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An Introduction to Financial Management
and ReportingDC Department of Small & Local Business
Development
John Pace, CPA, CVASenior Manager, Client Services
Steven Lyons, CPASupervisor, Client Services
December 12, 2013
Financial Management and Reporting
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John Pace, CPA, CVASenior Manager, Gelman, Rosenberg & Freedman CPAs
15 years of accounting and finance experience
Provides assistance to GRF clients in the capacity of temporary controller/chief financial officer, with duties such as cash flow planning and analysis, financial statement preparation, financial performance analysis, budgeting and bookkeeping.
Financial Management and Reporting
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Steven Lyons, CPASupervisor, Gelman, Rosenberg & Freedman CPAs
12 years of accounting and finance experience
Provides assistance to GRF clients in the capacity of temporary controller/chief financial officer, with duties such as cash financial statement preparation, budgeting, bookkeeping, financial performance analysis .
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Firm Bio
Gelman, Rosenberg & Freedman CPAs, located in the Washington, DC metropolitan region since 1981, is a professional services firm that provides clients with financial, tax and consulting solutions. For more than 30 years, our business has supported the financial and operational success of nonprofits locally, nationally and around the world. Our professionals also offer accounting and consulting services to government contractors, businesses, individuals and attorneys in need of advisory support.
Our mission, vision, values and philosophy provide a foundation upon which we strive to succeed. We want our clients to perceive Gelman, Rosenberg & Freedman as more than just accountants who deliver a once-a-year engagement. We seek to become trusted financial advisors who work throughout the year to provide clients with insights and expert advice.
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Agenda
Questions
Types of Financial Statements
Overview of Financial Statements
Common Reports
Cash vs. Accrual
Budgets
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Types of Financial Statements
Audit
Review
Compilation
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Sample Audit Report
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Sample Reviewed Report
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Sample Compiled Report
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Overview of Financial Statements
Financial statements offer a insight into the company’s financial health.
User of Financial Statements are potential investors, bankers, insurance agents, bond companies etc.
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Measure the activity showing how we got from one image to another (Income Statement or Statement of Activities)
Snapshot
Take a photo and capture the image (Balance Sheet or Statement of Financial Position)
Take a photo and capture the image (Balance Sheet or Statement of Financial Position)
December 31st
January 1st
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Nothing here about salary or living expenses
Moment in time
Assets are what you have
Liabilities are what you owe
Equity is the difference. It’s also the sum result of your whole history
Smith Consulting, Inc.
Balance Sheet
September 30, 2013
Assets
Checking account $ 1,000
Savings account 250
Total cash 1,250
Auto 7,000
Total Assets $ 8,250
Liabilities -
Car Loan 6,000
Equity 2,250
Total Liabilities and Equity $ 8,250
Balance Sheet - Basic
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Balance Sheet - Advanced
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Balance Sheet - Advanced
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Smith Consulting, Inc.Income Statement
For the Year Ended December 31, 2013
RevenueFees $ 10,000 Interest income 100
Total Revenue 10,100
ExpensesSalary 7,000 Travel 1,000 Supplies 300 Rent 200
Total Expenses 8,500
Net Income $ 1,600
Measures activity over time
How much cash do you have?
Who are the users of this report?Maybe bankers, owners, potential owners or
management
What do they want to know?Profitability, ability to repay
a loan, etc.
Income Statement-Basic
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Income Statement-Advanced
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Cash Flow Statement
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Equity Statement
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Questions?
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Common Internal Reports:
Budgets
Cash Projections
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Budgets
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Budget Process Developing a budget involves consideration of
strategic priorities, gathering data, articulation of assumptions and lots of communication. And a little math.
Using a budget involves clear reporting aligning budget categories with accounting data, more discussions and then making decisions.
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Budgets Are … Budgets are based on FACTS and ASSUMPTIONS
More about priorities than numbers
A roadmap for implementing the strategic plan
Budgets should tell a story. Are there any new activities or changes to existing activities?
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Budgets Are Not … Budgets are not law –budgeting is a totally different
concept than a government’s budget.
“Budgeted” doesn’t necessarily mean that the money is there
Budgets are not meant to be final – reality tends to get in the way
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What do you do when you get a budget report?
What should you do with budget reports?– Format can really vary so make sure you understand what the
numbers represent (esp. terms, dates and signs)– Help discover errors by making sure the numbers make sense -- do
they agree with your recollection of what actually happened?– Use them to keep program on track or identify things that will go
over/under budget– Ask questions!
Internal Reports: Comparisons to Budget
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Smith Consulting, Inc.RBI Program
January to August 2013
YTD YTD YTD 2013 2013
Actual Budget Variance Budget Remaining
Expenses
Salary 2,300 3,000 700 6,300 4,000
Travel 800 800 - 1,600 800
Supplies 300 150 (150) 250 (50)
Consulting - 100 100 200 200
Total Expenses 3,400 4,050 650 8,350 4,950
Sample Budget vs. Actual Report Let’s look
through the terms and information presented
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Content will vary
Variance between what?
Is a positive budget variance good or bad?
A Different Budget vs. Actual Report
Smith Consulting, Inc.RBI Program
January to August 2013
August YTD YTD 2013
Actual Actual Budget Budget Variance Expenses
Salary 1,000 2,300 3,000 6,300 700 Travel - 800 800 1,600 - Supplies 200 300 150 250 (150)Consulting - - 100 200 100
Total Expenses 1,200 3,400 4,050 8,350 650
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Percent of what?
Why is salary less than 50%
Do other percentages make sense?
Another Budget Report Format…
Smith Consulting, Inc.RBI Program
January to August 2013
August YTD 2013 Budget % of
Actual Actual Budget Variance Budget Expenses
Salary 1,000 2,300 6,300 4,000 37%Travel - 800 1,600 800 50%Supplies 200 265 250 (15) 106%Consulting - - 200 200 0%
Total Expenses 1,200 3,365 8,350 4,985 40%
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Other Internal Reports: Projections
What time period is projected?
How were the projections done?
Smith Consulting, Inc.RBI Program
January to August 2013
YTD Remaining Projected 2013 2013
Actual Projected 2013 Budget Variance Expenses
Salary 2,300 3,000 5,300 6,300 (1,000)Travel 800 800 1,600 1,600 - Supplies 300 150 450 250 200 Consulting - 100 100 200 (100)
Total Expenses 3,400 4,050 7,450 8,350 (900)
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Cash Projections
Starts with actual cash balance and typically goes out 6 months
Often called “cash flow report” but that is not what accountants mean when they use that title
Smith Consulting, Inc.
3 Month Projected Cash Flow as of 8/31/13
2013 2013 2013
September October November
Beginning Cash $ 68,300 $ 62,500 $ (13,000)
Cash In
Contributions 86,500 6,300 127,000
Ticket Sales 5,000 4,500 6,900
Total Cash In 91,500 10,800 133,900
Cash Out
Regular monthly (80,000) (80,000) (80,000)
Project costs (15,000) (4,000) (20,000)
Loan payment (2,300) (2,300) (2,300)
Total Cash Out (97,300) (86,300) (102,300)
Change during the Month (5,800) (75,500) 31,600
Ending Cash $ 62,500 $ (13,000) $ 18,600
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Cash Projections (cont.)
Note that “cash in” and “cash out” are not the same as revenue and expense
The purpose is to identify times that the cash balance might be a problem -- such as during October in this example
Smith Consulting, Inc.
3 Month Projected Cash Flow as of 8/31/12
2013 2013 2013
September October November
Beginning Cash $ 68,300 $ 62,500 $ (13,000)
Cash In
Contributions 86,500 6,300 127,000
Ticket Sales 5,000 4,500 6,900
Total Cash In 91,500 10,800 133,900
Cash Out
Regular monthly (80,000) (80,000) (80,000)
Project costs (15,000) (4,000) (20,000)
Loan payment (2,300) (2,300) (2,300)
Total Cash Out (97,300) (86,300) (102,300)
Change during the Month (5,800) (75,500) 31,600
Ending Cash $ 62,500 $ (13,000) $ 18,600
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Cash vs. Accrual Accounting
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Cash vs. Accrual Accounting Ex: In October 2010 a customer is invoiced for $1,000.
The check is sent to us in March 2011 What is the 2011 Revenue
Ex: In Dec 2010 you rented a meeting room to host a seminar. In Jan you got a bill from the facility for $800 and you paid it in Feb 2011. What is the 2011 expense?
Pay particular attention to this issue when trying to project revenue or when comparing budget to actual expenses
John Pace, Senior Manager, Client ServicesEmail: [email protected]
Steven Lyons, Supervisor, Client Services Email: [email protected] Telephone: (301) 951 – 9090Website: www.grfcpa.com
Questions & Answers