Dear @lubos,
I have done some research in the forum for past request and I have seen that there had been request to implent the possibility to calculate ratios from data inside Manager. Do you think there is room to implement them?
This could perhaps be just a report where you can specify what ratios you want to calculate, then period for the report. Perhaps the report could be comparative too.
But what kind of ratios you specifically need?
They are all based on data that comes from balance sheet, profit and loss and inventory variations of a certain period
I guess the basic implementation could be based on figures from balance sheet and profit & loss statement and then it could be expanded further.
Fine to start with these.
Great topic as these are the tools that demonstrate business health and performance. Great for reports and sometimes helpful / convincing when selling a business.
Indeed, it would help to generate the more common ratios such as:
- Current Ratio = Current Assets / Current Liabilities
- Quick Ratio = (Cash & Cash Equivalents + Inventory + Accounts Receivable) / Current Liabilities
- Debt to Total Assets = Total Debt / Total Assets
- Debt to Equity Ratio = (Long-Term Debt + Short Term Debt + Leases) / Equity
- Return on Equity = Net Income / Equity
- Profit Margin Ratio = Net Income / Net Sales
- Return on Assets = Net Income / Average Total Assets
- Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
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Some of these would be difficult to implement in a standard report, because they depend on the structure of a chart of accounts. Your last two suggestions would be impossible with the current implementation, because the program does not calculate averages over time.
I think ratio analysis is a fine idea, but I believe it should be implemented through user definition, allowing users to define ratios on the basis of their own charts of accounts, not some predetermined structure that may not be in effect.
I agree that ratio should be a blank paper, a sort of spreadsheet, that should let everyone do the calculations.
Sure, the more flexibility the better, these however are really bog-standard common ratios. I am not saying all should be implemented or how such as in a standard report. I just responded to @Lubos statement with these suggestions.
I agree with you on this. My point is that the location of data for calculating the ratios could be different, depending on how someone has defined the chart of accounts. For example, how would a standard report be defined to include leases, which could be accounted for in many different accounts. None of those accounts are built-in. And what if inventory is assigned to custom control accounts instead of Inventory on hand? The ratios themselves are simple, in most cases. But location of the necessary data can vary widely.
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I think this issue is actually the same as the problem when submitting a location specific tax return Income tax payable - #6 by Patch or specific financial reporting format . So perhaps there maybe a solution which addresses all the requirements. What about for each
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A “localisation” which defines the reporting categories (alternative chart of account groups and structure)
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User assigns their existing COA accounts to the above grouping similar to how we now assign grouping for “Cash Flow Statements”. There should also be a default “Blank” / “not assigned” as well as “Not reported in this business” groups.
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An “audit” report which shows an expanded view of accounts assigned to the groups, similar to the current “Financial Statement” reports but with the alternate COA structure
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A localisation report formatted to what ever is required by a particular reporting authority.
With the difference that ratio are not required by any tax authority and can be very different based on business types. So why start such a nightmare?
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@Davide I thought you wanted Manager to calculate relatively standard ratios. You appear to have thought of a good way of Manager identifying the required quantities but I think I must have misunderstood what you wanted Manger to actually do.
How would you like to see Manager add this functionality? What sort of user interface had you envisioned?
I think that it should be something like an excel plain sheet, so at begining, you should define, name, accounting typology and a time range (or more for comparables) when creating the report
then inside the report design:
- Write descriptions and headers inside cells
- you should select which values to use from your COA:
- for BS you should be able to choose from opening or closing balance of each account
- for P&L, more difficult, the current balance or of the one of the previous period (maybe it can be achieved by setting three dates for each time range at point one?)
- You should combine them with basic mathematical operators: + - * / ( ) ^
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Thanks for the insight on what you had envisioned. Clearly you would be able to use such a facility to perform ratio analysis of your businesses.
I agree basic maths operators on results would be very valuable. I would like to see rounding added to that list (but not for ratio analysis).
I have a couple of concerns about it’s wider applicability
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Accounting skills are different to data analysis and coding skills. The flexible tool you proposed could be used to create many reports but doing so requires the user to have both accounting and data analysis / coding skills. Imo Manager would benefit by separating these task (common report structure and format generated by someone with a broad skill set) then account selection for an individual business done by each individual user with knowledge of their businesses accounting requirements.
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The structure you have proposed is how the previous report transformation functioned. I’m not sure how much you used that. In practice very few users where able to use that functionality, significantly less than Managers custom report writer. I’m not sure NG Software wants to go back there so soon, perhaps they do & that’s clearly not my decision to make.
Will have to wait and see what Lubos comes up with.
I do not think one has to go back to the old system but the new system can be enhanced by adding basic calculation and logic operators so calculations, totals, ratios, etc can be executed.
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I believe that KPIs metrics/ratios would be very beneficial for Manager users (I am thinking most of Current Ratio, Quick Ratio, Invoice cycling time, Days Sales Outstanding, etc.) as stated above.
I would like to propose to investigate if this could be integrated/provided in the updated (upcoming) version of custom reports as @lubos mentioned:
No matter what anyone thinks about calculated ratios and analyses, others will always want something different or additional. Just see earlier posts in this thread for a hint at possibilities. Even with relatively standard metrics, definitions of how to calculate them are not universally agreed. Only individual users can determine what information they want to use for decision-making. That is why Manager has focused on making data available that can be manipulated as the user desires.
Anything provided will no longer be a custom report. Look at the existing built-in reports. You can only make very limited choices about their parameters. These choices were the ones thought to be useful by the developer. But many users object to some of them and have frequently asked for different capabilities. (That is why custom reports were first added to begin with.) More flexibility and intuitiveness for custom report building is by far a better solution for more users than built-in reports with predetermined formats or options.
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I agree with you.
I was just wondering if there is any progress on this particular idea in conjunction with the update to custom reports; I was thinking that through user definition, by using our own chart of accounts, it could be achieved.
In any case, it is not something vital; however, from my side it would be beneficial to have such tools than make the respective calculations outside the programme.