Accounting & Financial Tools to Beat Budget for Departmental Store
Tools to Budget is a powerful aid, not only to help you beat budget during any given operating period, but also to help you do a better job of budgeting in future years. It is based upon the premise that, you would pay close attention to each and every expenditure of funds you made. The equivalent in your personal finances is to maintain your current bank balance by accurately subtracting the amount of each check you write in your check register. The only differences in Tools to Beat Budget are that you don’t operate your own business (though since your long-term employment prospects depend upon the job you do in running your department, you probably should think of it as your own business) and the need to keep separate registers for each of your expense categories.
Tools to Beat Budget is a program aiming: [/b]
* Assist managers with bottom line responsibility in meeting the goals of their annual operating budget.
* Help managers become more familiar with the details of their operation.
* Provide managers with more real time information about the health and well-being of their operation.
* Make it far easier to prepare accurate budgets in coming years.
The concept behind Tools to Beat Budget is no different than an individual monitoring personal income and expenses each month. While simple in concept, Tools to Beat Budget does require managers to view each expense account (payroll and other operating expenses) as if their balances were maintained in a separate checkbook. Therefore, managers must deduct all expenses as incurred and keep a declining balance on each account.
But to avoid missing any invoices you should check with your Controller to make sure you receive copies of all invoices for your Department that might go directly to the Accounting Office. A printout of your deparments' General Ledger detail will allow you to see all posted charges to your expense accounts.
Tools to Beat Budget Program is made up of the following elements which are filed under the appropriate tabs in a 3-ringed binder: [/b]
Annual Budget: Each Department has a budget comprised of Departmental Schedule, Departmental Revenue Assumptions (profit centers only), and Departmental Payroll Cost Assumptions. Each Department's budget is the financial plan for that Department for the fiscal year.
Monthly Profit & Loss Schedules: Actual profit and loss schedules for each month which are prepared and distributed by the Accounting Office. The Monthly Profit & Loss report actual financial performance for the period and compare it to the budget. The Monthly Profit & Loss also compare year-to-date (YTD) actual performance to budget.
Weekly Revenue Reports: Reports prepared and distributed weekly which show revenues by Department (profit center only). This report also compares YTD actual to YTD budgeted revenues. You should use this report to compute your key departmental revenue benchmarks which can be compared to budgeted benchmarks. The format and time frame may vary from club to club, but the essential information of actual revenues for the department must be included in the binder.
Pay Period Summary Reports: Reports prepared and distributed bi-weekly which show payroll costs by Department. This report also compares YTD actual to YTD budgeted payroll cost. Finally, it computes the average hourly wage by Department and compares it to the budgeted amount. The format for this report may vary from club to club, but the essential information of payroll costs for the department must be included in the binder.
Cost of Goods Analysis: This worksheet is available for those Departments with retail sales, i.e., Golf, Food, Beverage, Tennis, and other retail outlets. Department Heads can compute and track their cost of goods percentage and compare it with the budgeted cost of goods.
Other Expense Log: These worksheets allow Department Heads to record their monthly Other Operating Expenses each month by expense account. By keeping these logs, Department Heads will know how much they have spent of their budgeted amount for each expense category.
Note that, resale purchases such as food and beverage and retail items are not considered Other Operating Expenses and Expense Logs are not kept for these items. They will be accounted for in the Cost of Goods Sold calculation. It is still a good idea for Department Heads of resale departments to get the General Ledger detail of such purchases and file them in your Tools to Beat Budget binder.
Again, in tracking remaining budgeted balances in expense accounts, managers must understand that 'budgeted but unspent amounts' are not an open invitation to spend the funds simply for the sake of spending them. Also, managers must not take an overage in one expense account and code it to another for the sake of hiding the overage. Such miscoding misstates the performance of the department, is misleading when trying to identify problems, and will be misleading when using the misstated numbers as historical records to create the budget of next year.
As with any other management tool, Tools to Beat Budget is only as valuable to a manager as the effort put into it. Managers should keep in mind that if their operation was their own business, each of the tools would be a necessary part of maintaining the profitability of business. While we do not own our operations, our management responsibility to ensure financial performance is just as much a necessity.
To make the system more effective Comparing Actual Performance to Budget or Standard Budget:
General Managers should conduct monthly reviews of Operating Statements with department heads.
In order to ensure that the business meets the financial objectives of its annual operating budget, it is imperative that all department heads monitor their monthly performance closely and be prepared to answer questions about the departmental performance and give reasons for any significant variance from budgeted amounts.
On a monthly basis after the final statement is prepared and distributed, the Controller will set up a schedule of meetings for department heads to meet with the General Manager and Controller to review the performance of department.
Department heads will bring their individual copies of the Tools to Beat Budget binder to the meetings.
Department heads must also be prepared to present plans to remedy significant or ongoing shortfalls in revenue or overages in expense categories.