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Management Accounts for a vendor operating several stores

by Apr 16, 2020Case Studies

Client Overview:

Client C had several shops and was working in a no-profit no-loss situation.

At a Glance

Problem Statement: 

  • The reason behind the break-even was unclear
  • Cashflow was always tight
  • Monthly P&L report from the in-house accountant was always late
  • We were appointed in to provide advanced reporting enabling the director to correctly understand his finance situation

Solution

  • Initial Assessment showed that the business was not reporting profit/loss by shop.
  • Just a single P&L account was being prepared with head office costs also accounted for.
  • In a meeting with the director, branch reporting was found to be beneficial instead of consolidated reporting like now.
  • Branch profits were then consolidated and the head office costs were deducted to correctly calculate the profit of the business as a whole.
  • Side by side, we also set-up Sage so that future accounting could be streamlined.
  • In our assessment, we found out that:
    • Some managers were being paid exorbitantly even when their stores were not the most profit making ones.
    • Some stores were making a loss due to irrational investment in advertising, travel and miscellaneous expenses.
    • Store managers were mostly clueless about how their branch was performing.
    • Feedback from the customers were mostly absent and there was no record of their buying patterns.
  • We worked with the director, providing him all the results of the assessment.

 

Result

  • The Director took some harsh decisions – some branches were closed, travel and misc budgets were set, financial targets and feedback were given to managers and overtime an increased performance was observed from each viable store and the business turned highly profitable.

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