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CFO Fundamentals: Your Quick Guide to Internal Controls, Financial Reporting, IFRS, Web 2.0, Cloud Computing, and More by ALLISON I. SHIM, JOEL G. SIEGEL, JAE K. SHIM

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CHAPTER THIRTY-ONE

Analysis, Evaluation, and Control of Revenue and Costs

A COMPANY CAN IMPROVE its bottom line and overall operations by analyzing, planning, monitoring, and controlling revenue and costs. Control reports help in this process. This chapter provides some benchmarks in this evaluation and control process.

CONTROL REPORTS

Control reports are issued to highlight poor performance so that timely corrective action can be taken. The reports should be frequent and detailed, and should look at each important operational level.

Summary reports should present performance over a long time period (e.g., monthly) and provide an overview of performance.

The form and content of the control report varies depending on the functions and responsibilities of the executives receiving it. The reports may be narrative, tabular, or graphic. A lower-level manager is more concerned with details. A higher-level manager is more interested in summaries, trends, and relationships. The reports may be in both financial and nonfinancial terms.

How can revenue be controlled?

Important questions needing answering in sales analysis are: What was sold? Where was it sold? Who sold it? What was the profit?

Sales and profitability analysis involves these considerations:

  • Customer: Industry or retail, corporate or governmental, domestic or foreign
  • Product: Type of commodity, size, price, quality, and color
  • Distribution channel: Wholesaler, retailer, agent, broker
  • Sales effort: Personal visit, direct mail, ...

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