Both Accrual and Cash Systems
Used in Accounting are
Inadequate for a Weekly Report
on Marketing Performance
Ted Mitchell
Accounting Systems
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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
Ignore the sunk costs that are accrued each month
Fixed Cost
Minimum
Cost in
Month 1
Maximum
Cost in
Month 1
$2,000
$2,000
$2,000
Utilities
$500
per month
$500
$500
Coffee
Maker
$3,000
$6,000
Furniture
$2,000
$4,000
Total
$7,500
$12,500
Rent for
Month
You will spend between $7,500 and $12,500 in cash into the
business in the first 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
Cost per cup, V
$7,000
$0.30
Cost of Goods Sold
COGS = 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
Marketing Profit,
Z = G – (Cost of Servers + Adv +Spots)
$2,800
$1,500
Three very useable weekly reports
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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
Cost per cup, V
$7,000
$0.30
Cost of Goods Sold
COGS = 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
Marketing Profit,
Z = G – (Cost of Servers + Adv +Spots)
$2,800
$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?