When you look at the financial statements, your objective should be to determine within one minute whether the company is making profits or not, and whether the revenues and expenses are in line with standards prescribed by the accounting bodies of the US.

How do you prepare the reports that give you the exact state of your business?

1. It all starts with your company’s chart of accounts.

Astonishingly, many new clients whom we work with use a very generic chart of accounts. These generic Chart of accounts usually created to ease the process of calculating year-end tax returns. But while these chart of accounts are advantageous in calculating taxes, they contribute very little in the way of management reporting. For QSR business, specific chart of account is needed to depict an exact snapshot of your business, the chart of account can be different for the other industries.

2. Classification of sales:

Classification of sales is very necessary as sales tax is a calculated as a percentage of taxable sales and not on net sales. Therefore, verifying the percentages becomes difficult if we record the net sales. Therefore, it is suggested to record Taxable Sales and Non-Taxable sales separately so that we can reconcile Sales Tax figures as well.

3. Group expenses by cost type.

Cost categories include:

• Direct costs are associated with your true operational costs. Examples include Employee Benefits, benefits, payroll taxes, uniforms, vehicles, and Food Cost.
• Marketing costs cover all activity to boost customer inflow. Examples include newspaper, radio, TV and online advertising, Photo/Printing/Graphics.
• General and administrative costs don’t fit into the categories above. They also are known as fixed costs, as they are fixed over several volumes of business. Examples include office utilities, office electricity, and Water.

4. Calculate the gross profit/margin.

Direct costs deducted from sales will give you the gross margin. By looking at the gross margin, you can determine whether you are operationally efficient. It tells you if you have generated enough sales volume to cover your fixed costs, and allow you to show a reasonable profit.

5. Compute variances with standard.

Once the management report is set up with actuals vs. the benchmark column, it is important to see how the actual results match up with benchmark. Here we recommend a column showing the variance which will eventually allow you to ask questions about why your company may or may not be measuring up to the benchmark or this year’s budget.

Producing a “One minute management report” that meets its objectives using these steps is not at all difficult. Accounting programs are easily adapted to generate financial statements that meet these criteria.

Fruxient Accounting specializes in restaurant accounting and our Team lead Gaurav, is a competent certified public accountant (CPA) who can help you set up a program and can assist you to maintain your books of accounts with QuickBooks online which is equipped to produce one-minute reports.

Here’s a snapshot of the report (Source – Client having 2 locations of Roy Rogers- Data for Dec 20) :