Understanding - Performance Analysis Report

Q1. What does the Performance Analysis Report include?

The Performance Analysis Report highlights key performance issues across the client’s P&L and Balance Sheet, it does not include ‘quick wins’ (opportunities identified on a management by exception basis).
The Performance Analysis Report only includes information related to sales, variable costs and overheads to provide the business owner with a good overview of sales trends and performance.
The Performance Analysis Report only highlights key performance issues across the client’s Balance Sheet and will highlight ‘quick wins’ if opportunities are identified on a management by exception basis.
The Performance Analysis Report highlights key performance issues across the client’s P&L and Balance Sheet and will highlight ‘quick wins’ if opportunities are identified on a management by exception basis.

Q2. When would the Performance Analysis Report be discussed with your client?

The Performance Analysis Report should form the basis of an in-depth monthly review of business performance with your client.
The Performance Analysis Report should form the basis of an in-depth quarterly review of business performance with your client.
The Performance Analysis Report is an opportunity exception report, so it is only discussed with the client if certain pre-requisite conditions are satisfied.
The Performance Analysis Report is only discussed with the client if the business’ specific circumstances indicate that this report would provide useful business information.

Q3. When are Performance Analysis Reports generated?

A new Performance Analysis Report is generated every time the reporting month is changed for a client and the data is synchronised.
A new Performance Analysis Report is generated on a management by exception basis only if the businesses specific circumstances indicate that this report would provide useful business information.
A new Performance Analysis Report is only generated if there are three years data in the clients accounting system.
A new Performance Analysis Report is generated automatically on the first day of each month.

Q4. What is the purpose of the ‘If You Only Look At One Thing (KPI), section of the report?

This part of the report is provided to give a detailed KPI Analysis that provides everything the business owner needs to know to manage their business.
This part of the report is provided to give a snapshot view of the Key Performance Indicators (KPI’s) your client should be aware of and ideally, they should be working to improve.
This part of the report shows the key things the business owner should monitor, Sales, Variable Costs, Fixed Overheads, Profit, Debtor Days and Cash Flow.
This part of the report displays every KPI VFD Pro calculates for the business.

Q4.5 What determines the presentation of the nominals within the Performance Analysis Report?

VFD Pro uses an industry standard chart of accounts to determine how each nominal is presented.
The presentation of the nominals for a business is based on their individual chart of accounts as per their accounting package.
The accountant / advisor can devise their own chart of accounts and map the business’ nominals to this.
VFD Pro uses sector specific (based on SIC code) chart of accounts to determine how each nominal is presented.

Q5. What information is provided in the Business Overview section of the Performance Analysis Report?

The Business Overview section is presented as a conventional Profit & Loss and Balance Sheet report as required by the International Financial Reporting Standards (IFRS), that specifies exactly how accountants MUST maintain and report their client’s accounts.
A high level overview of business performance displayed graphically comparing performance over the past month, quarter and 12 months compared with the corresponding period in the previous year, including analysis of Revenue, Cost of Sales and Gross Margin, Overheads and Profit.
A high level overview of business performance displayed in tabular form comparing performance over the past month, quarter and 12 months compared with the corresponding period in the previous year, including analysis of Revenue, Cost of Sales and Gross Margin, Overheads and Profit.
A high level overview of business performance customised to be specific to the business because no two businesses are identical, every business needs to report on different data.

Q6. How is the profit impact of the movement in revenue year on year calculated?

The profit for each of the last two years is a simple calculation based on sales, minus cost of sales, minus fixed overheads.
The profit impact of the movement in revenue is calculated by applying an average margin for the industry sector based on the Standard Industry Classification (SIC) code for each business.
Each business operates with a different margin structure, so the way profit impact is calculated varies from business to business.
The profit impact of the movement in revenue is calculated by applying the margin % achieved last year with the movement in the client’s revenue from last year to this year.

Q7. Which two key drivers of Revenue are included in the Executive Summary section of the Performance Analysis Report?

Each client’s revenue performance is broken down into its constituent parts (number of transactions and average transaction value).
Each client’s revenue performance is broken down into its constituent parts (number of customers and average purchase value).
Each business is different so the drivers reported on in the Performance Analysis Report will vary from business to business.
Each client’s revenue performance is broken down into its constituent parts (number of invoices raised and average invoice value).

Q8. What information is provided in the Revenue Analysis part of the Performance Analysis Report?

Overall revenue, transactions and average spend displayed graphically and in tabular format comparing monthly, quarterly and rolling 12-month period with the corresponding period in the previous 12 months.
Total sales, number of customers and average spend displayed graphically and in tabular format comparing the past month, quarter and 12-month period with the corresponding preceding period.
The total revenue reported is broken down by nominal code for the highest volume products or services the business sells.
Each business is different so the drivers reported on in the Revenue Analysis section of the Performance Analysis Report will vary from business to business.

Q9. In the Customer Analysis section, how are existing, new and lost customers identified?

The customer analysis provides a breakdown of sales to the top 10 customers this year versus last year, percentage of total sales and variance in absolute and percentage terms, but it does not provide any analysis of clients lost, gained or retained.
The customer analysis provides a breakdown of the top 10 customers in the last 12 months and the customers with the largest sales decrease. Customers lost are identified as those with the greatest sales decrease and new customers are identified as those with the greatest increase in sales.
New customers are those that are identified as having been added to the accounting system in the last 12 months. Lost customers are identified as those who have been removed from the accounting system in the last 12 months. Existing customers are identified as those who purchased in both of the last 2 years.
Existing customers are those with transactions recorded in each of the most recent 2 years. New customers are those with transactions recorded in the last 12 months, but not the preceding 12 months. Lost customers are those with transactions recorded in the preceding 12 months, but not the last 12 months.

Q9.5 How is a transaction defined within the Performance Analysis Report?

Each invoice raised is equal to one transaction.
Each customer represents one transaction.
Each line item on an invoice represents one transaction.
Total transactions are calculated by dividing total sales by total customers.

Q10. What do the red and green flags indicate on the cost of sales element of the Margin Analysis section of the report?

Red and green flags are used to highlight particularly good or bad movements in the elements that make up the cost of sales. A green flag indicates a positive variance of greater than 10% year on year. A red flag indicates a negative variance of greater than 10% year on year.
Cost of sales elements are analysed in absolute terms and as a % of revenue. The top 5 (by value) are displayed in the graph and table. Red and green flags indicate where the cost of sale line has increased (red) or decreased (green) as a % of revenue.
There are no Red or Green flags used in the cost of sales element of the Margin Analysis section of the report.
The red and green flags are optional. If the clients wants to use them, they can be enabled and used to identify exceptional items for discussion during a client / management review. A red flag is a negative performance issue whereas a green flag indicates a positive performance issue.

Q11. How is the commentary in the Overhead Analysis section of the report populated?

The commentary is automatically populated based on the individual client performance over the past month, quarter and 12-month period compared to the same time period in the previous 12 months and is provided to articulate the information displayed in the tables and graphs.
When the reports are generated the accountant / advisor adds the commentary to the Overhead Analysis and other sections of the report.
The commentary is an optional function and can be switched on or off for each client.
Every business is unique so it would be impossible to provide automated commentary that is specific to the business.

Q12. How is the profit information presented in the Profit Analysis?

The profit information is presented in a purely tabular form comparing the most recent 12 months with the preceding 12 months in absolute terms with the year on year variance.
The profit information is presented in a purely graphical form represented as a waterfall chart showing the movement in profit from last year detailing the constituent parts of the profit movement (sales, margin and overheads).
Profit £, and Profit % are displayed graphically and in tabular format. The table then reflects performance in each of the past 4 quarters. A waterfall chart then displays the constituent parts of the profit movement (sales, margin and overheads).
The layout and information presented is customised for each client (because no two businesses are identical it is not possible to provide a standard layout).

Q13. What is the basis for the Forecast Extrapolation shown in section 9?

The forecast extrapolation assumes the trading performance in terms or revenue, gross margin and overheads achieved in the last 12 months will be repeated adjusted for inflation and seasonality.
The forecast extrapolation has to be manually populated and so is an optional part of the report. If the data has not been manually populated this section of the report is omitted.
There is no forecast extrapolation because it would be impossible to automate the creation of the forecast in a reliable manner and it would take too long to populate manually unless the client is paying extra for the service.
The forecast extrapolation takes the most recent 6 months performance and extrapolates this forward (adjusting for seasonality) to generate a view on the likely direction of travel for profit over the next 12 months.

Q14. Which key ratios / information is included in the Balance Sheet Analysis?

Net Worth, Current Ratio, Quick Ratio, Cash Ratio, Total Debt to Equity, Debtor Days and Creditor Days.
Net Worth, Current Ratio, Cash Ratio, Total Debt to Equity, Debtor Days and Creditor Days.
Net Worth, Current Ratio, Cash Ratio, Total Debt to Equity, ROE, Debtor Days and Creditor Days.
Net Worth, Net Profit Margin, Current Ratio, Cash Ratio, Total Debt to Equity, Debtor Days and Creditor Days.

Q14.5 How are the Balance Sheet nominals classified within the Performance Analysis Report?

In order to prepare some of the ratio analysis VFD Pro categorises your assets and liabilities based on their nominal description.
In order to prepare some of the ratio analysis VFD Pro categorises your assets and liabilities based on the business’ chart of accounts.
In order to prepare some of the ratio analysis VFD Pro categorises your assets and liabilities based on a standard chart of accounts.
VFD Pro does not analyse Balance Sheet ratios.

Q15. How are Opportunities included in the Performance Analysis Report?

The Performance Analysis Report only includes actual business performance. If opportunities to improve a specific area are identified these are detailed in a separate report.
VFD Pro analyses every single transaction in the accounts to identify whether there is an opportunity to improve a specific area, for example Utilities or Customer Retention / Acquisition. When opportunities are identified these are detailed in a separate dedicated report.
When opportunities to improve a significant area are identified the full detailed analysis is included in the Performance Analysis Report.
Each business is different so it would not be possible to automatically identify opportunities to improve specific areas – where such analysis is possible, this is configured separately on a case by case basis.

Understanding – Performance Analysis Report

Understanding – Performance Analysis Report

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