N9G “TOOLBOX”

1. N9G “TOOLBOX”

2. What is the N9G Tool Box? • The N9G tool box provides the field with helpful information on wide range of subjects. • The tool box provides information to CNIC Regions & Installations; keeping them “audit-ready” at all times. • We have provided each of you with a tool box, just make sure as we provide you a tool monthly, you keep it in your tool box!

3. Topics that will be filling your Tool Box Monthly • Cost of Goods Sold November • Cash & Cash Handling December • Managers Financial Review January • NAF Personnel February • Contracts March • Reconciliation April • Assets Inventory May

4. Cost of Goods Sold • Cost of goods soldor COGS refer to the value of goods sold during a particular period • Costs are associated with particular goods using one of several formulas, including specific identification, first-in first-out (FIFO), or average cost. Costs include all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. • Cost of goods sold • The cost of the resale item that was sold to customers. The cost of goods sold is reported on the income statement when the sales revenues of the goods sold are reported.

5. Cost of Goods Sold • Calculating COGS • On a monthly basis you must perform the following: • Find your beginning inventory for the month you are calculating. (This will be the same number as the ending inventory from the previous month. You should be able to find this number on last month's balance sheet.) • Add the cost of purchases made during the month to the beginning inventory number. This would also include Mess Requisitions (These are any items which have been procured/mess requisitioned during the month that you will sell. Do not include office supplies in this number, as those are indirect expenses) • Calculate the subtotal of the beginning inventory, plus cost of items purchased and/or transferred in. Subtract the ending inventory value for the month from the subtotal you just calculated. This number, after subtracting, is your cost of goods sold. Remember this includes only direct cost of the goods purchased for resale. • Beginning Inventory + Purchases/Mess Requisitions – Ending Inventory= COGS

6. Cost of Goods Sold Inventory • Items purchased for the purpose of being sold to customers. • The cost of the items purchased but not yet sold is reported in the resale inventory account or central storeroom inventory account. Inventory is reported as a current asset on the balance sheet. • Inventory is a significant asset that needs to be monitored closely. Too much inventory can result in cash flow problems, additional expenses and losses if the items become obsolete. Too little inventory can result in lost sales and lost customers. Inventory is reported on the balance sheet at the amount paid to obtain (purchase) the items, not at its selling price.

7. Cost of Goods Sold • Inventory management • Involves regulation of the size of the investment in goods on hand, the types of goods carried in stock, and turnover rates. • The investment in inventory should be kept at a minimum consistent with maintenance of adequate stocks of proper quality to meet sales demand. • Increases or decreases in the inventory investment must be tested against the effect on profits and working capital. • Standard levels of inventory should be established as adequate for a given volume of business, and stock control procedures applied so as to limit purchase as required. • Such controls should not preclude volume purchase of nonperishable items when price advantages may be obtained under unusual circumstances. • The rate of inventory turnover is a valuable test of merchandising efficiency and should be computed monthly

8. Cost of Goods Sold • Inventory management • All inventories are valued at cost which is defined as invoice price plus freight charges less discounts. • Inventory items received at no cost are recorded as a debit to the inventory account and a credit to Bonus Merchandise. • End-of period physical inventories are valued at or priced on the first-in first-out (FIFO) basis. In FIFO, requisitions are priced at the earliest invoice cost at which the items were placed in stock. • Quantities on hand at the inventory date are considered to be those items most recently purchased. When possible, individuals familiar with departmental stock will be assigned to taking inventory. Counter will be indoctrinated thoroughly not only in the method of counting but also in the system of recording the count, for example, the count proceeds from left to right, top to bottom, in book-reading fashion.

9. Cost of Goods Sold • Inventory management • Completed by a team of two people. • One will call and inspect the inventory while the other enters (in ink) the quantities on the sheets. • Each department will be inventoried separately. (example: Food, Bar) • During the course of the inventory, independent test checks will be conducted to insure the maximum of accuracy. • Items found to be on hand, which were omitted from the inventory sheet, will be recorded by the inventory team, provided such items can be positively identified as activity owned property. • Unit prices for retail department merchandise will be taken from current vendor invoice at the time of count.

10. Cost of Goods Sold • Inventory management • All merchandise will be listed and counted in the same unit category as priced for sale Only the unit cost price will be shown for service department items. This will be taken from the vendor invoice. The same person inserting the unit price amount also records the unit "type" such as dz., ea. gr. • Inventory Count • All counts, identification, and pricing of inventories are to be adequately rechecked by a disinterested party* other than the one who recorded the original data. • All inventory counts are to be verified and audited by the accounting staff. • *Disinterested party is defined as anyone who does not work or manage the facility i.e., Bowling Center personnel would be a disinterested person for the golf course etc.

11. Cost of Goods Sold Extension of Inventory Sheets • All inventory count sheets will be extended and totaled by personnel in the accounting office. Departmental Inventory Worksheets • After the inventory work sheets have been extended and totaled, inventory sheets will be summarized in value by department. • These values will then be compared against the book inventory. • Retail variances will be converted to cost by multiplying retail variances by departmental cost ratios. Note: Variances in inventory have a major impact on cost of goods; therefore, all discrepancies must be investigated to determine the validity of the disparity. During the “soft close” of SAP, review your COGS, you have ample time to correct inventories prior to the final close out of SAP It is also imperative that costs of goods are reviewed on a monthly basis. This will provide the manager with a working document with which to assess the business as well as detect possible theft within his/her facility.

12. Cost of Goods Sold • Knowing the cost of sales for your industry is critical to maximizing your profit. • Consider the following businesses, both with identical revenues and operating costs XYZ Company, with cost of sales 2% higher than ABC Company, makes a $365,000 profit. ABC Company, with a 2% lower cost of sales, generates an additional $70,000.00, an increase of 19% in net income. Because they pay close attention to their cost of sales, ABC Company has a higher gross profit margin and is substantially more profitable than XYZ Company.

13. Cost of Goods Sold • Helpful Hints: • Formula to Calculate COGS percentage: • COGS / Revenue = % • $10,000 (COGS) / $50,000 (Revenue) = 20% • CNIC COGS Target: • 75% Retail • 25% Bar • 38% Food

14. Cost of Goods Sold • Check your COGS % during the SAP “Soft Close.” If it is not close to the CNIC targets, try checking some of the hints below before the final monthly closeout! • Is the inventory completed properly? • Have all Mess Requisitions been recorded? (These should be turned in as they are used, not at the end of the month, ensure you give a copy to the accounting office and maintain a copy locally) • Have all your purchases been properly recorded? • Have supplies been charged to the 151 account instead of the 701 account? • Do all the expenses that are charged to your code belong to you? • Have you been monitoring your sales and inventory weekly? • REMEMBER, LOOK AT YOUR COGS MONTHLY