Secret to Successful Financial Management delivered at TNSNA 2016 Annual Conference

1. Venkat Koripalli, SNS

2. President, PrimeroEdge
School Nutrition Software for 14 years
Over 25 years in software development
Bachelor’s degree in Computer Science & Engineering

3. Higher cost food
Rising labor costs
Decreasing participation

5. Quantitative: numbers
Financial: money
Useful: practical, not theoretical
Decisions: use the past to change the future

6. Bookkeeping: routine gathering of information
Financial accounting: reporting for outsiders
Management accounting: analytical information for insiders

8. Verify income
Verify assets and debts
Personal financial statements
 Income statements – W2
 Assets – Bank statements, 401K, etc.
 Loans, Credit Card Debt - Credit Report

9. Income Statement
 How much money did your department make or lose?
Balance Sheet
 List of resources (assets) and obligations (liabilities)
Statement of Cash Flows
 How much cash came in, how much went out

10. The Accounting Equation
Assets = Liabilities + Fund Balance
(Resources) (Source of financing)
7,000 = 5,000 + 2,000
(Cash in bank) (borrowing) (capital contribution)

11. Cash in bank
Kitchen equipment
Cafeteria furniture
Accounts receivable
Inventory
“Resources,
either owned
or controlled
by you that will
likely provide
future benefit”

12. Accounts payable
Wages payable
Student account deposits (deferred revenue)
Borrowing
“Obligations that
require sacrifice
of future benefit
– transferring
assets or
providing
services”

13. Shareholder Equity - ownership interest in the
assets
Paid-In Capital (Capital Contributions)
Retained Earnings
“The amount the
district originally
or subsequently
invested plus
income left in the
organization”

14. Balance Sheet Accounts
Asset Accounts
Liability Accounts
Fund Balance Accounts
Income Statement Accounts
Revenue Accounts
Expense Accounts
“A record that
provides an
efficient way to
categorize
similar
transactions”

15. Net Income = Revenues – Expenses
“Overall
measure of
economic
performance”

16. Meal Sales
Reimbursements
USDA Foods
“Amount of
assets created
from the sale
of goods and
services”

17. Food used
Wages and benefits
Utilities
Equipment maintenance
“Amount of
assets
consumed in
generating
revenues”

18. Balance Sheet
As of right now:
 What do you have?
 How much do you owe?
As of a Point in time (Snapshot)
Income Statement
How much did you make?
 This week
 This month
 This year
For a Period of Time

20. “the activity of
keeping
systematic
records of
financial
transactions”

21. Coca-Cola: 650 billion servings sold a year
Walmart: 10 billion customer visits a year
Houston Independent School District: 44,000,000 meals a year

22. All novels disappeared?
All bookkeeping records
disappeared?

23. Journal: Record transactions
General Ledger: Summary by account
G/L Accounts categories
Assets, Liabilities, Fund Balance, Revenue, Expense
Debits = Credits

24. Assets = Liabilities + Fund Balance
(Resources) (Source of financing)
Assets Liabilities Shareholder Equity
Apple 290 171 119
Facebook 40 4 36
Google 131 27 104
Microsoft 176 96 80

25. District invests $50,000 into the School Nutrition Department
Fund Balance
(Transferred Funds)
$50,000
Assets
(Cash)
$50,000
Assets Liabilities Fund Balance
1 Fund Transfer-In 50,000 0 50,000
Total 50,000 0 50,000

26. Students make $25,000 prepayments
Liabilities
(Deferred Revenue)
$25,000
Assets
(Cash)
$25,000
Assets Liabilities Fund Balance
1 Fund Transfer-In 50,000 0 50,000
2 Prepayments 25,000 25,000 0
Total 75,000 25,000 50,000

27. Purchase $10,000 of food on credit
Liabilities
(Accounts Payable)
$10,000
Assets
(Inventory)
$10,000
Assets Liabilities Fund Balance
1 Fund Transfer-In 50,000 0 50,000
2 Prepayments 25,000 25,000 0
3 Food Purchase (credit) 10,000 10,000 0
Total 85,000 35,000 50,000

28. Purchase $500 of supplies with cash
Assets
(Inventory)
$500
Assets
(Cash)
$500

29. Assets = Liabilities + Fund Balance
(Resources) (Source of financing)
Assets Liabilities Fund Balance
1 Fund Transfer-In 50,000 0 50,000
2 Prepayments 25,000 25,000 0
3 Food Purchase (credit) 10,000 10,000 0
4 Supplies Purchase
(cash)
+500
-500
0 0
Total 85,000 35,000 50,000

30. Asset accounts usually have debit balances
Liability and Fund Balance accounts usually have credit balances
At least one debit and one credit
Debits = Credits
Assets = Liabilities + Fund Balance
DR
(+)
CR
(-)
DR
(-)
CR
(+)
DR
(-)
CR
(+)

31. Assets = Liabilities + Fund Balance
1 Fund Transfer-In DR (+) Cash CR (+)
Transferred Funds
2 Prepayments DR (+) Cash CR (+)
Deferred Revenue
3 Food Purchase (credit) DR (+) Inventory CR (+)
Accounts Payable
4 Supplies Purchase (cash) DR (+) Inventory
CR (-) Cash

32. Net Income = Revenues – Expenses
Retained Earnings (Net Income) major part of Fund Balance
Revenues increase Fund Balance
Expenses decrease Fund Balance
Assets = Liabilities + Fund Balance
DR
(+)
CR
(-)
DR
(-)
CR
(+)
DR
(-)
CR
(+)

33. Assets = Liabilities + Fund Balance
DR
(+)
CR
(-)
DR
(-)
CR
(+)
DR
(-)
CR
(+)
Revenues
DR
(-)
CR
(+)
Expenses
DR
(+)
CR
(-)

34. School makes $200 in cash sales
Meal Sales
(Revenues)
$200
Cash
(Assets)
$200
Debit Credit

35. School makes $200 in sales from prepaid accounts
Meal Sales
(Revenues)
$200
Deferred Revenue
(Liabilities)
$200
Debit Credit

36. Reimbursement Claim $50,000 submitted
Reimbursement
(Revenues)
$50,000
Debit Credit
Accounts Receivable
(Assets)
$50,000

37. Reimbursement Claim $50,000 received
Cash
(Assets)
$50,000
Credit Debit
Accounts Receivable
(Assets)
$50,000

38. Purchase $10,000 of food on credit
Accounts Payable
(Liabilities)
$10,000
Inventory
(Assets)
$10,000
Debit Credit

39. School uses $3,000 of food in production
Food Used
(Expenses)
$3,000
Inventory
(Assets)
$3,000
Credit Debit

40. District processes $5,000 payroll
Salaries
(Expenses)
$5,000
Cash
(Assets)
$5,000
Credit Debit

41. Transaction date
Description
Affected accounts
Amounts
“A
chronological
record of all
transactions”

42. Summary by account
G/L Accounts categories
Assets, Liabilities, Fund Balance, Revenues, Expenses
Assets & Expenses have debit balances
Liabilities, Fund Balance & Revenues have credit
balances
Revenue and Expense balances are zeroed for the
beginning of the year
“A record of all
transactions
categorized by
account”

44. Restaurant 1
Very traditional
Pay bills on time
Pay salaries
Restaurant 2
Tracks detailed data
Item-by-item costs
Sales by time of day
Customer demographics
Popular combinations

45. Internal Use
Detailed data
Secret Information
Short-term and long-term planning
Daily decision making

46. By school
Lunch, breakfast participation
Day of week
Season
Theme Lines
Specific items
Student demographics – girls/boys, race, income levels

47. Product costing – recipe cost, menu cost
Performance evaluation – Participation, Food costs, Labor costs, Overheads
To CEP or not to CEP
Investing in long-term projects
Replacing old equipment
Adding lines, kiosks

48. Breakfast in classroom?
More ala carte sales?
Some catering?
More/fewer employee hours?

49. Budgeting
Break-even analysis
Meal Prices
Performance evaluation

51. A plan to meet a specified goal
Comparison between actual results and the plan
Helps Decisions
Employees
Scheduling
Pricing
Cost Control

52. Motivate staff to achieve budget goals
Deviations from the budget
Not find fault, assign blame
Loss of motivation, defensive attitude
Budgetary slack
Provide help

53. Projecting accurate sales is difficult
Uncontrollable external factors
USDA and state regulation changes
Demographics
Changes to economy
Customer tastes
Weather patterns
Unexpected events – hurricanes, water supply

54. Student enrollment projection from District office
Participation projection
Previous years sales

55. Sales revenue
Reimbursement revenue
Other revenue

56. Food Costs
Labor Costs
Benefits and other costs
Overheads

59. Fixed costs
Costs that do not vary with the quantity of production
Variable costs
Costs that vary in proportion with the quantity of production

60. Contribution Margin = 100% – Variable Cost %
Break even point = Fixed Cost $
Contribution Margin

62. 1 lunch = 1 meal equivalent
3 breakfasts = 2 meal equivalents (2/3 = .67)
3 snacks = 1 meal equivalent (1/3 = .33)
1 supper = 1 meal equivalent
Non-program food sales =
revenue from non-program sales
(free lunch reimbursement + USDA Foods value per lunch)

63. # of Meal Equivalents
# of Paid Productive Labor Hours
20,000
1,200
= 16.67 MPLH

64. Calculate average revenue per meal equivalent
Guidelines for pricing non-program food items
Compare revenue per meal with cost per meal

65. Total Revenue
Total Meal Equivalents

66. Local Income + Reimbursement + USDA Food per Meal
Price Reimbursement USDA Foods Total
Paid 2.75 0.37 0.2375 3.3575
Reduced Price 0.40 2.75 0.2375 3.3875
Free 0.00 3.15 0.2375 3.3875

67. Increase Participation
Take advantage of Special Provisions
Increase paid meal prices
Add approved non-Federal revenue

68. Adult meals
Student second meals
A la carte
Contract meals
Catered food or meals
“Foods and beverages
sold in a participating
school, other than
reimbursable meals,
and purchased using
funds from the
nonprofit foodservice
account.”

69. Total Non-Program Foods Revenue
Total Revenue
Total Non-Program Food Costs
Total Food Costs>

70. Total costs to produce a meal
Meal costs per expenditure category
Percentages of operational costs to total revenue (operating ratios)
Costs to produce a meal compared with the average revenue generated per
meal

71. Food Costs
Labor Costs
Overheads
Total Expenses = Food Costs + Labor Costs + Overheads

72. Category Costs
Total Revenue
Food Cost % =
Food Costs
Total Revenue
20,000
50,000
= 40%

73. Cost Food Used = Beginning Inventory Value + Food Purchased – Ending
Inventory Value
Annual Month
Beginning Inventory 8,000 9,000
Food Purchased 300,000 25,000
Ending Inventory 7,000 7,000
Cost of Food Used 301,000 27,000

75. Balance Sheet
Accounting Equation
Accounts & G/L Account Categories
Income Statement

76. Journal
General Ledger
Language of Accounting

77. Budgeting
Break even Analysis
Meal Pricing
Performance Monitoring
…

78. Continue the Learning
ICN (formerly NFSMI)
Webinar Series
E-book
Put it into Practice