited resource, so managers cannot say which funding requests will lead to an improvement in the efficiency of that Exhibit 2.3 Capital Budget.
2-9 HOW DO I CALCULATE THE COST OF CAPITAL?
The following example shows the method by which Canary Corporation's weighted cost of capital is calculated. Combining these into the weighted average calculation shown in Exhibit 2.6, we see that the weighted cost of capital is 9.75 percent.
2-10 WHEN SHOULD I USE THE INCREMENTAL COST OF CAPITAL?
If a significant change in the current mix is anticipated, the new proportion should be factored into the weighted cost of capital calculation. However, the weighted cost of capital does not only include debt; it also includes equity, and this cost changes over time.
2-11 HOW DO I USE NET PRESENT VALUE IN CAPITAL BUDGETING?
Although depreciation is really only an estimate, it has a net cash flow impact caused by a reduction in taxes, and thus should be included in the net present value calculation. The net present value approach is the best way to see if a proposed capital investment has a sufficient rate of return to justify the use of any funds required.
2-12 WHAT PROPOSAL FORM SHOULD I REQUIRE FOR A CASH FLOW ANALYSIS?
Accordingly, the impairment on the purchase of capital equipment should be offset against the cash flow caused by income taxes. Also, if a project is for a new product, management may consider it particularly risky and will therefore require a higher hurdle rate.
2-13 SHOULD I USE THE PAYBACK PERIOD IN CAPITAL BUDGETING?
We can use this format to reach the end of year 4; we know the cash flows will pay back the investment sometime in year 5, but we don't have a month-by-month cash flow that tells us exactly when. Since only $250,000 of net investment remained at the end of the fourth year, and this is the same monthly amount of cash flow in the fifth year, we can assume that the payback period is 4.1 years.
2-14 HOW CAN A POST-COMPLETION ANALYSIS HELP ME?
We compare net actual and projected values at the end of the report so management can see if there are any problems that deserve correction. In this case, the project's initial costs, both for capital items and working capital, were so far over budget that the net present value is completely in the red.
2-15 WHAT FACTORS SHOULD I CONSIDER FOR A SITE SELECTION?
It is often worthwhile to review existing sites to see how much space can be consolidated or if some items can be sent for cheaper long-term storage. Finally, it is necessary to collect on overdue invoices, which requires the sales staff to be used to make collections, handle customer deductions, optimize the use of the collection staff and involve legal assistance when necessary.
3-1 HOW DO I CREATE AND MAINTAIN A CREDIT POLICY?
So relaxing or tightening credit policies can have a dramatic impact on profits when product margins are low. If a company operates internationally, its credit policy can be tailored to the business cycles of specific countries.
3-2 WHEN SHOULD I REQUIRE A CREDIT APPLICATION?
When customers submit orders, credit staff access this information, verify the aging status of the items ordered, and adjust credit policies as necessary. To speed up this process, consider converting the credit application to PDF format and emailing it to the customer.
3-3 HOW DO I OBTAIN FINANCIAL INFORMATION ABOUT CUSTOMERS?
National Agricultural Credit Conference National Paper Packaging Credit Group National Christian Suppliers Paper and Film Nationally Dressed. National Credit Group for Home Centers National Suppliers to Window Manufacturers National Home Appliance/Consumer Credit Group.
3-4 HOW DOES A CREDIT GRANTING SYSTEM WORK?
Another example is setting up a system where the amount of credit granted is a percentage of the customer's reported level of equity. An existing customer's order exceeds his credit limit by less than 20 percent and there is no history of payment problems.
3-5 WHAT PAYMENT TERMS SHOULD I OFFER TO CUSTOMERS?
If the credit insurance policy specifies a maximum credit limit per customer, the insurance company must decide to increase the credit limit or the company can assume the uninsured risk of granting additional credit. The cost of credit insurance can exceed ½ percent of the invoiced amount, which varies considerably depending on the perceived risk of each customer.
3-6 WHEN SHOULD I REVIEW CUSTOMER CREDIT LEVELS?
Credit insurance is available for domestic credit, export credit and cover for customized products before delivery, in case customers cancel orders. Also, goods exported to countries with a high perceived level of political risk will not receive credit insurance.
3-7 HOW CAN I ADJUST THE INVOICE CONTENT AND LAYOUT TO IMPROVE COLLECTIONS?
The typical accounting computer system automatically sets the invoice date to the current date (invariably later than the invoice date) and adds a default payment terms date that is stored in the customer file. You can then copy the signature images from the websites and paste them directly onto an invoice, providing the customer with a receipt on the invoice.
3-8 HOW CAN I ADJUST BILLING DELIVERY TO IMPROVE COLLECTIONS?
The solution is to ask customers when they process checks and make sure the company issues invoices well in advance of those dates so they get paid as soon as possible.
3-9 HOW DO I ACCELERATE CASH COLLECTIONS?
The basic process is to scan a check into a check reader, which scans the magnetic ink characters on the check into a vendor-supplied software package. Another use of padlock truncation is to enter system verification information that the customer provides to the company by phone or fax.
3-10 SHOULD I OFFER EARLY PAYMENT DISCOUNTS?
One downside is the credit card service fee charged by the bank, which usually results in a 2 to 3 percent discount. The system has the added benefit of eliminating the deposit slips and per-transaction deposit fees typically charged by banks.
3-11 HOW DO I OPTIMIZE CUSTOMER CONTACTS?
The concept behind this approach is to divide or stratify all past due accounts receivable and concentrate the majority of the collection staff's time on the largest invoices. One solution is to measure the performance of collection staff to determine which are the best, then assign them the most difficult customers.
3-12 HOW DO I MANAGE CUSTOMER CONTACT INFORMATION?
By allocating the collection staff's time in this way, it is possible to collect overdue invoices more quickly. It can also be connected to an autodialer to reduce the time collection staff spend establishing connections.
3-13 HOW DO I INVOLVE THE SALES STAFF IN COLLECTIONS?
Another possibility is to regularly email the accounts receivable aging report directly to the sales staff so they can quickly determine the payment status of their customers. A negative way to involve the sales force in collections is to periodically issue a report containing bad debts by salesperson.
3-14 HOW DO I HANDLE PAYMENT DEDUCTIONS?
This approach was originally designed to take the biggest deductions out of the debtor list; but more importantly, it allows the collection staff to investigate the reasons why the largest deductions occur and put a stop to them. This approach may initially have the reverse result of actually increasing the number of outstanding deductions on the books, as debt collection personnel now focus on the largest and therefore most time-consuming deduction problems.
3-15 HOW DO I COLLECT OVERDUE PAYMENTS?
If a customer has a history of withholding payment based on a disputed item, act quickly and insist on immediate payment of the undisputed balance until the customer understands that this scam will no longer work. The best solution is to write the promised payment information in a letter or e-mail and send it to the customer.
3-16 WHEN SHOULD I TAKE LEGAL ACTION TO COLLECT FROM A CUSTOMER?
Even if a court issues a judgment against a customer and in favor of the company, the customer may attempt to illegally dispose of company assets, leaving the company unable to take action. It is especially effective when used to freeze the customer's bank account, as the receiving bank will block all account access at once.
4-1 WHY DO I NEED CONTROLS?
The appropriate use of controls has become an increasingly important part of the accountant's role, given the highly publicized misuse of company resources that has been reported in the press in recent years. All parts of a business contain some control weaknesses, while some harbor significant areas of risk, particularly the misappropriation of company assets or misrepresentation of financial results.
4-2 HOW DO I CONTROL ORDER ENTRY?
When customers return products, it is possible that the return was caused by an error in the order entry or shipping process. To investigate this potential problem, compare the return documents to the customer order and the sales order.
4-3 HOW DO I CONTROL CREDIT MANAGEMENT?
If order entry staff are still completing a sales order based on the customer's order, rather than entering this information into the computer for automatic distribution throughout the company, then an additional check is to compare the information on the sales order to the original sales order. customer purchase. , to ensure that the order information is correctly transcribed. Finally, customers' financial situation will inevitably change over time, making the original credit review obsolete.
4-4 HOW DO I CONTROL PURCHASING?
A useful control is to build several flags into the computer system that identify those customers whose ordering or payment habits indicate a change in their financial situation. In addition, a regularly scheduled credit check of the largest customers can detect initial credit problems.
4-5 HOW DO I CONTROL PROCUREMENT CARDS?
I have completed and attached the Missing Purchase Card Receipt form for all line items for which I do not have receipts. I have circled the issues that are currently being disputed by suppliers. I have signed and dated this account statement.
4-6 HOW DO I CONTROL PAYABLES?
The check signer must also compare the backup information attached to each check with the check itself, the name of the payee, the amount to be paid and verify the expiration date. This is an important control point for companies that do not use purchase orders, as the check writer represents the only supervisory review of purchases.
4-7 HOW DO I CONTROL INVENTORY?
Otherwise, the warehouse staff will quickly lose track of the moving transactions, resulting in the complete corruption of the inventory database. The valuation of inventories may also be affected by the application of the lower-of-cost-or-market (LCM) rule, whereby inventories cannot be valued higher than the market price on the valuation date.
4-8 HOW DO I CONTROL BILLINGS?
Accordingly, part of the standard month-end closing process should include an investigation of all journal entries in these accounts. This should include a clear representation of the amount owed, the account number and the due date.
4-9 HOW DO I CONTROL CASH RECEIPTS?
The cashier then enters the receipts in the cashier's receipts journal, prepares the daily deposit slip, and sends the checks and cash to the bank. Also, a clerk other than the one who originally entered the cashier's receipts should reconcile the receipts in the cashier's office with the copies of the receipts.
4-10 HOW DO I CONTROL PAYROLL?
This is because an employee can steal cash by taking money from the cash register and recording the refund on the cash register's tape. It is also helpful to have someone in addition to the payroll clerk compare the payroll records to the approval pay documents to ensure that the correct wage rates are being used.
4-11 HOW DO I CONTROL FIXED ASSETS?
If the company owns fixed assets that can be easily moved and have a significant resale value, then there is a risk of them being stolen. The following table indicates the section number where the answers to each question can be found:.
5-1 HOW DO I CALCULATE THE BREAKEVEN POINT?
The area between the fixed cost line and the variable cost line is the total variable cost at different volume levels. The area below the income line and above the variable cost line is the income tax expense at various levels of sales.
5-2 WHAT IS THE IMPACT OF FIXED COSTS ON THE BREAKEVEN POINT?
For example, as noted in Figure 5.2, the area under the fixed cost line is the total fixed costs that must be covered by product margins. Finally, the area below the income limit and above the income tax limit is the amount of net profit that can be expected at different levels of sales.
5-3 WHAT IS THE IMPACT OF VARIABLE COST CHANGES ON THE BREAKEVEN POINT?
In Figure 5.3, the maximum amount of profit a company can earn is at the sales level just before additional fixed costs are incurred because the increase in fixed costs is so high. Although incremental costing does not always result in as large a cost increase as shown in Figure 5.3, it is certainly an important point to consider when increasing capacity to handle additional sales volumes.
5-4 HOW DO PRICING CHANGES ALTER THE BREAKEVEN POINT?
The breakeven chart previously mentioned in Exhibit 5.5 is a good example of what breakeven analysis really looks like in the market. Given the fluid nature of the model, it is reasonable to revise it periodically in light of ongoing changes in the marketplace to update assumptions and make better calculations of breakeven points and expected profit levels.
5-5 HOW CAN THE PRODUCT MIX ALTER PROFITABILITY?
The main task that remains is to fill in the present value for each of the interest rates shown in the results table. This creates a pop-up data entry screen, as shown in Figure 5.12, which asks for the source of the number of periods in the present value calculation (which is cell C5), as well as the source of the interest rates to be used. in the same calculation (which is cell C4).
5-8 HOW DO I CALCULATE COST VARIANCES?
This is based on the actual price paid for the direct labor used in the production process, minus its standard cost, multiplied by the number of units used. It is usually reported to production managers and human resources - the production manager because this person is responsible Exhibit 5.11 Reformatting cells in two-variable table.
5-9 HOW DO I CONDUCT A PROFITABILITY ANALYSIS FOR SERVICES?
Exhibit 5.17 shows how the billing rate, full hourly labor cost, and percentage charged can be combined to reveal a complete picture of profitability for salaried employees. Chubby is currently profitable on an hourly basis, a break-even analysis reveals that the percentage charged is much higher Exhibit 5.16 Calculation of full hourly labor costs.
5-10 HOW ARE PROFITS AFFECTED BY THE NUMBER OF DAYS IN A MONTH?
The gross margins reported for the employees in Exhibit 5.17 should be extrapolated by the total number of hours worked during the reporting period to obtain the total gross margin earned during that period. Overhead is then compared to this figure to determine the profit or loss for the period, as shown in Table 5.19.
5-11 HOW DO I DECIDE WHICH RESEARCH AND DEVELOPMENT PROJECTS TO FUND?
The standard approach is to apply a discount rate to all possible projects, and then select those with the highest net present value (NPV). The ECV formula requires one to multiply the net present value of a potential project by its probability of commercial success, minus the cost of commercialization, and then multiply the result by the probability of technical success, minus the cost of development.
5-12 HOW DO I CREATE A THROUGHPUT ANALYSIS MODEL?
The amount of planned production as well as the amount of potential sales is shown in the "Units of Scheduled Production" column of the throughput model. The model makes it easy to determine the exact amount of system improvement (or degradation) that occurs by incrementally changing one element of the production system.
5-13 HOW DO I DETERMINE WHETHER MORE VOLUME AT A LOWER PRICE CREATES MORE PROFIT?
When reviewing a proposal with this model, one must examine the impact of the decision on the incremental change in net profit caused by the change in throughput minus operating costs divided by the change in investment. Specifically, due to the low flow of dollars per minute, the planned production of the plasma TV 4200 had to be reduced from 180 units to only 25, almost eliminating the flow of this product.
5-14 SHOULD I OUTSOURCE PRODUCTION?
5-15 SHOULD I ADD STAFF TO THE BOTTLENECK OPERATION?
Due to scheduling issues, the employee must be assigned to a limited resource for a full eight-hour workday, even though she only needs a total of one hour per day. The main problem is that an employee on a limited resource will only work one hour out of eight, which is a 12.5% utilization rate that will certainly attract the attention of accountants.
5-16 SHOULD I PRODUCE A NEW PRODUCT?
By replacing the old model with the new model, we arrive at the results shown in Exhibit 5.25. Furthermore, the throughput per minute on the new product has decreased so much that it is now ranked as the third most profitable product, Exhibit 5.26 The New Product Addition Decision (Higher Throughput/Minute).
6-1 HOW CAN I AUTOMATE TIME CLOCK DATA COLLECTION?
By doing this, the payroll staff has no key punching duties whatsoever, the online system can alert employees of obvious key punch errors on the spot, and timekeeping data is available to management much more quickly. An alternative is to build an internal web-based system, which may be more useful in companies that have closely integrated their timekeeping systems with a postal invoicing system.
6-2 HOW DO I COLLECT TIME INFORMATION BY TELEPHONE?
Under this approach, employees call up a website that simulates a time slot and use it to enter their work hours. Using one of these outsourced solutions is particularly attractive if the payroll processing function is already outsourced, as the supplier can automatically transfer input data directly to their payroll application, resulting in even less work of payroll processing by the payroll department.
6-3 HOW CAN I SIMPLIFY PAYROLL DEDUCTIONS?
Another alternative is to eliminate certain types of benefits, such as supplemental life insurance or 401(k) loans, in order to eliminate related deductions. Either of these approaches to the problem will reduce the number or timing of deduction changes, thereby reducing the workload of payroll staff.
6-4 HOW DO EMPLOYEES ENTER THEIR OWN PAYROLL CHANGES?
Self-service portals can also be constructed for managers who can enter a different set of information into the payroll system. If a manager wants to give an employee a disproportionately large salary increase, the system should alert the payroll staff or a senior manager of this increase, who must approve it before the salary database is updated with the new information.
6-5 HOW DO I AUTOMATE PAYROLL FORM DISTRIBUTION?
Using this approach, no one has to turn to payroll personnel for the most recent copy of a form. Further, payroll staff can regularly update the PDF forms on the intranet site, so there is no risk of someone using an old, outdated form.
6-6 SHOULD I PAY EMPLOYEES VIA DIRECT DEPOSIT?
Some companies also use sweepstakes and other promotional devices to reward those employees who switch to direct deposit. Implementing direct deposit requires transferring payment information to the company's bank in the appropriate direct deposit format, which the bank uses to transfer money to employee bank accounts.
6-7 HOW DO PAYCARDS COMPARE WITH PAYMENTS BY DIRECT DEPOSIT?
When paying an employee via direct deposit, the first payment to the new employee is by check, as the bank wants to book the first direct deposit transaction in advance. However, look for payroll cards to gradually make inroads into direct deposits and payroll over the next few years.
6-8 WHAT ISSUES SHOULD I CONSIDER WHEN SETTING UP A PAYCARD PROGRAM?
6-9 HOW DO I MAKE ELECTRONIC CHILD SUPPORT PAYMENTS?
By going fully electronic, it's much easier to make automatic, recurring support payments on time. To learn more about the process of setting up recurring electronic child support payments, the National Automated Clearing House Association has posted an excellent ``User's Guide to Electronic Child Support Payments'' online, located at http://ecsp.nacha. org/resources.html.
6-10 HOW DO I AUTOMATE PAYROLL REMITTANCES?
6-11 SHOULD I OUTSOURCE PAYROLL?
Again, many smaller in-house payroll systems don't have a report writing package, so this can be a real advantage. A study commissioned by ADP and independently conducted by PriceWaterhouseCoopers shows that the total cost of outsourcing can be 30 percent lower than the cost of in-house payroll processing.
6-12 CAN I OUTSOURCE EMPLOYMENT VERIFICATIONS?
In short, there are many good reasons for a company to outsource its payroll function to a qualified supplier. Job Count charges employers $0.25 per active employee per year, as well as a fee of between $4 and $5 for each social services verification.
6-13 CAN I OUTSOURCE BENEFITS ADMINISTRATION?
If they also want salary information, the employee must use their PIN number to create a salary key code (either through the website or over the phone), which is good for one-time access to their salary information. If the outside party is a low-volume user of The Work Number, they will pay $13 for each employment verification and $16 for each salary verification, while a higher-volume user will pay $11 and $14, respectively.
6-14 HOW MANY PAYROLL CYCLES SHOULD I HAVE?
As a result, it is beneficial to closely examine the payroll and benefits administration provider's financial health, local operational staff and operational procedures to ensure a close match likely to result in a comfortable long-term relationship. It is also useful to discuss the granting of advances with your payroll staff so that they are prepared for the likely increase in advance requests.
6-15 HOW CAN I REDUCE THE NUMBER OF EMPLOYEE PAYROLL–RELATED INQUIRIES?
Answer: If you leave the company voluntarily, you will be paid as part of the next ordinary salary. The accountant must determine the type of inventory accounting system to use, the necessary controls to ensure that costs are properly recorded, and a set of metrics to monitor inventory levels.
7-1 HOW DO I MANAGE INVENTORY ACCURACY?
The issue of most immediate importance is how to obtain assurance about the accuracy of inventory so that inventory valuation can be included in the financial statements. Have warehouse staff continuously count blocks of inventory using this report.
7-2 HOW DO I IDENTIFY OBSOLETE INVENTORY?
If the computer system includes a BOM, there is a good chance that it will also generate a "where used" report that lists all the BOMs to which the inventory item is applied. If the report for the item does not indicate "where it was used", the part is probably no longer needed.
7-3 HOW DO I DISPOSE OF OBSOLETE INVENTORY?
By doing this, most of the excess inventory will still be parked in the warehouse when the contractors are away. This creates more storage space in the warehouse, so that the space can be used for other purposes.
7-4 HOW DO I SET UP A LOWER OF COST OR MARKET SYSTEM?
In the example, the numbers in the first six columns are used to derive the upper and lower limits of the market values that will be used for the lowest cost or market calculation. The lowest cost or market calculation is likely to be made at such irregular intervals that the inventory accountant forgets how the calculation was made in the past.
7-5 WHICH INVENTORY COSTING SYSTEM SHOULD I USE?
Have the accounting staff expense the value of the write-down in the accounting records. This results in a rolling cumulative index linked (hence the name) to the index derived in the previous year.
