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FINANCIAL MANAGEMENT

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FINANCIAL MANAGEMENT FINANCIAL REPORT Compiled by calendar month, reporting period, predetermined Serves as a check on the financial control of the entire operation ... – PowerPoint PPT presentation

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Title: FINANCIAL MANAGEMENT


1
FINANCIAL MANAGEMENT
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3
FINANCIAL REPORT
  • Compiled by calendar month, reporting period,
    predetermined
  • Serves as a check on the financial control of the
    entire operation
  • Affords basis of comparison for preceding and
    future periods
  • Provides statistical source for compilation of
    annual reports
  • Gives information for preparation of budget
  • Provides means of comparison with like operations

4
FINANCIAL REPORTS
  • Provide information
  • Enough money to pay bills
  • Too much money tied up in inventory
  • Food cost higher or lower than expected

5
ESSENTIALS OF ACCOUNTING
  • Recording
  • Classifying
  • Summarizing and reporting
  • Analyzing

6
INCOME STATEMENT
  • Shows business operating results revenue,
    expenses, and income
  • Financial status over period of time (month,
    quarter) profit and loss indicated
  • Revenue sales, income, money generated
  • Cost of goods sold COGS cost of meals served,
    food cost, money spent for goods
  • Gross margin/profit money left after paying for
    COGS
  • Operating expenses rent, utilities,
    depreciation (12-18) of total

7
BALANCE SHEET
  • Shows relationship between a business debts and
    the items it owns
  • Balance sheet equations
  • Liabilities Owners equity Assets
  • Assets Liabilities Owners equity
  • Assets
  • Current converted to cash within one year
  • Fixed long term, used to operate business
  • Liabilities
  • Current paid within one year
  • Fixed long-term, due beyond one year
  • Equity capital and stocks

8
FINANCIAL DATA SHOWS
  • Need to implement better controls
  • Reduce costs
  • Improve budgeting process
  • Increase profit and the return of owners
    investment
  • Help prevent theft and fraud point to areas for
    controls
  • Allows you to plan and control the business

9
FINANCIAL ANALYSIS
  • Break even point sales are equivalent to fixed
    costs plus variable costs
  • Fixed costs stable regardless of sales (rent,
    depreciation)
  • Variable costs vary due to sales amount and
    volume (food cost)
  • Other costs indirect (utilities) or direct
    (paper goods)

10
INFORMATION INCLUDED
11
NUMBER OF MEALS SERVED
  • Patient census count, NPO
  • Nourishments
  • Supplements
  • Snacks
  • Cafeteria meals
  • Special meals to groups
  • Tube feedings

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MEAL COUNT
  • Inflate meal count ? cost per meal too low
  • Meal count too low ? inflates meal cost
  • 0.05/meal off X 400,000 meals
  • 20,000

14
CALCULATE RAW FOOD COST
  • BEGINNING INVENTORY
  • PURCHASES (FOR REPORTING
  • PERIOD)__________________________
  • TOTAL WORKING INVENTORY
  • CLOSING INVENTORY
  • COST OF RAW FOOD USED
  • 30-40 OF DOLLAR SALES

15
FOOD COST
  • Food is the most expensive and/or variable cost
  • Unexplained increase in food cost should first
    evaluate possible theft

16
LABOR COSTS
  • Payroll salaries and wages
  • vacation, holiday, personal day
  • Social security taxes
  • Workmens compensation
  • Health and life insurance
  • Other fringe benefits
  • retirement plans
  • dental/eye plans
  • day care
  • free meals
  • profit sharing plans, etc., etc.

17
FULL-TIME EQUIVALENTS
  • FTEs
  • 1 FTE 40 hour work week
  • 1 FTE relief can cover 2.5 FTEs
  • Compute FTEs
  • Add ALL man-hours for period of time (week, day,
    month)
  • Include part-time and full-time
  • Divide total hours by 40 to get FTE

18
Each full-time employee 16 hours / week off2 X
16 3240 - 32 8 or ½ employeetherefore each
relief 2.5 FTE
19
TURNOVER
  • Employees lost replacement
  • total staff
  • So if total staff 50
  • Terminate 4
  • Replacement 2
  • 4 2 6
  • 6/50 0.12 (12 turnover rate)

20
LAWS WITH A FINANCIAL IMPACT
21
MINIMUM WAGE
  • Bureau of Labor Statistics current information
    on federal minimum wage
  • Fair Labor Standards Act of 1938-
  • sets minimum wage
    annual
    gross income of lt500,000 exempt from paying min.
    wage
  • can pay teens a temporary training wage

22
IMPACT
  • For every 10 increase in minimum wage 1.2-1.6
    increase in hamburger or chicken

23
WORKMENS COMPENSATION ACT
  • 1908 1911
  • Provide medical costs for those injured on job
  • Encourage employer interest in safety
  • Reduce court delays

24
OCCUPATIONAL SAFETY AND HEALTH ACT
  • (1970)
  • Enforced by Occupational Safety and Health
    Administration (OSHA)
  • Assure safe and healthful working conditions
  • Meet standards through training
  • Keep records of incidents

25
SOCIAL SECURITY ACT
  • 1935
  • Federal Insurance Contribution Act (FICA)
  • Compulsory
  • Many expansions
  • Medicare 1965

26
OTHER EXPENSES
  • Paper goods

27
PRODUCTIVITY
  • Defined by Spears ratio of output to input or
    the ratio of goals to resources of food service
    system

28
MEASURE PRODUCTIVITY
29
QUANTITY
  • Quantity focuses on amount of a product
    produced or service rendered
  • Meals per patient day
  • Meals per labor hour
  • Minutes per meal
  • Labor cost per day
  • Food cost per patient per day
  • ETC see Spears

30
QUALITY
  • Focuses on accuracy and quality of the product
    produced
  • Food temperature
  • Sensory characteristics
  • Safety and sanitation of work area
  • Seven principles of HACCP

31
OUTCOMES
  • Measures whether product met the proposed outcome
    did we accomplish what we set out to do
  • Satisfaction surveys
  • Plate waste
  • Service parameters such as time, accuracy and
    lack of crisis management

32
PRODUCTIVITY INDICATORS
  • Acute care facilities? 3.5 meals/labor hour
  • Extended care facilities?5.0 meals/labor hour
  • School foodservice?13.0-15.0 meals/labor hour
  • Cafeteria?5.5 meals/labor hour
  • Healthcare institutions with 3 meals snacks 7
    days/ week?14 minutes/meal can be used

33
BUDGETS
34
DEFINED
  • A plan for operating a business expressed in
    financial terms
  • A plan to control expenses and profit in relation
    to sales
  • Provides an organized procedure for planning and
    for development of standards of performance in
    numerical terms

35
BUDGET TYPES
36
OPERATING
  • Forecasts level of service to be provided
  • Projects costs necessary to support this level of
    service
  • Formulate plan for making management decisions
  • Control department activities

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IMPORTANT TO FOOD SERVICE
  • Standard for comparing actual with forecasts
    FEEDBACK
  • Financial plan for allocation of resources
  • Organizational plan for meeting departmental
    objectives
  • Represents forecast for coming year

39
CAPITAL BUDGET
  • Finances major purchases or improvements
  • Multiple years up to 5 years
  • Item not consumable
  • Cost level and usable time period is defined

40
PREPARATION
  • Main objective is to formulate a carefully
    delineated plan for making management decisions
    and controlling departments activities
  • Timetable
  • Objectives
  • Financial feasibility

41
REVIEW OF DATA
  • Incremental budgeting based on previous year
    and of increase (food, labor, etc), of
    decrease
  • Flexible budgeting prepares for level of
    service at both higher and lower end of original
    estimate
  • Zero based budgeting justification for each
    item, expenditure

42
COST CONTROLS
43
DEFINED
  • Planned goals and objectives are accomplished
    with most efficient and effective use of
    resources
  • Closely linked to planning

44
COMPONENTS
  • Strategic plans ultimate results are provision
    of goods and services to satisfy client needs and
    wants with increased revenue and decreased
    expense
  • Policies and Procedures written statement of
    goals and objectives with written procedure of
    how to reach them

45
EFFECTIVE CONTROL CHARACTERISTICS
  • Extension of planning process
  • Provide accurate up-to-date information about
    plans and standards predetermined targets
    against which future performance will be measured
  • Should be flexible to deal with changing
    environment within and outside organization

46
FEEDBACK
47
DEFINED
  • Any process that compares the operations actual
    performance, as documented in output reports,
    with standards of performance, established in
    control documents

48
FUNCTION
  • Evaluates financial performance
  • Evaluates operational performance
  • Identifies potential problems
  • Identifies potential opportunities
  • Should be
    objective
    based on fair observations of actual data,
    activities and conditions

49
FEEDBACK PROCESSES
50
FINANCIAL STATEMENT ANALYSIS
  • Trend analysis
    compare financial/nonfinancial results from
    several accounting periods
  • Ratio analysis
    mathematical relationship between any 2 items
  • Common size analysis
    report each line item as a
  • Variance analysis
    difference between actual and projected

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FINANCIAL INDICATORS
  • Based on volume planning
  • What level of revenue necessary to make desired
    profit

57
SENSITIVITY ANALYSIS
  • Electronic spreadsheets
  • Impact of 5 increase in cafeteria revenue on net
    income (example)
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