1. Financial Reports Understanding and interpreting monthly financial reports

2. Session Objectives By the end of this session, you will: Understand how a budget is formulated and allocated across the year to the profit and loss statement (P&L) Understand what information the P&L and balance sheet provide Understand how the P&L relates to the Balance sheet Understand how accruals, prepayments and GST are applied to the P&L and balance sheet Understand how the following are presented in the financial reports: current income and expenditure long-service leave and annual leave income and expenditure relevant to a different year Income and expenditure variances (negative and positive variances to budget) Be able to identify the key areas/numbers to look for in a P&L and balance sheet and know what questions to ask Understand various possible reasons for ‘errors’ in the P&L and balance sheet Identify any outstanding questions that need answering by Catherine/Libby

3. Introduction… Accounting 101 GST Accruals Prepayments Brackets around numbers (xx) The ‘matching’ principle Budgeting What is a budget? What can go wrong? What can go right?

4. Introduction (cont)… The Profit and Loss Report What does it tell us? Revenue Expenditure Budget Period to date and Year to date Variances Balance Sheet What does it tell us? Assets Liabilities Equity (also known as Capital Reserves) Summary How do the reports fit together What to look for in the reports The flow on effect and how it’s represented in the reports Optometry South Australia Reports

5. Accounting 101… Accounting 101 GST What is it? Role of Optometry Australia (a tax collector) Where do we see GST in the financial reports and budgets Accruals What does ‘accrual’ mean? Why do we use accruals? Prepayments What does ‘prepayments’ mean? Why do we use prepayments? – Prepaid Revenue (revenue in advance) – Prepaid Expenses (payments in advance) Brackets around numbers eg. (100) What does it mean and why is it in red? The ‘matching’ principle What does it mean? Why do we do it?

6. Budgeting… Budgeting What is a budget? Why do we have them? How do we work them out? Do they include GST? What can go wrong? Unforeseen circumstances Incorrect timing of events What can go right ? Things ‘go to plan’ Unforeseen circumstances Windfall gains

7. The Profit and Loss Report… The Profit and Loss Report What does it tell us? How much we’ve made or lost during the financial year How we’re tracking to budget Areas of concern Revenue Membership income Conference income Funding income Interest and other income Expenditure Conference expenditure Travel expenditure Payroll expenditure Member activity expenditure General office expenditure

8. The Profit and Loss Report (cont)… The Profit and Loss Report Budget Current period Year to date Full year budget Period and Year to date results Actual result for the period Actual result for the year to date Variances Variance between the budget for the period and the actual period result Variance between the budget for the year to date and the actual year to date result

9. The Balance Sheet… The Balance Sheet What does it tell us? What we own (Assets) What we owe (Liabilities) Our investment (Equity, also known as Capital and Reserves) Assets Cash Accounts Receivable (entities that owe us money) Prepayments Suspense Rental Security Bond Fixed Assets

10. The Balance Sheet (cont)… The Balance Sheet Liabilities Accounts Payable (entities that we owe money to) Sundry Creditors Superannuation and PAYG payable Provision for annual leave and long service leave GST Accruals Revenue in advance Charles Wright Prize Equity (also known as Capital and Reserves) Recent & Prior Year profit Profit Period

11. Summary… Summary How do the reports fit together The profit and loss only tells us about the current financial year. The balance sheet tells us about the past years as well as the current financial year. What to look for in the reports Large variances to budget (either positive or negative variances) Negative numbers (numbers in red with brackets) Large suspense account in the balance sheet The flow on effect and how it’s represented in the reports For example, a decline in Exhibitors willing to spend their advertising dollar at Blue Sky lead to a decrease in overall conference income. Fixed conference costs remain the same regardless of exhibitor income which leads to less cash in the bank. With less cash in the bank, other projects can’t be explored or implemented.

12. Summary (cont)… Summary… Optometry South Australia Reports The story behind the numbers in the: – Profit and Loss Report – Balance Sheet Report

21. Questions…