Both Accrual and Cash Systems Used in Accounting are

Inadequate

for a Weekly Report on Marketing Performance

Ted Mitchell

Accounting Systems

• • • • • • •

1) Monthly Accrual System

Audience is the shareholder Seek to match costs and revenues over time Smooth out the profit picture

2) Weekly Cash Flow System

Audience is the Cost accountant Records all cash flows

You as Marketing managers will find • • • The classic

monthly accrual-based

Accounting Reports – Balance sheet (important for retained earnings) – Income statement To be inadequate for making profitable marketing decisions You will be wanting a

weekly

marketing performance report

Ignore the sunk costs

that are accrued each month Fixed Cost Minimum Cost in Month 1 $2,000 Rent for Month Utilities per month Coffee Maker Furniture $2,000 $500 $500 $3,000 $2,000 Total $7,500 Maximum Cost in Month 1 $2,000 $500 $6,000 $4,000 $12,500 You will spend between $7,500 and $12,500 in cash into the business in the first month

Marketing Manager in Biz Cafe

• • Need a Weekly Performance Statement That identifies the cost of the marketing decisions made in the week and the market’s immediate response to those weekly decisions

You will want to build a weekly marketing manager’s report • • • • On a spreadsheet constructed for the reporting of a weekly marketing performance It will include: Price, Demand, Revenues, Cost of Goods Sold, Gross Profit, Direct Marketing Expenses for the Week and Marketing Profit!

Marketing is the amount of profit being contributed to the owners’ net income by the firm’s weekly marketing efforts

Marketing Performance Report for 100 hours of Operation in Week # Selling Price Tag, P Quantity of Cups sold (Demand), Q Revenue, R = P x Q Cost per cup, V Cost of Goods Sold COGS = V x Q Gross profit, G = R - COGS Cost of Servers (21 x $10 x 10 hrs) Cost of Advertising Cost of Radio Spots Marketing Profit, Z = G – (Cost of Servers + Adv +Spots) $3.50

2,000 $0.30

$1,400 $1,400 $7,000 $600 $2,100 $2,800 $6,400 $1,500

Three very useable weekly reports

• • • • • • • • • • • Provide some information for the Weekly Marketing Report

1) The Dashboard Report

Cost of Goods Sold, COGS Gross Profit, G

2) The Weekly Sales Receipts Report

Demand (Quantity sold), Q Price Tag(s), P Revenue, R

3) The Decision Summary

Servers and Cost of Advertising, Radio Spots and Cost of

Marketing Performance Report for 100 hours of Operation in Week # Selling Price Tag, P Quantity of Cups sold (Demand), Q Revenue, R = P x Q Cost per cup, V Cost of Goods Sold COGS = V x Q Gross profit, G = R - COGS Cost of Servers (21 x $10 x 10 hrs) Cost of Advertising Cost of Radio Spots Marketing Profit, Z = G – (Cost of Servers + Adv +Spots) $3.50

2,000 $0.30

$1,400 $1,400 $7,000 $600 $2,100 $2,800 $6,400 $1,500

You have to calculate your own Marketing Profit, Z

Any Questions on?

• • 1) Why are the cash system and the accrual systems inadequate for the marketing manager in Biz-Café 2) Why is in the Weekly Report on Marketing Performance?