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

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




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

IncomeAccount

Period End

Closing

Balance Sheet

Profit and Loss

Statement

Financial Reports

Trial Balance

Profit and Loss Accounts

Gen

eral

L

edg

er

Level 1

Assets

Liabilities

Cap. + Res.

Turnover

Cost of Sales

Operating C.

Non-Operating

Tax + Extr.

Bank account

Account Type

Balance Sheet

Dates Up to a certain date

Drawers/ TypeAll 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

Dates Selected period

Drawers/ TypeSelection 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).


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

Dates Selected period

Drawers/ TypeAll Profit and Loss Accounts:The last 5 drawers: Revenues, Cost of Sales, Expenses, Financing, and Other Revenues and Expenses

CalculationThe 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.


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 Accounts Profit and Loss Accounts

Asset Accounts

Liability Accounts

RevenueAccounts

Expense Accounts

Balance Sheet Profit & Loss Statement

Revenue

./. Expenses

= Profit/Loss

EquityAssets Liabilities

EquityAccounts

Exercise - Financial Reports

Cash Management Reports

Controlling Reports




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 Date Security Level Document Account Debit Credit

Cash AccountsPayment to vendor (Bank transfer)

House Bank 5,000

Credit/ Checks Incoming Payment Credit Card Clearing acc.

10,000

Customer Liabilities

A/R InvoiceCustomer acc.

2,000

Debts to Vendors

A/P Invoice Vendor 3,000

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?


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 Partner Document Due Date Balance DueFuture Remit

Aging Intervals

0-30 31-45 46-75 76-100

Funtech A/R Invoice 1,000 1,000

A/R Invoice 20,000 20,000

A/R Invoice 500 500

A/R Invoice 750 750

Surf O’bello A/R Invoice 3,100 3,100

A/R Invoice 1,500 1,500

Microchips A/R Invoice 270 270

A/R Invoice 4,700 4,700

A/R Invoice 11,000 11,000

The money owed to a company and how long it has been owed

42,820 11,000 4,600 24,700 2,250 270

100% 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”?


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 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.

Account100000

Account200000

Account300000

Account400000

Account500000

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

Sales Service Accounting

Admin

OEC Computers

Sort Code

Cost Accounting: Distribution Rules

684220Employees

2002001000500Area

100000100PC 3

010000100PC 2

001000100PC 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 RuleX area

Profit Center 1 Profit Center 2 Profit Center 3

Journal Entry

1000Heating Costs

Distr. Rule area

Journal Entry

1000Heating Costs

Distr. Rule area

Projects - Question

What do you expect from “project based accounting”?

Projects in SAP Business One

AccountingDocuments

Project:

....

Original Documents

Project:....

Project A Project B

Trial Report - Budget Report

P&L BudgetReport

P&L

Transaction Report

General Ledger


P&L

Transaction Report

General Ledger


P&L 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