profitability report call w jay

Financial Analysis of Repairs

• Monthly Repair Data

  • December: 563,000

  • November: 910,000

  • October: 1,000,000

  • September: 870,000

  • August: 824,000

  • July: 752,000

• December was identified as the lowest repair month within the first half of the year, showing a significant drop:

  • Half of what was achieved in November

  • Two-thirds of what was achieved in August and September

• The reduction in repairs leads to a dramatic effect on margins:

  • High services and repairs are crucial to meeting budgeted margins.

Commission Accounting and Adjustments

• Commission Adjustment:

  • The process of removing repair labor from accounts requires careful consideration to avoid double counting revenue.

  • Cost Accounting:

  • Costs placed on repairs create a credit in the outsourced contra account.

  • Bills must offset this credit.

  • According to the discussion, only jobs that did not ship within the month should be accrued.

• Instructions for Commission Calculation:

  • Items that already have revenue against them should be disregarded for commission purposes.

  • Repair costs should not be removed from overall costs; however, when calculating commissions, these should be adjusted based on invoicing.

Procedures for Handling Outstanding Repairs

• Upon inspection of entries (including Purchase Orders and Work Orders):

  • If no revenue exists for a particular repair, the costs should not be removed from the cost.

  • Adjustments to entries must correspond directly to ensure accuracy in reported totals.

• Example Clarification:

  • Consideration of external invoices and their alignments with contracts must ensure that recorded values are accurate and timely.

Necessary Reconciliations

• All reports and work papers must match with cost of goods sold (COGS) to ensure integrity in financial reporting:

  • For discrepancies found:

  • Investigate whether entries attributable to personal names should exist within COGS.

  • Adjustments to work papers are critical, similar to monthly balance sheet reconciliations.

• Variance Analysis:

  • If discrepancies are found, determine if transactions are in other accounts.

  • The primary concern remains that the report matches the income statement, ensuring transparency and accurate profit margin calculations.

General Recommendations

• Always ensure that reports concerning commissions are aligned with COGS:

  • Exclude outsourcers with no revenue from gross commission calculations.

  • Maintain clean records to minimize chances of accruing inaccuracies, which could lead to loss of sizable financial sums (e.g., a half million dollar mistake).

• Regularly ensure updates to financial documentation in systems (like NetSuite) is maintained, as it may take some time for adjustments to reflect in overall reports.

Conclusively:

• Gathering all items correctly categorized with attention to detail will solidify the integrity of financial reports and help in achieving budgeted margins!