Or would I like to know where the money was spent in the functional areas? Marketing, sales, development, operations, etc., right?

In contrast, there are two different concepts that often lead to confusion and - in our view - to additional complexity and thus costs, especially in the start-up sector. The structure of the profit and loss statement (P&L), which is mainly preferred by international investors, vs. the structure used in German-speaking countries.

The latter is often referred to as the business analysis (BWA). Every entrepreneur is familiar with this, as it is the reporting system regularly provided by the tax consultant or accountant. Incidentally, this term was introduced by DATEV in 1960 as the DATEV standard BWA-1. Today, the BWA is also used by banks as a tool to assess the Cash position of companies.

Initial vs. ongoing planning

Especially in business planning (of start-ups), the outline of GAAP is often used. Why? Because many templates on the internet prescribe this outline and can be found in the downloadable Excel templates. By the way, an excellent template by Christoph Janz from Point Nine Capital is available here.

It is practical for the venture company because it makes all plans internationally more comparable and easier to read. The structure plays a subordinate role in the preparation of the first business plan. The areas often listed separately in GAAP, such as Administration (General & Administration or G&A for short), Sales & Marketing (S&M) and Research & Development (R&D), require detailed plan assumptions either way, which are then usually determined in separate spreadsheets in Excel.

It becomes more exciting when the business plan then becomes an instrument for monitoring operations or a financing instrument. 

The tax advisor as a killjoy

And then comes the BWA from the tax advisor. And it doesn't match the GAAP business plan at all. After more or less long telephone calls, it is clear that the tax advisor will NOT map the business plan structure. But surely it can't be that difficult? So you start the manual reconciliation via Excel and soon you spend half a day on administrative tasks. As if there weren't enough of them already! 

The investor as a critical questioner

And then there is due diligence. An investor wants an insight into the company, asks for the business plan and the current reports of the tax advisor. But the cross-check causes problems, so questions land on the entrepreneur's desk that really don't have to be there and that have little to do with the actual company vision. In the worst case, trust is lost. 

The BWA as a panacea?

Of course it is not. But from an efficiency point of view, planning on the basis of a BWA is highly recommended. This gives you a closed reporting system. The business plan can be reconciled with the monthly reports. Ideally, this report should be included by the tax advisor. (In addition, the business plan can be easily updated on the basis of historical figures. You can immediately see the development of individual positions over the last months or years and make corresponding projections. 

But I would like to know where the money was spent in the functional areas?

If you take a closer look at the GAAP classification, you will find that the functional areas often only break down personnel costs and additional easily identifiable and allocable expenses. Sales & Marketing would be, for example, the salaries of the sales and marketing staff as well as the marketing expenses. However, the marketing expenses can also be easily derived from the BWA.

A "real" breakdown of the functional areas would require cost centre accounting. This is time-consuming, expensive and requires a lot of support. The question everyone has to answer for themselves is: How much information do I really need and how much am I willing to invest in terms of money or time? 

And what can be done better?

From our point of view, ongoing reporting, especially by small and medium-sized enterprises (SMEs), is about observing the cash flow. COMMITLY as a cash flow planning tool has therefore virtually merged the BWA with an indirect cash flow calculation. How COMMITLY determines the cash flow can be read here.
The categories in detail can be found here.