Financial Performance Analysis of Grow Management Consultancy for 2014

The report presented here provides an analysis of the financial performance of Grow Management Consultancy for 2014. The overall performance of the business is good as depicted from the net profit of $652,077. The company has further plans to improve the sale of E-book publication and Workshop.

Part-A
Executive Summary
The report presented here provides an analysis of the financial performance of Grow
Management Consultancy for 2014. The overall performance of the business is good as depicted
from the net profit of $652,077. The company has further plans to improve the sale of E-book
publication and Workshop.
Introduction
This report has been prepared to analyze the financial performance of Grow Management
Consultants, a company engaged in providing leadership consultancy services. The report will
highlight the trend in revenues and profits of the company. An analysis of cash flows will also be
conducted. Apart from it, the report will produce a concise discussion on the strategic goals and
priorities of the company. Further, a discussion on the use of accounting software will also be
done in the report.
Analysis of Financial Performance 2014-15
The overall financial performance of the company has been assessed to be positive for the
2014. The actual and budgeted figures of net profit and revenues for the year 2014 have been
shown below:
The revenues of the company were $1,335,600 in the year 2014 and company made net
profit of 652,077. The net margin is worked out to be 48.82% (652,077/1,335,600). The net
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margin of the company is very high which indicates that the business has high profitability
potential.
The gross margin is computed by dividing the gross profits with total sales and gross
profit is computed by deducting the cost of sales from sales (Goldmann, 2017). The total sale
from workshops and publications was $40,000 against the cost of sale of $34,000. Thus, the
gross margin of workshop and publication is worked out to be 17.65% (40,000-34,000/34,000).
The gross margin of workshop and publication is also good which indicates that the company
can increase the workshops and E-book publications in the coming years.
The overall profit of the business was $652,077 in 2014. However, segment wise analysis
of profits provides more detailed and deep picture of profitability. It also helps the managers to
identify the segments earning profits and segments that are incurring losses so that appropriate
resource allocation could accordingly be done. In case of Grow Management Consultancy, it has
been observed that the workshop segment of the company has earned profit of $14,000 while the
E-book publication segment has incurred losses of $8,000 in 2014.
The revenues from workshops were budgeted at $45,000 however; the actual sale was
recorded at $38,000. The negative variance of $7,000 is worked out in the case of workshop
sales. Further, the sale from publications was budgeted at $15,000 and actual sale was recorded
at $2,000, leaving a negative variance of $13,000. The main reason behind negative variance in
workshop sale was lack of attraction for the clients. The content of the workshops was company
specific which caused failure of the workshop model. Further, E-book publications are too costly
making it difficult for the company to increase the sale volume.
Analysis of Strategic Goals and Priorities
Strategic goals of the company for the year 2015 include increasing sales of E-books and
workshops. The company is to primarily focus on putting more efforts on marketing for E-books
and workshops. Following costs will be incurred to meet these operational plans:
Workshop
Type Cost
Venue and catering in Sydney CBD $5,000
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Speaker fees and travel $10,000
Marketing $5,000
Conference bags $1,000
Staff time (appoint casual Project Officer
for 6 months, may be permanent
depending on success)
$30,000
Total
E-Book Publications
Type Cost
Contract writer $10,000
Desk top publishing $3,000
Marketing $1,200
Analysis of Cash Flow Statements
The analysis of cash flow statement shows the liquidity position of the business. It has
been found out that cash inflows of Grow Management Consultancy are much higher than the
cash outflows. The figures show that the company has cash surplus in each month growing with
rapid pace. The cash surplus for the month of July 2014 was $39,559 which grew to $87,520 in
June 2015.
Analysis of Financial Software
Grow Management Consultancy uses MYOB accounting software for the purpose of
book keeping and financial reporting of the financial events and transactions. MYOB is a cloud
based accounting package which provides a company the platform with all facilities for
accounting and book keeping. The accounting software provides an edge to the firm by cutting
the high IT infrastructure and maintenance cost (R&G Technology, 2014). The maintenance
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costs are borne by the cloud provider which relieves the company from incurring high costs. Due
to anytime and anywhere access, greater speed, good response time, and high accuracy, MYOB
is amongst the most popular accosting softwares being used by the small businesses. The biggest
disadvantage of MYOB is that it lacks high storage capacity. So, the bigger businesses might not
use MYOB for accounting. Considering the small size of Grow Management Consultancy,
MYOB could be said to be the best choice for the company (R&G Technology, 2014).
Quick Books is another good accounting package recommended for small business. The
advantages of Quick Books involve low cost and easy to use (Basic365, 2015). However, this
accounting package is suitable for bigger business as it has limitations of data storage capacity.
Further, Quick Books is also not effective in providing dynamic managerial reports. There is
another accounting software named Xero Online. This is probably the most popular after
MYOB. The biggest advantage of Xero is tha it provides bank feeds which makes bank
reconciliation very easy. The biggest disadvantage of the software is that it has no built in debtor
reporting. However, the debtor controlling system and reporting could be customized within the
software. One more disadvantage of Xero is that it could be very slow at times making it difficult
for the company to process transactions (Basic365, 2015).
Freeagent is also available there for the small to medium sized businesses. This
accounting software is most popular for the system of invoicing and billing. It is also a cloud
based accounting package and costs very low to the company. The biggest disadvantages of this
software is that it catches bugs very quickly which could leave the confidential data unsafe
(Basic365, 2015).
Conclusion
It could be concluded that the company has performed good in the current year with
profitability of $652,077. The company has strong plans for achieving improvement in the future
financial performance. For this purpose, the focus is needed on increasing the sale of E-book
publications and Workshops.
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References
Basic365. 2015. Pros and Cons: Top 6 Accounting Softwares. Retrieved from
https://www.basis365.com/blog/pros-and-cons-of-the-top-6-accounting-software-today
Goldmann, K. (2017). Financial liquidity and profitability management in practice of polish
business. In Financial Environment and Business Development (pp. 103-112). Springer,
Cham.
R&G Technology. (2014). MYOB: Benefits and Challenges for your Organization. Retrieved
from http://blog.rgtechnologies.com.au/myob
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Appendices
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PROFI T & LOSS 2014 - 2015
I ncome
Consulting fees $1,175,600
Workshops $38,000
Publications $2,000
Executive Search Service $120,000
Gross profit/ net sales $1,335,600
Expenses
Accounting fees $6,823
Advertising & marketing $5,000
Computer Software $4,600
I nsurance $7,500
Lease/ loan payments $1,500
Motor vehicle expenses $2,500
Office Cleaning $5,500
Office supplies $2,100
Rent & rates $43,000
Repairs & maintenance $1,200
Salaries/ wages (including PAYG) $504,000
Superannuation $60,000
Telephone $3,400
Utilities $2,400
Travel and accommodation (for workshops) $24,000
Contract writer e-book $10,000
Total expenses $683,523
NET PROFI T (Net I ncome) $652,077

Cash Flow Statement
Grow Management Consultants Pty Ltd
July 14 to June 15
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual
INCOME
Consulting fees 97,975 85,000 82,500 122,000 98,000 121,000 87,625 89,500 105,000 83,000 70,500 133,500
Workshops 6,000 8,000 10,000 12,000
Publications 250 250 350 200 150 150 250 200 200
Executive search 7,000 8,000 12,,000 10,000 12,000 9,000 9,000 9,000 11,000 12,000 11,000 10,000
NET INCOME 104,975 99000 82500 132250 118250 130350 96825 108650 116150 95250 93700 143700
EXPENSES
Salaries/wages 42,000 42,000 42,000 42,000 42,000 42,000 42,000 42,000 42,000 42,000 42,000 42,000
Superannuation 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000
Cleaning 800 800 800 800 800 800 800 800 800 800 800 800
Accounting fees 0 0 6,823 0 0 0 0 0 0 0 0 0
Advertising and marketing 1,000 0 500 700 0 800 0 0 2,000 0 0 0
Contract witer (e-book) 10,000 3,580 3,580 3,580 3,580 3,580 3,580 3,580 3,580 3,580 3,580
Computer software 0 2,600 0 0 0 2,000 0 0 0 0 0 0
Motor vehicle expenses 653 451 870 177 149 263 560 0 920 590 210 340
Utilities 0 672 0 0 0 1,476 739 0 1,048 0 0 0
Insurance 0 0 0 329 329 0 0 3,370 0 0 0 0
Office supplies 100 120 180 120 150 190 180 230 230 130 220 250
Lease/loan payments 100 120 100 100 210 50 150 0 200 150 120 200
Rent 3,580 3,580 3,580 3,580 3,580 3,580 3,580 3,580 3,580 3,580 3,580 3,580
Sundries 200 200 140 170 230 200 200 140 170 230 180 220
Travel and Accommodation 1,583 0 1,435 1,947 122 0 0 0 128 171 0 0
Repairs & maintenance 100 0 400 0 0 400 0 300 0 0 0 0
Telephone [phone] 300 290 310 330 240 210 210
TOTAL EXPENSES 65,416 59,413 65,718 55,243 56,440 60,639 57,079 59,310 59,986 56,471 55,900 56,180
SURPLUS/ DEFICIT 39,559 39,587 16,782 77,007 61,810 69,711 39,746 49,340 56,164 38,779 37,800 87,520
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