Unit 5: Controlling Reports Contents: We will discuss the reports in their financial accounting context: Financial Reports Cash management reports Company analysis and planning

Controlling Reports: Unit Objectives After completing this unit, you will be able to: Discuss the effect of standard processes in SAP Business One on controlling reports. Decide when to use each report. Interpret typical report data.

Controlling Reports: Course Overview Diagram Controlling Reports Topic 1: Financial Reports Topic 2: Cash Management Reports Topic 3: Company Analysis and Planning

Controlling Reports: Business Example You are implementing SAP Business One at a new customer, OEC Computers. Your main contact at the customer site is Maria the accountant. You have almost completed the system setup and you are now discussing some controlling tools that Maria will use periodically. You give Maria some guidelines regarding the purpose and the outcome of each report. The reports will help Maria to see the big picture of the business and to control financial processes internally and externally.

Financial Reports Controlling Reports Topic 1: Financial Reports Topic 2: Cash Management Reports Topic 3: Company Analysis and Planning

Financial Reports: Topic Purpose After completing this topic, you will be able to: Discuss the effect of standard processes in SAP Business One on Financial Reports: Balance Sheet Trial Balance Profit and Loss Describe when to use each report. Interpret typical report data.

Financial Reports: Business Example You review the Financial Reports with Maria: Maria mentions that you discussed the influence of the Period-End Closing on the Financial Reports: Balance Sheet and Profit and Loss. This is because you usually issue the Financial Reports at the last day of each financial year/ period to get the financial status of the company. You demonstrate to Maria the financial reports in SAP Business One. You then discuss the matching a controller does between the financial reports and other reports before closing a period.

Financial Reports: Question Balance Sheet: Assets: Fixed Assets:10.04% Current Assets:89.96% Total Assets: 100% From a financial controller’s point of view – What are the consequences of this result on the financial status of the company? Where is the money invested? At the end of the year you issue the Balance Sheet report. You present the report in a summarized form. For the Assets Drawer you see the following result:

Chart of Accounts Structure in Association with Financial Reports Balance Sheet Accounts Accounts Payable Account Income Account Period End Closing Balance Sheet Profit and Loss Statement Financial Reports Trial Balance Profit and Loss Accounts General Ledger Level 1 Assets Liabilities Cap. + Res. Turnover Cost of Sales Operating C. Non-Operating Tax + Extr. Bank account Account Type

Balance Sheet DatesUp to a certain date Drawers/ Type All Balance Sheet Accounts: Assets, liabilities, and owner’s equity accounts Calculation Run on the account balances of the Balance Sheet accounts and summarizes their values: Total Assets = Total Liabilities + Equity. Also: Relative percentage of each balance in the company’s assets, liabilities, and equity set. Each first-level title (drawer) equals 100 %, and its related titles and active G/L accounts display their relative percentage. Example of documents and accounts affecting the report A/R Invoice - Accounts receivables, Sales tax account. Outgoing Payment - Bank account. Good Receipt PO - Inventory account The Balance Sheet presents the financial position of a business, the company’s value.

Trial Balance DatesSelected period Drawers/ Type Selection from: All accounts (Profit and Loss and Balance Sheet) All business partners master data. Calculation For each account: total debit and credit amounts, and the ending balance = debit amount – credit amount + opening balance amount. For the entire report: if the trial balance includes all the accounts in a complete period, the debit and credit side totals must be equal. Total report balance = 0 (the same as in each and every journal entry). Example of documents and accounts affecting the report A/P Invoice - Vendor, Accounts Payable account, Expense/ Clearing/ Inventory account, Output Tax account. The Trial Balance displays a summary of all accounts and/or business partner balances. Can comprise a particular cross section.

Profit and Loss Statement DatesSelected period Drawers/ Type All Profit and Loss Accounts: The last 5 drawers: Revenues, Cost of Sales, Expenses, Financing, and Other Revenues and Expenses Calculation The balances of the Expense accounts will be subtracted from the balances of the Revenue accounts to come up with the profit or the loss for the fiscal year/ selected period. Example of documents and accounts affecting the report A/R Invoice - Income account. A/P Invoice - Expense account. The Profit and Loss Statement shows the profit (or loss) of your business for the fiscal year/ selected period. It explains the change in the company’s value.

Financial Reports: Reflection Question Total Assets = Total Liabilities + Equity. How is the calculation balanced if the report considers only the Balance Sheet accounts? The Balance Sheet calculation is:

Financial Reports Balance Sheet AccountsProfit and Loss Accounts Asset Accounts Liability Accounts Revenue Accounts Expense Accounts Balance SheetProfit & Loss Statement Revenue./. Expenses = Profit/Loss Equity AssetsLiabilities Equity Accounts

Exercise - Financial Reports

Cash Management Reports Controlling Reports Topic 1: Financial Reports Topic 2: Cash Management Reports Topic 3: Company Analysis and Planning

Cash Management Reports: Topic Purpose After completing this topic, you will be able to: Discuss the effect of standard processes in SAP Business One on monetary reports. Describe when to use each report. Interpret typical report data.

Cash Management Reports: Business Example Maria tells you that controlling the customer receivables status and minimizing payment time is a crucial task for her: You tell Maria that SAP Business One provides her with the tools to control customer receivables. You discuss the Customer Receivables Aging Report and the Dunning process that enable active tracking of open A/R Invoices. You also discuss the Cash Flow that helps you forecast the monetary status of the company.

Cash Management Reports: Question 1 OEC Computers invests in a new product and applies for a loan from the bank. What report would the bank ask for before approving the loan? Does the bank need to see a past status of the company or a forecast?

Cash Flow Report Cash flow is a forecast report – The report provides information about the liquidity of your business that is beyond the scope of a Profit and Loss Statement. It displays the Balance Sheet Accounts which reflect the monitory value of the company. ■ Cash ■ Credit Card Vouchers ■ Checks Received ■ Customer Liabilities ■ Payables to Vendors Totals and Balances (Per Time Interval) of:

Cash Flow Report in SAP Business One Due DateSecurity LevelDocumentAccountDebitCredit Cash Accounts Payment to vendor (Bank transfer) House Bank5,000 Credit/ Checks Incoming Payment Credit Card Clearing acc. 10,000 Customer Liabilities A/R InvoiceCustomer acc.2,000 Debts to Vendors A/P InvoiceVendor3,000 To: Today + 5 days Cumulative Balance : Today + 5 days 4,000 The Cash Flow runs on: Open transactions – not reconciled (with the option to Display Fully Reconciled Postings). The transaction Due Date. The Cash Flow is displayed according to: The level of probability that the transaction will turn to cash (incoming and outgoing). Time Intervals. Today Today + 3 Today + 4 days Today + 5 days

The Sales process affects the cash status of the business. How can OEC Computers improve the Cash Flow Results? What kind of options does a company have to optimize their cash flow? Background: although a company is profitable, it can go bankrupt due to cash flow problems. Keeping a positive cash flow is therefore important. How can they ensure that a timely invoice is generated to enhance positive cash flow? Cash Management Reports: Question 2

Customer Receivables Aging Report Define Payment Terms for your customers that influence sales documents due date and expected payments, Cash Flow, Aging report and Dunning: Default payment terms for customers and vendors in System Initialization Payment terms in the Business Partner Master Data Payment terms in documents (Due Date field) The Customer Receivables Aging report is the monetary controller of the Sales-A/R module. This report shows all the money owed to a company and how long it has been owed. This is a key report for managing the company’s cash flow as well as evaluating the credit quality of customers.

Aging Reports Customer Receivables Aging Business PartnerDocumentDue DateBalance Due Future Remit Aging Intervals Funtech A/R Invoice 1,000 A/R Invoice 20,000 A/R Invoice 500 A/R Invoice 750 Surf O’bello A/R Invoice 3,100 A/R Invoice 1,500 Microchips A/R Invoice 270 A/R Invoice 4,700 A/R Invoice 11,000 The money owed to a company and how long it has been owed  42,820 11,0004,60024,7002, % 25.68%10.74%57.68%5.25%0.63% Aging Date

What proactive steps can OEC Computers take to improve the Cash Flow Results? What kind of options does a company have to ensure timely payments? How can they prevent “bad debts”? Cash Management Reports: Question 3

Dunning Process A complementary tool to enhance a positive cash flow will be to send debtor statements for outstanding debts. For this purpose you need to configure the Dunning System.

Exercise – Aging Reports and Dunning

Company Analysis and Planning Controlling Reports Topic 1: Financial Reports Topic 2: Cash Management Reports Topic 3: Company Analysis and Planning

Company Analysis and Planning: Topic Purpose After completing this topic, you will be able to: Discuss the effect of standard processes in SAP Business One on company analysis and planning reports. Describe when to use each report. Interpret typical report data.

Company Analysis and Planning: Business Example Maria says that in previous years they ended the fiscal year with much more expenses than expected: OEC Computers would like to be able to plan their expenses for a fiscal year and track them during the year. They also want to track profit and loss: Internally, by department. And at the project level. Reports that provide financial analysis of cost planning and profitability inside the company: Budget Project Cost Accounting

Budget - Question When the company decides on an annual expense budget, what kind of data is being considered? What can be a good reference for this kind of forecast?

Budget Management The Budget module helps you manage and track company expenses. The purpose of budgeting is to provide a forecast of revenues and expenditures i.e. to construct a model of how our business might perform if certain strategies, events and plans are to be carried out. This way, the actual financial operation of the business can be measured against the forecast. In SAP Business One a budget is based on the data you enter, which specifies the maximum amount that can be allocated to a particular G/L account. You can block the creation of transactions for G/L accounts that exceed their budget limit.

Budget Management and the Perpetual Inventory system If your company manages a perpetual inventory system, you can use the Purchase Accounts Posting System. This option includes the recording of expense accounts in journal entries created by purchasing documents that affect the inventory valuation. You can use the budget functionality to control these purchase accounts, thus monitoring your expenses in real time. This functionality can be used where the purchase accounting option is enabled. Starting from 8.8 version Purchase Accounting is available for all localizations.

Defining Budget Settings Steps to activate the budget functionality: 1. First, the budget functionality has to be initialized in your company. ■ You can manage your budget on an annual or monthly basis. ■ You have the option to Mark all P&L accounts as budget accounts. 2. Define Budget Distribution Methods. ■ Budget Distribution Methods allow you to automatically divide the budget amount among the months of year. ■ Note: budget distribution methods are not relevant for working with an annual budget.

Account Account Account Account Account Optimistic Scenario Use Budget Scenarios Main Scenario Pessimistic Scenario Note that during routine work, deviation from the budget is checked against the main budget scenario only. The other scenarios are used for budget reports! 3. Budget scenarios are used mainly for displaying budget reports. Using a scenario, you create a prognosis of a particular situation for the company's budget and obtain important information about what the budgetary balance would be according to the selected scenario.

Defining Budget Amounts 4. After you have defined budget scenarios, it is now time to define budget amounts. 5. Now the budget is defined for the selected accounts, enabling you to perform an analysis by comparing the defined budget with the actual business activity.

Budget: Getting Down to Work In the course of routine work, when you create a transaction against an expense G/L account which is Relevant to Budget, a check for deviation from the main budget scenario is executed, and if the budget is exceeded, an alert is issued. In the Authorization window, under the Financials module, there is a Budget clause in which you can define authorizations for users to confirm budget deviation in case a G/L account exceeds the budget and an alert is displayed (according to the definition under General Settings  Budget tab page). The Budget Report enables you to display the company’s budget data according to your requirements. This report analyzes the business activities that occur during a defined period, with reference to a selected budget scenario. Company Budget Reports: The standard company reports can be displayed along with the budget data. You can run the budget reports according to a preferred budget scenario.

Cost Accounting: Business Example Assuming your company is divided to departments: Sales Support Service And Accounting In this example, the Sales department brings more revenues than the other departments. On the other hand they have a lot of expenses: travel, hotel, dinner, conferences, advertising, bonuses etc. As the accountant of the company, how could you know the bottom line for each department? How can you issue a Profit and Loss report for a department?

Cost Accounting: Profit Centers and Sort Codes Support Center_z SalesService Accounting Admin OEC Computers Sort Code

Cost Accounting: Distribution Rules Employees Area PC PC PC 1 PC 3PC 2PC 1Center_zTotalProfit Center Dist. Rule Distribution Rules for DIRECT Costs and Revenues Distribution Rules for INDIRECT Costs and Revenues

Cost Accounting: Link Between General Ledger and Cost Accounting Heating Costs Distribution Rule X area Profit Center 1Profit Center 2Profit Center 3 Journal Entry 1000 Heating Costs Distr. Rule area Journal Entry 1000 Heating Costs Distr. Rule area

Projects - Question What do you expect from “project based accounting”?

Projects in SAP Business One Accounting Documents Project:.... Original Documents Project:.... Project A Project B Trial Report - Budget Report P&L Budget Report P&L Transaction Report General Ledger Trial Report - Budget Report P&L Transaction Report General Ledger Trial Report - Budget Report P&L Budget Report Trial Report - Budget Report

Exercise - Cost Accounting + Projects

Controlling Reports: Unit Summary Main Terms: Financial Reports: Balance Sheet Trial Balance Profit and Loss Financial Report Templates Cash Management Reports: Cash Flow Customer Receivables Aging Report Dunning Company Analysis and Planning: Budget Project Cost Accounting: – Profit Centers – Distribution Rules