| 1.1 Portfolio
40 Finance Account Management | |
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| 1.1.40 Finance Account Management: | | Financial Management Application (FMA) is an integrated set of general ledger accounts including accounts receivable and accounts payable; including an exceptional dual audit trail. Your financial management application must allow a virtually unlimited amount of general ledger accounts and sub-accounts to be provisioned. It must allow you to define your own accounting periods and let you close individual components separately to match the needs of any new subsidiaries and international divisions that you may introduce. Without these essential accounting functions, it becomes very hard for your finance people to monitor the multitude of cost centers within your company and ensure that you are operating within your budget. |
| Cash Flow Management: | | One of the keys to managing your financial health is your ability to monitor your cash flow carefully on a regular basis. When your company is growing rapidly, you may face unexpected costs for permits, licenses, raw materials, equipment, extended contract work, and vendor agreements to name a few. These investments often require large upfront payments and smart financial planning to keep cash flow positive. If there is not enough cash on hand to meet any one of these obligations, it could result in repercussions for your company, threaten its growth and even expose it to legal liabilities. | | To avoid these potential pitfalls, it is vital that your cash inflows keep pace with your cash outflows. Your financial management application should allow you to perform cash flow analysis to examine the components of your business that affect cash flow, such as accounts receivable, inventory, accounts payable and credit terms, to name a few. By performing cash flow analysis on these individual components, you will be able to more easily identify cash flow problems and opportunities for improvement. | | Real-time visibility is important in making timely informed decisions. When information can be accessed instantly from almost anywhere, without wasting resources on report data extraction and tying data from different sources together, people can make more accurate, faster decisions. By having greater real-time visibility into your cash flows through detailed dashboards and KPI (key performance indicators), you will be alerted to discrepancies and "red flag" situations a lot more rapidly. |
| Recurring Revenue: | | Energy brokerage has an unusual degree of recurring revenue that must be managed in a unique way that most financial management applications are not able to support. Running a business with a predictable revenue stream is difficult when you are in nascent stages of growth because there are so many uncertainties related to new customer acquisition. But once you establish a stable customer base, you need to focus efforts on extracting on-going revenues from these customers and increasing your customers value to power your next stage of growth. Close coordination between finance, sales, and service is necessary to identify recurring revenue streams, and define the periods of chargeability for services rendered and when revenue can be recognized on your company's balance sheets. Your financial management application needs to be able to handle and report on these varieties of recurring revenue scenarios. | | When identifying potential recurring revenue streams, it is imperative to know your company is able to measure the cost of providing that service. Your financial management application should be able to accurately model different chargeability scenarios and get a handle on direct and indirect customer costs and acquisition costs, service costs and product delivery costs, as well as which customer segments drive margin and which do not. The old adage that 20% of your customers generate 80% of your profits is particularly important with recurring revenue, because the remaining 80% of break-even or marginally loss making customers may be costing you year after year unless you smooth out profitability across your customer base. |
| Revenue Recognition: | | It is also important to have good revenue recognition processes in place. Your billing infrastructure needs to be able to handle multiple pricing schemes for different customers and suppliers. You may be managing different payment terms, whether monthly, quarterly or annually, and may be billing customers/suppliers in advance, in arrears, or prorating them on partial months. Using spreadsheets can quickly get out of hand, and different or one-off billing arrangements can throw things off and result in billing errors. A financial management application with robust billing capabilities ensures that you are able to manage your subscription based billing plans easily and accurately. It can even turn billing into a competitive differentiator by allowing your customers and suppliers to change their billing plans and payment options, thus improving satisfaction and lowering attrition. | | While billing processes greatly aid with revenue recognition, a financial management application should also help you comply with legal regulations regarding revenue recognition. Your financial system should feature built-in support for key revenue recognition rules such VAT and cash accounting to enable you to recognize revenue for multi-element sales, and to recognize them at different rates - energy VAT is different. | | These new revenue recognition rules bring with them a whole set of complicated calculations that your finance people must perform. A financial management application that incorporates support for flexible revenue recognition will ensure that your people reduce their dependence on multiple spreadsheets and error-prone manual processes. Such a system also helps ensure that you gain clear visibility and continual monitoring for all aspects of the revenue recognition process, and that you are positioned to manage and recognize different types of revenue such as time-based, percentage of completion and event-based, among others. | | Support for these new revenue recognition rules is especially important because new regulations can allow companies to recognize revenue much sooner. Before the advent of these new regulations, if you were unable to determine the fair value of any of the items that were part of a sale, you had to defer the revenue for those items until they were delivered sometime in the future. However, these new regulations allow you to apply an Estimated Selling Price (ESP) for items not yet delivered and recognize their revenue a lot earlier. These regulations thus have a material impact on your revenues and consequently are very important to your bottom line. |
| Financial Planning and Reporting: | | To accurately plan and forecast future costs for various initiatives, your financial management application should give you deep visibility into the current state of your operations so that you can identify problem areas. | | Financial planning involves pulling together data from several departments within your company to gain a comprehensive view of your operations, and then modeling several "what-if" scenarios to assess the impact of different cost structures. Without a financial management application that allows you to easily perform these functions, your finance team will end up wasting time consolidating data from various systems instead of performing strategic analysis. | | Financial reporting for compliance purposes is extremely important in today's highly regulated environment. Regulations such as European Data Protection Directive and numerous Human Rights acts must be adhered to strictly. In this kind of environment, it is very important that your monthly reports, performance reporting and financial close be impeccable, in case you are ever audited. This is a major reason why it takes so long for many companies to close out every quarter. A financial management application that can withstand regulatory scrutiny, accelerate financial close and produce key financial reports on demand offers a tremendous competitive advantage. | | A robust system should also allow your finance people to drill through from data entry sheets or budget reports directly into underlying transactions, providing deep and unparalleled insight into your business. It would also allow your team to monitor any financial measures according to their role; whether controller, bookkeeper, finance manager or analyst using customizable dashboards and key performance indicators. When it comes to financial planning, your budgeting and forecasting functionalities rank at the top of the list, especially because of their focal role in controlling costs. Your financial management application needs to enable multi-dimensional data collection and automate the consolidation of plans so that you can clearly look into the costs for personnel, sales, capital equipment and more. Automation also improves accuracy and reduces errors by eliminating broken links and formulas. | | A key best practice within financial planning is to compare actual data with plan data. With spreadsheet-based planning, integrating actual data into budgets, forecasts or what-if scenarios is cumbersome, and subsequent variance analysis is nearly impossible. Financial management applications with budgeting and forecasting capabilities seamlessly integrate year-to-date actuals with future expectations and allow you to perform variance analyses to compare actual results against budgets. |
| Fixed Asset Management: | | As your company grows, you may acquire a variety of fixed assets such as equipment, fixtures and buildings. You need to be able to maintain and control the complete asset lifecycle of all your fixed assets, from creation to depreciation, revaluation and retirement, so that you can get a better view of how this affects your bottom line. Accordingly, a financial management application must have detailed asset management functionality and support multiple depreciation calculation types. It needs to handle both depreciating and non-depreciating assets, maintenance schedules and insurance. It must also tightly weave your asset acquisition process into your accounting processes to help ensure that no equipment slips through the cracks. | | There are several methods of depreciation and each method has a different set of advantages and disadvantages. Your financial management application should allow you to use any of the standard depreciation methods including straight line, fixed declining, sum of years digits, asset usage and even your own user-defined depreciation methods. | | Strong management of your fixed assets can help you benefit from tax deductions related to the depreciation of your assets. These deductions only serve to help shore up your cash flows so that you can reinvest the proceeds into your business and grow further. |
| Integrated Inventory Management, Fulfilment and Shipping: | | A major component of cost control is ensuring that inventories are replenished at the appropriate times. When you have more inventories on hand than required, it increases your costs, which in turn hits profit margins. To manage each product-service margins with a clear view into costs, turn rates and profitability, a good financial management application will incorporate strong inventory management controls and provide you with complete real-time visibility into demand, supply, costs and fulfilment trends. In this manner, you can slash inventory costs by tightening control of stock levels while increasing operational efficiencies. |
| Low Total Cost of Ownership and Superior Ease of Use: | | A typical finance team has to contend with several applications ranging from accounting to financial planning, business intelligence, inventory management and front-office systems like order management, CRM and ecommerce. You have to spend valuable time to plan, deploy, manage, integrate and maintain these multiple applications. Capital-intensive hardware infrastructure, servers and software licenses, combined with expensive, time-consuming upgrades, drive up your operating expenses and those costs can get out of control the faster you grow. Furthermore, your finance people may become dispersed in multiple locations, and may have to deal with a cumbersome and slow access your in-house financial management applications. | | Your core business management system should not only perform essential finance functions but also minimize overhead and help manage costs. Selecting a cloud-based financial management application like Bizzone is a sure-fire way to reduce the TCO (Total Cost of Ownership) of your solution. | | It is only through a cloud-based financial management solution that your people can easily access data in real-time without having to rely on manual spreadsheets. This type of solution is managed and operated by the application service and all of your transactional and customer data is housed in secure data centers together with the hardware and software infrastructure to run it. | | This kind of financial management application is called multi-tenant, which means that the application service is able to achieve economies of scale by running the application for thousands of customers across a shared infrastructure, with cost efficiencies that are impossible to achieve for an individual company to realize on its own. The result is that a cloud-based multi-tenant financials application can be more than 50% cheaper to run than its on-premise alternative. In fact, in a recent Institute of Management Accountants (IMA) survey, respondents cited lower TCO as the number one benefit of moving to the cloud, followed by anytime, anywhere access. | | An added benefit of a cloud-based financial management application is that there is a single version of the application. This means that your finance department receives automated upgrades and functionality (such as support for the latest accounting and regulatory changes) without requiring they undertake a time consuming and painful patching and upgrade process. It also means that customizations you make to your application carry over seamlessly during automatic upgrades, and you do not have to be burdened with implementing new releases. The result is a seamless upgrade process taken care of by the application service, such that your finance department will always be running on the latest software and hardware. | | With a cloud-based financial management application, your employees have anytime, anywhere access to their systems through a web browser using any kind of computer, laptop, tablet or smart phone. This enables your finance people to always have access to critical information such as cash on hand, cash flows, liabilities, debts, profit margins and more. |
| A Streamlined Order-to-Cash Process: | | One key to maintaining control over your bottom line is ensuring that your core business processes can scale efficiently as you continue growing. Without doing so, you can compromise your ability to increase profits demand as your revenues grow. As businesses grow rapidly, the order-to-cash process is one of the first areas to expose these growing pains and an inefficient, manual order-tocash process can be expensive and cause major revenue recognition and customer service issues. | | When sales people convert a prospect into a customer and place an order, that information typically needs to be transferred to other databases to process the order management fulfilment, update the accounting information, populate customer records and calculate and pay commissions. Without efficient order-to-cash systems, you may not be able to capture this information in your accounting systems in time for the close of the quarter, resulting in inaccurate reporting, decreased revenue results and unhappy sales people because of delayed commission pay-outs. Furthermore, hours of employee time are wasted retyping data from one spreadsheet to another, and costs only rise as more people and contractors must be hired and paid overtime to handle order processing demands. | | Once an order has been placed into your CRM, you need to ensure that customers and/or suppliers provide payment in time and that your days sales outstanding (DSO) number doesn't get to a point where it results in order cancellations or dissatisfaction. Bizzone integrates front and back office processes and includes built-in functions that allows your business to reduce unnecessary paperwork and costs by enabling personnel to turn closed opportunities into orders with just a few clicks of the mouse. It also provides your finance and executive team with far more accurate and timely insight in to business performance. By streamlining and accelerating the order-to-cash process, your business can benefit from improved cash flows. |
| Procure-to-Pay Processes: | | All businesses need to purchase services and equipment. Without strict purchasing and approval processes, you run the risk of employees engaging in maverick spending that can hurt your bottom line. A financial management application that handles the complete procure-to-pay process gives you visibility into all areas of spending to quickly identify and rectify any out-of-control costs and find opportunities for savings. You can also create a complete purchasing audit trail that ensures accountability. | | Another benefit of a streamlined procure-to-pay process is time savings and the elimination of errors through automation of the entire process through purchasing, receiving and account payables. When your finance employees can track the status of purchase requisitions and orders through self-service functionality that eliminates paper-based forms and associated errors, it frees your finance people to focus on activities that help grow the business while trimming the bottom line. | | A further benefit of automation is that new purchase orders are automatically generated once re-order points have been reached for a certain good or raw material. Instead of having to pull people off projects to look up previously-completed purchase orders and order quantities, and generate another purchase order, purchase orders can be automatically triggered by your financial management application. | | Once purchase orders have been generated, vendors that provide goods or services to your company need to get paid. Your finance people will need to confirm with the receivables department whether the services or goods were delivered as promised and only then authorize accounts payable to release payment to the vendor. All these activities consume valuable cycles that your finance people could spend on other critical financial processes and operations. Integrating receivables with accounts payable ensures that payment can be promptly delivered to vendors. |
| HR Process Management: | | Your employees are your company's most valuable asset; without them, you simply cannot achieve your growth objectives. However, there are a lot of infrastructure costs associated with each employee and it is important to minimize them. | | Basic HR management such as introduction, payroll and expense management can morph into a spreadsheet nightmare when the HR department passes information over to your finance people. Calculating parameters such as salary, withholdings, deductions, and sick and leave accruals can consume several hours each week, with manual, error-prone processes executed primarily through spreadsheets and jumping around various applications. | | For your finance people to accurately ascertain what employees cost the organization, this information needs to be integrated with the accounting system. Moreover, a payroll system should calculate earnings, deductions, company contributions and taxes automatically. This payroll system also should automate all tax management and tax filing, provide direct deposit options to employees and facilitate paperless payroll. In this manner, all payroll processes are streamlined, manual and duplicate processes eliminated, and money is saved as a result. | | A closely-related aspect of payroll is incentive compensation for your sales personnel. Finance people often spend hours every month calculating and paying commissions, and your sales operations personnel have to spend countless hours resolving sales disputes on commission payment amounts. To avoid these scenarios, you need an incentive compensation system that allows sales operations to configure sophisticated sales commission rules based on quotas, sales, quantity and profitability. This incentive compensation system should integrate with your payroll systems to streamline payment processing, and integrate with your accounting systems so that your finance people can oversee sales incentive programs. | | Another way to trim employee infrastructure expenses is to enable employee self-service within your HR management system and integrate it with your accounting system so that all data changes are automatically captured. A system where employees can enter and track timesheets, expense reports, purchase orders, manage leave and view pay-stub details ensures that these processes get completed in a timely manner. Notifications and requests for approvals can be routed automatically to the appropriate managers, and all approvals can instantly be reported to finance and payroll. Having this self-service functionality in your finance systems allows your people to analyze the impact of employee activity on the bottom line, not just move data from spreadsheet to spreadsheet. |
| Business Intelligence: | | Getting an accurate view of your company's operations can often be a challenge. Data is frequently fragmented and scattered across several systems, and spreadsheets are often out of date, error-prone and hard to maintain. Traditional add-on analytics tools are expensive to implement, and often lack the key business intelligence components and easy access required to make them pervasive. | | Consider what are the key business intelligence components that you need for both a holistic and detailed view of business operations. For a broad overview of the performance of your various divisions, you need role-based dashboards that deliver personalized insights tailored to each finance user need; be it the controller, bookkeeper, financial planning and analysis managers, analysts or owner. These dashboards need to extract data from a single, centralized data repository so that the data is real-time and "multiple versions of the truth" are eliminated. | | To analyze the performance of your company correctly, you need quantitative metrics and key performance indicators to evaluate the success or failure of various activities within your company departments. These key performance indicators enable you to measure performance against benchmarks and goals specific to lines of business, and show key variances and period-on-period trends. Once anomalies have been identified, you should be able to drill down from this summary level to greater detail, all the way to the underlying transaction. | | Beyond historical comparisons, the ideal solution will give your finance people a real-time view into key performance indicators and performance metrics that span the full vista of your operations; across sales, marketing, service and brokerage to enable analysis of financial impacts and cross-departmental dynamics. Real-time data, accessible on demand over the web, delivers actionable insights that improve your ability to rapidly address issues as they arise and capitalize on opportunities. |
| Multi-Company and Corporate Business Management: | | At some point in time, your company may grow across multiple geographies, with multiple subsidiaries and international locations. At that stage, you will have to deal with reporting currency, calculating taxation and meeting different legal and compliance requirements for each division. You will also need to consolidate financial and business information and gain visibility at the regional and global level. | | Handling European taxes poses a challenge for many companies. Your financial management application should readily handle taxes across subsidiaries through an integrated tax engine that allows for multiple VAT and tax schedules. The application must also handle country specific accounting standards and deliver multi-currency management in all financial areas including accounts receivable, accounts payable, payroll, billing, invoicing, order management, forecasting, quota management and commissions. | | With global currency exchange rates changing on a daily basis, your financial management application needs to be able to automatically update exchange rates. It needs to enable your finance department to maintain the current local currency conversion rate as well as the historical rates used at the time an order was placed or a commission was paid. | | While multi-faceted currency conversion capabilities are an important part of running a global business, consolidation of financials and real-time roll-up is critical to achieving a more rapid financial close, as well as to gaining timely visibility into operations. Your financial management application needs to deliver multi-currency consolidation across accounts receivable, accounts payable, payroll, inventory, billing, invoicing and order fulfilment; from local in-country operations to the regional office to head office. | | The need for inter-company transactions is important if you have multiple subsidiaries. Many companies do not have a clear inter-company transaction policy and find themselves struggling with currency, accounting and tax implications. You need to properly revalue foreign currency inter-company assets and liabilities and set currency conversion rates before performing the inter-company transactions using a common base-currency. To do this, your financial management application needs to have local entity and inter-entity reporting, automated management of revenue recognition, tight internal controls, easy-to-follow audit trails and multi-national compliance capabilities. |
| Adaptability to Specific Business Models: | | Your financial processes need to be robust, auditable and as automated as possible to maximize efficiency and provide detailed visibility into your company operations. In re-engineering your processes to meet these goals, you need to be sure that your financial management application is flexible. When your company tries to enter new markets or expand to new sales channels, your financial management applications need to be agile enough to adapt to these new business models. | | Your financial management application should be able to address the needs of your unique energy industry and utility business model. Generalized financial tools cause problems, but energy specific financial accounting applications like Bizzone are able to help to resolve your complex business billing requirements. | | In addition to utility-specific capabilities, your financial management application should have built-in configurability, ease of customization and flexible workflow management to align with your unique business processes. The task management or workflow engine must be able to rapidly edit the actions and rules that impact a particular financial process and be able to specify conditions for workflow transitions to help with back-office automation. The financial management application should also contain graphical customization components so that your people can more easily and rapidly create customizations and custom objects by simply selecting various logic elements. |
| Project Accounting and Contracts Management: | | For companies with professional green-energy services, project-based accounting and billing is one of the most important and complex areas for finance people to tackle. Your team needs to be in constant contact with the appropriate business units in your company to ensure that project deliverables have indeed been completed and that payment can be recognized, collected and released to contractors. Coordination with accounts payable for payment processing also needs to be performed with detailed line items of the various deliverables the contractor has provided at each stage. The situation gets more complicated when multiple contractors are involved and can take up even more of your finance teams valuable time. | | When the project-to-bill process is integrated with the finance and accounting systems, stakeholders have complete real-time visibility into the relevant aspects of the project and no longer must spend time retrieving this information from other groups. Best-in-class financial management applications can automatically calculate the appropriate proportions of payments to be made at each stage of the project to all parties involved. This reduces the amount of time your finance people need to work on complex payment calculations so that they can focus on activities such as analyzing project costs to determine areas where money can be saved for future projects. | | Robust project-based billing capabilities serve as a threshold for complex contracts management. Many companies suffer revenue leakage and customer churn because they rely on cumbersome, inefficient and sluggish manual processes to manage contracts. The many spreadsheets and organizational handoffs involved introduce costly errors and project delays, and rob companies of the opportunity to capitalize on the full potential of their contract-based business. In many cases, companies leave money on the table because they cannot respond quickly enough to expiring customer relationships. | | One of the many issues around contracts management is managing the multiple transactions that typically occur with a customer over the course of a year. Some of these may be one-time transactions, while others are annual contract renewals for new users, product and module licenses, or support and maintenance entitlements. A good financial management application simplifies this process for both you and your customer by allowing the co-termination of multiple transactions into a single contract with a single renewal. At the same time, multi-contract support provides for additional flexibility when it may not be appropriate to co-terminate all items under a single contract. This streamlined approach helps ensure maximum revenue during the renewal process. | | Uplift and discounting are critical aspects of the contract management process. As you renew a customer, you may increase pricing based on a pre-defined price book, a standard across the board increase, or you might increase pricing for only some of your customers. Similarly, you may extend discounts to select customers. It is important that you have the flexibility to implement and customize uplifts and discounts across any range of customers. However, managing this process with spreadsheets introduces the risk of error, lost revenue and customer dissatisfaction It is essential that your financial management application supply features that enable uplifts to be managed across the board or on a customer or contract basis, while supporting granular discounting down to the individual transaction level. |
| Conclusion: | | An integrated Financial Management Application with your CRM is key to running your operations profitably. You need to have real-time insights into numerous financial metrics such as profitability ratios, inventory margins, liabilities, fixed assets and taxes. An integrated financial management application that brings together your order-to-cash and procure-to-pay processes provides you with great business visibility while allowing your team to perform their jobs much quicker. An adaptable financial management application with rich business planning, comprehensive system integration and solid reporting capabilities that operates in the cloud will position you for the next stage of growth. |
| Abstract: | | Financial Management Application (FMA) is an integrated set of general ledger accounts including accounts receivable and accounts payable. Tax accounting is included to the extent needed to deliver a draft annual return, tax returns and cash flow analysis. | | FMA is very comprehensive and only limited by what is requested of it. FMA is so much more than an accounts package - it is the management of all financial data and procedures. |
| Terminology: | | Do not use the term "payment", terms are "credits" for amounts receivable and "debits" for amounts payable. | | Take care with the term "supplier", terms are "debits" for amounts payable to a company supplier such as rent on the building. An energy provider to a client may be called a supplier, but is a type of customer who "credits" amounts receivable on behalf of the client. |
| Two by Two | | The General Ledger (GL) has two parts; (1) Accounts Receivable (AR) and (2) Accounts Payable (AP). | | Each account has two parts; (2) Schedule and (2) Amounts. |
| Schedules: | | Account Receivable (AR) schedule details are in the contract account, but are extracted to this simple summary table for ease of invoicing. The AR schedule generates complete and correct invoices and sends them by email. | | Account Payable (AP) schedule records all standing orders, regular payments and provides a forecast of what may have to be paid in the future. The AP schedule generates the monthly payment schedule. |
| Accounts: | | Account Receivable (AR) ledger records the date and gross amount of every credit into a bank account. The AR ledger has amounts entered daily to match the bank account. | | Account Payable (AP) ledger records the date and net amount of every debit from a bank account. The AP ledger has amounts entered daily to match the bank account. |
| Many Account Ledgers | | An account ledger exists for every company where (1) amounts can be receivable from and (2) amounts are payable to. Double accounting principals demands that every receivable company is known to the CRM as a client (or supplier). The same principal demands that every payable company is known to the CRM as a supplier. | | From any client, all credits received can be viewed and from any supplier, all debits made can be viewed. However, the energy business is even more complex because suppliers make credits for and on behalf of client as an account receivable amount. For example BT is a supplier where payments are made to but Eon is a supplier where payment are received from on behalf of a client contract. |
| Reports: | | FMA has a massive number of optional reports - anything can be analysed by selecting data from the AR and AP transaction tables. User Specified Reports (USR) is the driving force where any bespoke report can be selected and run in a few minutes. | | FMA has a fundamental calendar month structure where at the end of any month, that months transactions are frozen and a balance recorded. Automated Data Assistant (ADA) is run at midnight to undertake predefined procedures such as invoicing (by email). ADA means that a number of task that were traditionally done manually are now fully automated, errors are eliminated and work must be done when scheduled. |
| Schedule: | | The client-contract-account holds all the AR schedule details that is extracted and stored in a derived table as: | | * Client and Energy-Supplier keys and names. | | * Contract Start to contract end dates. | | * Payment period: contract advance, contract arrears, monthly, annual. | | * Payment amount: fixed, variable percentage of spend, variable pence per unit. | | * Estimated annual revenue; for reasonableness exception reporting. |
| Task Management: | | FMA includes task management that may also be known as "memos" in accounting terms. | | A task may be a note to the transaction, an attachment as scanned image or uploaded document or a workflow scheduled for follow-up. | | Task management includes a diary of events where follow up is needed at a specific data and time. | | Task management should be used for exceptions, rather than generic tasks that are shown in reports. |
| Multi-Currency: | | For ITIL operational reasons, the application must match all international laws and regulations; and that includes the need to support multi-currency accounts, even where GBP is the only currency used. For every account transaction, the overhead is 3 fields as: (1) Currency will always be "GBP", (2) Exchange Rate will always be "1.00" and (3) Country will always be "UK". For a company operating in Europe, the 3 fields are: (1) Currency as "EUR", (2) Exchange Rate as "1.00" and (3) Country as "FR" or any other European country code. | | The benefit is that automated VAT and annual returns can be made where amounts by country must be recorded. |
| Expendiiure Codes: | | For accounting reasons, expenditure must be classified and reported by expenditure code as follows: | | RRW rent rates and water (sewerage and PAT). | | LAH light and heat (utility energy as electric and gas). | | RAR repairs and renewals (mainteance and improvement). | | TAS travel and subsistence. | | MTE motor travel expence. | | TFI telephone fax TV license and internet. | | POS postage and stationary (zero rated). | | MTE cleaning and caretaking. | | MTE catering and drinks. | | TRA training and seminars. | | SUB magazine subscriptions (zero rated). | | EQU office equipment (ICT). | | BAN bank charges. | | INS insurance. | | ACC accounting charges. | | GEN general expenses. | | SUP purchased supplies (cost of sale). | | MAR marketing and gifts. | | ENT entertainment (not vatable). | | COM commissions payable agency and professional services. | | INT bank interest. | | SAL salaries pensions benefits and tax. | | EXP staff expense form. |
| Sage Nominal Codes: | | 0nnn fixed assets. | | 10nn stock (99). | | 11nn debitors (99). | | 12nn bank and cash (99). | | 2nnn liabilities (999). | | 30nn capital and reserves (99). | | Above is on balance sheet. | | 4nnn sales and income (999). | | 5nnn purchases (999). | | 60nn labour and direct costs (99). | | 61nn marketing (99). | | 7nnn overheads (999). | | 8nnn adjustments (999). | | 9998 suspense account. | | Above is on P&L sheet. |
| Internal: | | The FMA application code is "A" to be used as the prefix to all FMA records and tables. The FMA function code is "7" to be used as the prefix to all FMA functions. | | AAP accounts payable (AP) is implemented as "aap1" and "aap2". | | AAR accounts receivable (AR) is implemented as "aar1" and "aar2". | | APS accounts payable schedule is implemented as "aps1" and "aps2". | | ARS accounts receivable schedule is implemented as "ars1" and "ars2". | | APT accounts payable task is implemented as "apt1" and "apt2". | | ART accounts receivable task is implemented as "art1" and "art2". | | ASU supplier accounts who get paid (and Directors) as "asu1" and "asu2". | | UOP user options specify all FMA placeholders using the FMA application code. | | USR user specified reports define all FMA spread sheets using the FMA application code. |
| General Ledger | | General Ledger is a report showing the accumulation of accounts receivable (income) and accounts payable (outgoing). Automated Data Assistant (ADA) will generate the double-entry GL accounts from the AR and AP daybooks. AP and AR may have associated tasks (as memos in accounting terms) that include attachments with scanned images and uploaded documents. | | Directors Account Ledger has a type as "real" with both DR and CR transactions. | | Client/supplier Account Ledgers have a type as "personal" with CR and some DR transactions. | Nominal Account Ledgers have a type as "nominal" for revenue (CR), expenses (DR), gains (CR) and losses (DR).
| Debit | Credit |
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| Asset | Increase | Decrease |
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| Liability | Decrease | Increase |
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| Revenue | Decrease | Increase |
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| Expense | Increase | Decrease |
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| Capital | Decrease | Increase |
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| Accounts Receivable (AR) | | Daily bank reconciliation is undertaken to record credits received (on behalf of clients) as revenue in the Accounts Receivable Daybook. AR will balance amounts with accounts due and accounts invoiced. Amount receivable is entered as a gross amount (from the bank account) with the VAT and Net amounts automatically calculated. |
| Accounts Payable (AP) | | When any debit is made to any (supplier) account, details are entered as an expense into the Account Payable Daybook. All outgoings are replicated to the general ledger account so a cash flow balance of incoming against outgoing can be established. Amount payable is entered as a net amount with the VAT and Gross amounts automatically calculated. |
| Balance Sheet | | International standards define the structure of a balance sheet as: | | 1. Current Assets as Accounts Receivable. Cash and prepaid expenses with inventories may be applied as and if needed. | | 2. Non-Current Assets as Property, plant, equipment, intangible assets and equities may be applied as and if needed. | | 3. Liabilities as Accounts Payable. Promissory notes, corporate bonds, provisions for warranties and deferred tax with unearned revenue may be appended as and if needed. | | 4. Equity as issued capital and reserves as the balance of assets minus liabilities. |
| Cash Flow | | Cash flow is not a legal reporting requirement, but it is a valuable means to visualize cash flowing in and out of the company. Cash flow ignores all intangible balance sheet amounts and concerns itself with accounts receivable and accounts payable. | | Cash flow is reported as: (1) operations, (2) investments and (3) financing, but it is the net total that is significant. |
| Islamic Finance: | | Where the payment of interest on a loan is not an acceptable method of doing business, we have a solution where we buy the product-service that is needed by a customer and rent that product-service at an agreeable fee that may taper towards zero. At no time is a loan or interest payments part of the business transaction - this is an ethical method of doing business. One day we suspect that all business will be conducted using this ethical rental-subscription-lease method of working between business partners. |
| Executive Escalation: | | FMA is designed to prevent fraud and accidental errors - nothing can be deleted, nothing can be changed, nothing can be hidden. Executive Escalation of all critical events are made by automated email so they cannot be prevented or lost. | | Executives can specify the rules that they demand to be used and any variation on those rules will result in an escalation email. For example; reasonable payment limits are specified for each supplier and where any limit is exceeded, then an Executive Email is automatically sent so action can be taken. The monthly phone bill will be known to have an upper and lower limit that is recorded in the supplier record. The expected amount received from a named client-supplier is recorded in the contract-account, if that amount is not correct then an Executive Email is sent out for urgent action. |
| No Spread Sheets: | | By simply using the CRM to eliminate easy to change spread sheets, fraud and errors can be dramatically reduced. Executives get a monthly report to monitor a modest number of account payable supplier accounts to ensure that outgoings are not being fraudulently converted. VAT Accounts are made up as a balance sheet at the end of each month and quarter, so no delay is involved before the VAT account can be filed. Annual Accounts are made up as a draft balance sheet at the end of each month, so no delay is involved before the annual accounts can be audited and filed. | | Formal double entry principals are deployed to eliminate fraud - when a new transaction is entered, it is recorded to many accounts so a change to any one account will instantly become apparent. Double entry means that when an amount is credited to one account it is debited from another account to maintain the balance as Equity = Assets - Liabilities. The sum of all assets in the accounts receivable ledger minus the sum of all liabilities in the accounts payable ledger is the equity as profit or cash in bank. |
| Automation: | | Many tasks that were traditionally done by book keepers are fully automated so errors are eliminated, delays are avoided and financial data is created on-time every time. |
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