1 shaw financial literacy breakout session internal financial reporting march 24, 2015 krissie brown...

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SHAW FINANCIAL LITERACYBreakout Session

Internal Financial Reporting

March 24, 2015

Krissie Brown – Corporate Manufacturing AccountingBrandy Tunnell – Corporate Manufacturing AccountingAlan Hundley – Corporate Controller

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Internal Financial Reporting - Objectives

Learning Objectives

• Learn about how financial transactions are recorded

• Learn about how Shaw organizes financial results for internal reporting

• Understand how various groups within Shaw are reported

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Internal Financial Reporting - Transactions

• Examples of Transactions include:– Sales Invoices - Customers– Purchases, Invoices and Checks – Suppliers– Payroll, Travel & Ent., Insurance – Associates– Production and Raw Material Usage – Mfg.– Inventory Movements and Transportation – Logistics– Depreciation of Assets – Facilities and Equip.– Journal Entries and Accounting Adjustments

• How is all that detail managed and tracked?

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• Chart of Accounts• Language of Accounting• Numeric Codes to organize the “who, what, and

where” of each transaction

Account Dept. (GL) Plant Project

500203 – Direct LaborThis is the “What”

01145 - Tufting 0004 – Plant 4Plant not always

used

123456789 –Control SystemProject tracking only

Dept. and Plant segments together = COST CENTERThis is the “Who and or Where”

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• General Ledger System– Maintains a running balance netting all of the

transactions for each account combination– Every transactions balances within itself:

Example Journal Entry to Record Direct labor:

Debit 500203-01145-0004 $500.00 Direct Labor –Tufting Plant 4

Credit 110751-00000 ($500.00) Cash

– Shaw uses PeopleSoft General Ledger• Delivered integration with AP, Purchasing,

Inventory, Asset Management• Custom integration to Shaw Legacy systems• Chart of Accounts Standard across all Shaw Mfg.

Locations• Spectra, China, and ClearPath on other systems

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Internal Financial Reporting - Reporting

• Balance Sheet and Cash Flows– Total Company only – very limited distribution

• Income Statements - Internal Management Tools– Primarily organized to align with Sales Organizations

• Residential, Commercial, Miscellaneous Operations– Further broken down by Selling Structure and Region

• Residential – Retail / Builder and Regions (Geographic)• Commercial – Shaw Contract / Hospitality and Regions• Miscellaneous Operations – Includes Fiber, Cushion, Adhesive• Promotional Goods

– Within Selling Structures, also broken down by Product • Carpet (Broadloom/Tile), Hardwood, Resilient, Ceramic)

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So, if Income Statements are organized to align with Sales Organizations, what does that not cover?

– Manufacturing Plants and Support Functions– Distributions Centers and Regional Distribution Centers– Transportation Cost Centers– Research and Development Cost Centers– General and Administrative and Customer Service Cost Centers

How are the results of those operations managed and how do they fit into Shaw’s Income Statement?

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Cost Center Details:– General Ledger Departmental Reports produced monthly

for each “Cost Center”• Comparative listing for each Account

– Actual vs Budget and Prior Year – Includes current period and year-to-date comparisons

– Departmental Reports are also published at the detail level each month with supporting transactional details (Accounts Payable, T&E, Journal Entries, etc.)

– Roll-up summaries produced to align with organizational structure (i.e. VP, Director, Manager)

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Further Analysis on Internal Operations:

• General Ledger data is also combined with other operational data to produce numerous reporting packages that provide operational insight into the operations.

• A few examples include:• POVA: Plant Operating Variance Analysis• Analysis of Inventories• Sample Cost Analysis• Freight Out to Customers Analysis

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Allocations:• The results of internal operations are allocated to the Income

Statement in order to allow the income statement to represent a complete profit picture.

• The following functions are allocated to specific sales units (specific income statement pages):

• Raw Material Purchases – Cost of Sales• Manufacturing Operations – Cost of Sales• Distribution Operations – Cost of Sales• Research and Development – Cost of Sales• Transportation – Cost of Sales and Selling Expense• Regional Distribution Centers – Selling Expense

• The basis for allocating these functions varies but most common drivers are Sales, Cost of Sales and Yards Shipped.

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Allocations (Continued)

• General Administrative cost (HR, IS, Accounting, Legal, Customer Service, etc.) is not allocated to sales. These are only reported on the Total Company Income Statement. These functions support the entire organization.

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• Income Statement for Illustrations (Fictitious Data)

• Allocated to various Sales segments

• Reported on Total Company Income Statement Only

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Internal Financial Reporting - Objectives

Questions / Discussions

Thank You!

1 shaw financial literacy breakout session internal financial reporting march 24, 2015 krissie brown...

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