Through prepared financial reports, management functions such as revenue management will play an important role in business development strategies. Yield management is examined in more detail below.
For financial managers, preparing company financial reports at the end of the period is one of the tasks that need to be done immediately.
Financial statements provide a lot of important information about the company’s performance over some time, particularly information about the company’s earnings.
Understand Yield Management
In the business area, the term earnings management is often known, which refers to an intervention activity by company managers to achieve certain goals in the external accounting process.
This process is done intentionally, but within the limits of Generally Accepted Accounting Principles (GAAP), to continue to control the amount of profit to be reported.
Thus, it can be seen that yield management is a manipulation of profits in deals to achieve more optimal profits. This can also be aided by the existence of a good management information system in running the business.
Yield Management Goals
Yield control measures are not carried out without a basic motive and purpose. There are several reasons why companies feel the need to manage the profits generated through revenue management. Here are some of those goals:
As a bonus purpose
Usually, company managers have information about the net income of the company. Managers who have information about the company’s net income act opportunistically to perform revenue management by maximizing ongoing profits. Therefore, managers try to manage by maximizing profits. This is how company leaders and several other ranks can receive bonuses (bonus purposes).
Political motivation is typically used by companies that have ties to government interests. The company will tend to cut profits due to public pressure. However, under other conditions, this management action can result in the company saving on taxes.
CEOs nearing retirement will tend to increase their income to be able to increase management bonuses, and if the company is performing poorly, they will maximize profits to avoid getting fired.
Increase in the company’s share price
A highly desirable goal of any revenue management strategy is to increase the company’s share price. Big wins will raise the company’s profile, so the company’s share price will rise quickly.
The company that is about to go public has no market value yet and may prompt the manager of the going public company to perform revenue management in hopes of boosting the company’s stock price. This type of strategy is often used by management when a company is going public (IPO).
Reports for Investors
For investors and potential investors, financial reports may or may not make them believe in providing additional investment funds. Because the information in the financial statements can provide the results of an analysis of how the company will develop these mutual funds, to then use them as a profit for the investors.
The general purpose that encourages companies to manage business profits is to encourage reports for investors. At the end of the period, the company must submit financial statements to the investors. Increased profits are seen as an indicator of a company’s good performance, so sometimes management needs to employ this strategy.
Earnings Management Pattern
In general, there are four patterns of revenue management typically performed by business leaders. The four patterns include:
- Income maximization is a pattern often employed when profits are falling to protect the company when dealing with debt.
- Earnings smoothing is a pattern of earnings management in which reported earnings are smoothed so that earnings appear stable and investors view the company’s performance positively.
- Income minimization, a pattern commonly used to reduce the tax burden so corporations don’t draw government attention.
i.e. Taking a dip, in the form of a pattern executed by imposing future costs and erasing some of the company’s assets.
Yield Management Strategy
This management cannot be done without an acceptable basis as an excuse. In addition, the management also needs to know that the production process is going well to quickly see the profit made.
The right strategy is required for implementation. Below are some strategies that can be used in yield management.
Set up accounting estimates
Management can seize the opportunity by setting accounting estimates. Management may estimate accounting estimates for multiple components such as B. the amortization of intangible assets, estimates of bad debts, the amortization period of assets, and warranty costs.
Change in Billing Methods
Management can change the accounting method for recording a transaction. For example, management is changing the depreciation method for property, plant, and equipment.
All companies use the year-to-year method of depreciation and then replace it with using the straight-line method of depreciation. Different calculations will certainly result in different wins.
Move income or expense periods
Business managers can also employ strategies that are quite effective in implementing revenue management. Management can move certain periods of income or expenses in the annual accounts to be prepared.
For example, business leaders can delay or accelerate spending on research and development departments, or defer advertising spending to the next billing period.
This management in business development strategy is required so that business continuity is maximized for the coming period. Hence, businesses need accounting software for proper results management.