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

Fixed Cost Minimum Cost in Month 1

Maximum Cost in Month 1

Rent for Month

$2,000 $2,000 $2,000

Utilities per month

$500 $500 $500

Coffee Maker

$3,000 $6,000

Furniture $2,000 $4,000

Total $7,500 $12,500

You will spend between $7,500 and $12,500 in cash into the business in the first month

Ignore the sunk costs that are accrued each 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 $3.50

Quantity of Cups sold (Demand), Q 2,000

Revenue, R = P x Q $7,000

Cost per cup, V $0.30

Cost of Goods SoldCOGS = V x Q

$600

Gross profit, G = R - COGS $6,400

Cost of Servers (21 x $10 x 10 hrs) $2,100

Cost of Advertising $1,400

Cost of Radio Spots $1,400 $2,800

Marketing Profit, Z = G – (Cost of Servers + Adv +Spots)

$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 $3.50

Quantity of Cups sold (Demand), Q 2,000

Revenue, R = P x Q $7,000

Cost per cup, V $0.30

Cost of Goods SoldCOGS = V x Q

$600

Gross profit, G = R - COGS $6,400

Cost of Servers (21 x $10 x 10 hrs) $2,100

Cost of Advertising $1,400

Cost of Radio Spots $1,400 $2,800

Marketing Profit, Z = G – (Cost of Servers + Adv +Spots)

$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?