Build Your Management Pl Flow
As companies grow, it takes sometime for Finance to catchup with business requisite management reporting requirements. So, how accounting is done in the accounting software might be completely different from how Management looks at Financials or how they would like to. In that process, a lot of manual outside work has to be done to produce Management Financials.
So generally it’s a standard practice to put together and publish an internal cadence flow of how internal core Financial Natural Accounts eventually build up-to the Management Financials. Though this is very simple when we look at it from the outside, it still is a big challenge for a lot of companies esp. when there is significant sudden growth. For example, initially when companies start they might just have 3 layers to the Management PL – Revenue, Gross Margin & EBITDA. But as the company grows, intermediary new additional Margins will need to be introduced as the internal business becomes complex – so management might need multiple variants of Margin like Contribution Margin, Net Margin, Operating Margin etc.
While on the outside these look easy, when base accounting is setup and established, it is hard to introduce new margins in the core accounting software. In the same example above, initially the company had only Gross Margin so they might have had a set of Payroll accounts. But when a new margin like Net Margin is introduced, either a new set of Payroll accounts need to be introduced or a breakup of the existing Payroll accounts through another segment like Department etc will be required. If the accounting software does not cater to these, then these will have to be done outside.
So, as a standard having Enterprise Performance Products like QuarkCube becomes fundamental to organizations that continue to grow. Introducing changes to core accounting softwares is hard – EPM products provide that necessary agility to Enterprises to produce Management aligned reporting so that proper data driven decisions can be made.
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