An Introduction to Financial Management and Reporting
1. An Introduction to
Financial Management
and Reporting
DC Department of Small & Local Business
Development
John Pace, CPA, CVA
Senior Manager, Client Services
Steven Lyons, CPA
Supervisor, Client Services
December 12, 2013
2. Financial Management and
Reporting
John Pace, CPA, CVA
Senior 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.
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3. Financial Management and
Reporting
Steven Lyons, CPA
Supervisor, 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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4. Financial Management and
Reporting
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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10. Financial Management and
Reporting
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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11. Financial Management and
Reporting
December 31st
Snapshot
January 1st
Take a photo and capture the image (Balance Sheet or
Statement of Financial Position)
Measure the activity showing how we
got from one image to another (Income
Statement or Statement of Activities)
Take a photo and capture the image (Balance Sheet or
Statement of Financial Position)
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12. Financial Management and
Reporting
Balance Sheet - Basic
Smith Consulting, Inc.
Nothing here about salary or
living expenses
Moment in time
Assets are what you have
8,250
Liabilities are what you owe
6,000
Equity is the difference. It’s
also the sum result of your
whole history
Balance Sheet
September 30, 2013
Assets
Checking account
$
1,000
Savings account
250
Total cash
1,250
Auto
Total Assets
7,000
$
Liabilities Car Loan
Equity
Total Liabilities and Equity
2,250
$
8,250
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15. Financial Management and
Reporting
Smith Consulting, Inc.
Income Statement
For the Year Ended December 31, 2013
Revenue
Fees
Interest income
Total Revenue
Expenses
Salary
Travel
Supplies
Rent
Total Expenses
Net Income
$ 10,000
100
10,100
7,000
1,000
300
200
8,500
Income
Statement-Basic
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.
$ 1,600
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22. Financial Management and
Reporting
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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23. Financial Management and
Reporting
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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24. Financial Management and
Reporting
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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25. Financial Management and
Reporting
Internal Reports: Comparisons to
Budget
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!
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26. Financial Management and
Reporting
Sample Budget vs. Actual Report
Smith Consulting, Inc.
RBI Program
January to August 2013
YTD
YTD
YTD
2013
2013
Actual
Budget
Variance
Budget
Remaining
2,300
800
300
-
3,000
800
150
100
700
(150)
100
6,300
1,600
250
200
4,000
800
(50)
200
3,400
4,050
650
8,350
4,950
Expenses
Salary
Travel
Supplies
Consulting
Total Expenses
Let’s look
through the
terms and
information
presented
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27. Financial Management and
Reporting
A Different Budget vs. Actual
Report
Content will vary
Smith Consulting, Inc.
RBI Program
January to August 2013
August
Total
Expenses
YTD
2013
Actual
Expenses
Salary
Travel
Supplies
Consulting
YTD
Actual
Budget
Budget
Variance
1,000
200
-
2,300
800
300
-
3,000
800
150
100
6,300
1,600
250
200
700
(150)
100
1,200
3,400
4,050
8,350
650
Variance
between what?
Is a positive
budget variance
good or bad?
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28. Financial Management and
Reporting
Another Budget Report Format…
Percent of
what?
Smith Consulting, Inc.
RBI Program
January to August 2013
August
Total Expenses
2013
Budget
% of
Actual
Expenses
Salary
Travel
Supplies
Consulting
YTD
Actual
Budget
Variance
Budget
1,000
200
-
2,300
800
265
-
6,300
1,600
250
200
4,000
800
(15)
200
37%
50%
106%
0%
1,200
3,365
8,350
4,985
40%
Why is salary
less than 50%
Do other
percentages
make sense?
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29. Financial Management and
Reporting
Other Internal Reports:
Projections
Smith Consulting, Inc.
RBI Program
January to August 2013
YTD
Total Expenses
Projected
2013
2013
Actual
Expenses
Salary
Travel
Supplies
Consulting
Remaining
Projected
2013
Budget
Variance
2,300
800
300
-
3,000
800
150
100
5,300
1,600
450
100
6,300
1,600
250
200
(1,000)
200
(100)
3,400
4,050
7,450
8,350
(900)
What time
period is
projected?
How were
the
projections
done?
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30. Financial Management and
Reporting
Smith Consulting, Inc.
3 Month Projected Cash Flow as of 8/31/13
2013
September
Beginning Cash
$
68,300 $
2013
October
62,500
2013
November
$
(13,000)
Cash In
Contributions
Ticket Sales
86,500
5,000
6,300
4,500
127,000
6,900
Total Cash In
91,500
10,800
(80,000)
(4,000)
(2,300)
(80,000)
(20,000)
(2,300)
(97,300)
(86,300)
(102,300)
(5,800)
(75,500)
31,600
62,500 $
(13,000)
Starts with actual
cash balance and
typically goes out 6
months
133,900
(80,000)
(15,000)
(2,300)
Cash
Projections
Cash Out
Regular monthly
Project costs
Loan payment
Total Cash Out
Change during the Month
Ending Cash
$
$
18,600
Often called “cash
flow report” but that
is not what
accountants mean
when they use that
title
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31. Financial Management and
Reporting
Cash Projections
Smith Consulting, Inc.
3 Month Projected Cash Flow as of 8/31/12
2013
September
Beginning Cash
$
68,300 $
2013
October
62,500
2013
November
$
(13,000)
Cash In
Contributions
Ticket Sales
86,500
5,000
6,300
4,500
127,000
6,900
Total Cash In
91,500
10,800
(80,000)
(4,000)
(2,300)
(80,000)
(20,000)
(2,300)
(97,300)
(86,300)
(102,300)
(5,800)
(75,500)
31,600
62,500 $
(13,000)
Note that “cash in” and
“cash out” are not the
same as revenue and
expense
133,900
(80,000)
(15,000)
(2,300)
(cont.)
Cash Out
Regular monthly
Project costs
Loan payment
Total Cash Out
Change during the Month
Ending Cash
$
$
18,600
The purpose is to
identify times that the
cash balance might be
a problem -- such as
during October in this
example
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33. Financial Management and
Reporting
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
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