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please contact our Product Support and Consulting Department:

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frequently asked questions

Running a ProfitCents Report


Printing Reports


Customizing and Saving Reports


Formulas


Benchmarks and Scoring


Other Topics


 

How are the industries classified?

ProfitCents industry selections are categorized by the North American Industry Classification System (NAICS). Each industry category has a NAICS code (from 2002). These codes are issued by the government and are often found on tax returns.

To learn more about NAICS codes, go to http://www.census.gov/epcd/www/naics.html.

The ProfitCents for Nonprofits industry selections are categorized by the National Taxonomy of Exempt Entities (NTEE) classification system.

To learn more about NTEE codes, go to http://nccsdataweb.urban.org/PubApps/nteeSearch.php?gQry=all&codeType=NTEE.

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What if my client's industry is not listed?
If your client's industry is not listed, use an industry as close to your client's as possible and use the report as a financial assessment rather than emphasizing industry comparisons.

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What if I don't have the specific data for each field?
If you do not have the requested Income Statement and Balance Sheet information, you can leave the fields blank and the system will enter 0 for both periods. The report will be created using the rest of the information you have provided.

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On the financial statement input screens, which specific accounts do I enter?
To find out which specific accounts should be entered into the system, click on the account name or the question mark next to each data field. You will see an explanation of the information that is to be included in that field.

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How do I run another report?
To run a new report, click the NEW REPORT button located at the top of the report. This will take you back to the Report Selection page. If you have reports available, you can run another report by clicking on the appropriate GO button. If you do not have reports available, please contact Sageworks™ at 866.603.7029 option 2 or sales@sageworksinc.com.

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Is my input data saved?
Yes. After you run a report, click the NEW REPORT button located at the top of the report. This will return you to the Report Selection page. You will need to select the type of report you will be working on and the company you wish to analyze. You can choose to create a brand new report or work with an existing report. If you choose to work with an existing report, you will be able to access any of your old reports. Use the DELETE buttons to remove old reports from the list.

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How do I print the report?
From the Web: Click the PRINTER FRIENDLY button, which is located at the top of the ProfitCents report. The report will open in a printer friendly Web page. From the browser's top menu, click File and Print. Your report will print out as it appears in your Web browser.

Our site is optimized for printing and use in Internet Explorer 5.5 and above. If you have difficulty printing from your browser, please upgrade to Internet Explorer 5.5 or higher, or print your report from Microsoft Word.

From Microsoft Word: Users can also save to and print from Microsoft Word 97 and higher. To customize and save the report before you print it, see "How do I customize and save the ProfitCents report?" below.

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How do I print the custom header?
In order for the custom header to print out as it appears on the report (in the browser), "print background colors" must be selected in the browser settings.

In Internet Explorer, go to Tools > Internet Options and select the Advanced tab. Scroll down to Printing and check the box next to Print background colors and images.

In Netscape, go to File > Page Setup and check the Print backgrounds option.

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How do I eliminate the header and footer information from my report when I print from the Web?
When printing Web pages, your browser can be set to display header and footer information.  Header information includes the Web page title and its location (URL). Footer information includes the page number, the page total, and the date/time printed.

To eliminate header and footer information from your report when printing from Internet Explorer, click on File > Page Setup. Once the dialog box appears, delete the information from the Header and Footer sections. Click OK.

In Netscape 7.xx or Firefox, click File > Page Setup and select the Margins & Header/Footer tab.

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Am I free to edit the report?
Yes, you may add to or delete from the report anything you wish. The ProfitCents report is designed to be a tool to better aid you or your customers in business decisions.

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How do I customize and save the ProfitCents report?
A simple way to customize the report is to add your firm name to the top. On the data input pages, simply enter your company name. You can add your name and phone number to the report as well.

You can further customize the report by saving it into Microsoft Word and editing it. Word 97 and above are supported.

To save the report, click the SAVE TO WORD button on your ProfitCents report. You will then be given the option of receiving it via e-mail, or to download the report directly from your browser. To receive it via e-mail, type in your e-mail address in the appropriate field and click ENTER. A Microsoft Word file containing your report will be sent to you as an attachment and will be approximately 80-150KB in size. Some e-mail programs will reject the attachments. To avoid this problem, please add reports@sageworksinc.com to your address book.

To download the report directly from your browser, click the DOWNLOAD button or the report link (e.g. PCReport62048).

Once the report is in Word, you will be able to edit it just as any other document. You can easily space the document to print on your company's letterhead.

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I am having trouble opening a ProfitCents report in Microsoft Word XP (2002).
Some users may experience a problem with opening a ProfitCents report in Microsoft Word XP (2002). To fix this problem, select the "Check for Updates" option on the Microsoft Update Site, and download the Office XP Service Pack 3 update.

Note: The "Check for Updates" option is only available for Internet Explorer. If you are using a different browser, click here to go directly to the Office XP Service Pack 3 update.

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Do the periods selected for the analysis (one month through 12 months) affect the ratio calculations?
Yes. Several metrics are annualized in our system. They include:

Inventory Days
Accounts Receivable Days
Accounts Payable Days
Return on Equity
Return on Assets
Fixed Assets Turnover
Sales per Employee
Cash Flow Leverage
Profit per Employee
Debt Leverage Ratio
Z-Score

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In Extreme and Analytical Procedures reports, how is the "Distance from Industry" calculated? What does it signify?
To calculate: Take the difference between the company's current period number for a metric and the number it is closest to in the industry range. Divide the difference by the industry number and multiply by 100 to calculate a percentage.

Example:
Financial Indicator Current Industry Distance from
Industry   
Current Ratio 3.32 1.40 to 2.00 +66.00%

3.32 - 2.00 = 1.32
1.32 / 2.00 = 0.66
0.66 * 100 = 66.00%

Distance from Industry = +66.00%

The plus sign (+) signifies a positive result - the company is doing BETTER than average for this metric. The minus sign (-) signifies a negative result - the company is doing WORSE than average for this metric.

So, in this case, the company's current ratio is 66% better than the average in its industry.

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In Analytical Procedures reports, how are the expected values calculated?
In order to calculate the expected values, we apply statistical techniques to the company's historical data. If there are only two periods of historical data, we perform a simple trend analysis.

Example:

Using historical values for sales from 2003 and 2004, what is the predicted value for sales in 2005?
12/15/2005 12/15/2004 12/15/2003
Sales $8 $5 $3

The trend analysis is as follows:

Expected % Change = ($5 - $3) / $3 = 66.66%
Expected 2005 Sales = $5 * 1.66 = $8.3

If there are three or more periods of historical data, we use either Simple Exponential Smoothing or the adjusted Holt-Winters Exponential Smoothing model to calculate the expected values. For more information about each algorithm, please see the prediction algorithms section. The following table lists each Analytical Procedures account with its corresponding method of prediction:

Account Prediction Algorithm

Sales Adjusted Holt-Winters Exponential Smoothing
Cost of Sales Calculated
Gross Profits Calculated
Gross Profit Margin Exponential Smoothing
Depreciation Percent Adjusted Holt-Winters Exponential Smoothing
Depreciation Calculated
Amortization Percent Adjusted Holt-Winters Exponential Smoothing
Amortization Calculated
Other Overhead or S,G,&A Expense Adjusted Holt-Winters Exponential Smoothing
Other Operating Income Adjusted Holt-Winters Exponential Smoothing
Other Operating Expenses Adjusted Holt-Winters Exponential Smoothing
Operating Profit Calculated
Interest Percent Adjusted Holt-Winters Exponential Smoothing
Interest Expense Calculated
Other Income Adjusted Holt-Winters Exponential Smoothing
Other Expenses Adjusted Holt-Winters Exponential Smoothing
Net Profit before Taxes Calculated
Adjusted Owner's Compensation Most recent historical value
Adjusted Net Profit before Taxes Calculated
Net Profit Margin Calculated
EBITDA Calculated
Extraordinary Gain Adjusted Holt-Winters Exponential Smoothing
Extraordinary Loss Adjusted Holt-Winters Exponential Smoothing
Taxes Paid Calculated
Net Income Calculated

Cash Calculated
Accounts Receivable Calculated
Accounts Receivable Days Adjusted Holt-Winters Exponential Smoothing
Inventory Calculated
Inventory Days Adjusted Holt-Winters Exponential Smoothing
Other Current Assets Adjusted Holt-Winters Exponential Smoothing
Total Current Assets Calculated
Gross Fixed Assets Adjusted Holt-Winters Exponential Smoothing
Accumulated Depreciation Calculated
Net Fixed Assets Calculated
Gross Intangible Assets Adjusted Holt-Winters Exponential Smoothing
Accumulated Amortization Calculated
Net Inangible Assets Calculated
Other Assets Adjusted Holt-Winters Exponential Smoothing
Total Assets Calculated
Accounts Payable Calculated
Accounts Payable Days Adjusted Holt-Winters Exponential Smoothing
Short Term Debt Adjusted Holt-Winters Exponential Smoothing
Current Portion of Long Term Debt Adjusted Holt-Winters Exponential Smoothing
Other Current Liabilities Adjusted Holt-Winters Exponential Smoothing
Total Current Liabilities Calculated
Notes Payable / Senior Debt Calculated
Notes Payable / Subordinated Debt Calculated
Other Long Term Liabilities Calculated
Long Term Liabilities Calculated
Total Liabilities Calculated
Preferred Stock Calculated
Common Stock Calculated
Additional Paid-in Capital Calculated
Other Stock / Equity Calculated
Ending Retained Earnings Calculated
Total Equity Calculated
Number of Employees Adjusted Holt-Winters Exponential Smoothing
Z-Score Calculated
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In Analytical Procedures reports, how is the expected value for cash calculated?
Cash is calculated by adding the company's expected "net free cash flow" to the company's cash balance from the previous period. "Net free cash flow" is equal to the company's net profit after taxes +/- balance sheet changes + depreciation & amortization.

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In Nonprofits Analytical Procedures reports, how do I change/use the expected values of Program Service Revenue, Contributions, and Gross Fixed Asset accounts?
When you change the Program Service Revenue, Contributions, or Gross Fixed Assets accounts, all OTHER accounts related to these accounts in the program will change as well, as calculated by the formulas we use. Therefore, some care in using this functionality is required.

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In Analytical Procedures reports, how do I change/use sales and fixed assets expected values?
When you change the sales and/or fixed asset accounts, all OTHER accounts related to sales/fixed assets in the program will change as well, as calculated by the formulas we use. Therefore, some care in using this functionality is required.

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What is Exponential Smoothing?
Exponential smoothing is a forecasting method in which current and past values of a time series are used to predict future values of the series. The forecast is based on a weighted average of current and past values, with the recent values carrying more weight.

Example:

Using historical values for gross fixed assets from 2002 - 2004 and a smoothing constant (alpha) of .5, what is the predicted value for gross fixed assets in 2005?
12/15/2004 12/15/2003 12/15/2002
Gross Fixed Assets $5,800 $4,500 $6,000

Forecasting with exponential smoothing (alpha = .5):

Prediction for 12/2003 made in 12/2002 = $6000
Prediction for 12/2004 made in 12/2003 = .5 * $6000 + .5 * $4500 = $5250
Prediction for 12/2005 made in 12/2004 = .5 * $5250 + .5 * $5800 = $5525
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What is adjusted Holt-Winters Exponential Smoothing?
The adjusted Holt-Winters Exponential Smoothing algorithm is a forecasting method that extends simple exponential smoothing to allow for trends.

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How did we decide which prediction algorithm to use when generating expected values?
We use either Simple Exponential Smoothing or the adjusted Holt-Winters Exponential Smoothing algorithm to generate the expected values used in ProfitCents Analytical Procedures. See below for a break down of each algorithm:

Simple Exponential Smoothing is used when an account is to be predicted as a function of its historical values, and the account is not expected to exhibit any consistent upward or downward trends. For example, the gross fixed assets account is predicted using this method.

Adjusted Holt-Winters Exponential Smoothing is used when an account is to be predicted as a function of its historical values, and a trend IS expected. For example, the sales account is predicted using this method as opposed to Simple Exponential Smoothing because historical movements in sales are expected to provide information about the current level of sales.

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When using Historical Forecasting to perform a projection, how are the forecasted values calculated?

In order to generate automatic assumptions and perform a forecast, we apply statistical techniques to the company's historical data. If there are only two periods of historical data, we perform a simple trend analysis.

Example:

Using historical values for sales from 2003 and 2004, what is the predicted value for sales in 2005?
12/15/2005 12/15/2004 12/15/2003
Sales $8 $5 $3

Since there are only 2 periods of historical data, we perform a simple trend analysis:

Predicted % Change = ($5 - $3) / $3 = 66.66%
Predicted 2005 Sales = $5 * 1.66 = $8.3

If there are three or more periods of historical data, we use a combination of Ordinary Least Squares regression, Simple Exponential Smoothing, and Holt-Winters Exponential Smoothing models to perform the forecast. The following table lists each account with its corresponding method of prediction:

Account Prediction Algorithm

Sales Holt-Winters Exponential Smoothing
Cost of Sales Calculated
Gross Profits Calculated
Gross Profit Margin Exponential Smoothing
Depreciation and Amortization Percentage of Gross Fixed Assets
Interest Expense Calculated using Loan Information
Other Overhead or S,G,&A Expense Holt-Winters Exponential Smoothing
Other Operating Expenses Fixed (not predicted)
Net Profit before Taxes Calculated
Adjusted Owner's Compensation Most recent historical value
Adjusted Net Profit before Taxes Calculated
Taxes Paid Percentage of NPBT
Other Income Fixed (not predicted)
Other Expenses Fixed (not predicted)
Net Income Calculated

Cash Calculated (see below for more information)
Accounts Receivable Exponential Smoothing on Accounts Receivable Days
Inventory Exponential Smoothing on Inventory Days
Other Current Assets Holt-Winters Exponential Smoothing
Total Current Assets Calculated
Gross Fixed Assets Holt-Winters Exponential Smoothing
Accumulated Depreciation Most recent historical value + predicted Depreciation
Net Fixed Assets Calculated
Other Assets Holt-Winters Exponential Smoothing
Total Assets Calculated
Accounts Payable Exponential Smoothing on Accounts Payable Days
Short Term Debt Calculated using Loan Information
Current Portion of Long Term Debt Calculated using Loan Information
Other Current Liabilities Holt-Winters Exponential Smoothing
Total Current Liabilities Calculated
Senior Debt Calculated using Loan Information
Subordinated Debt Calculated using Loan Information
Other Long Term Liabilities Calculated using Loan Information
Long Term Liabilities Calculated
Total Liabilities Calculated
Retained Earnings Most recent historical value + predicted Net Income
Total Equity Calculated

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When performing projections, how is cash forecasted?

Cash is calculated by adding the company's projected "net free cash flow" to the company's cash balance from the previous period. "Net free cash flow" is equal to the company's net profit after taxes +/- balance sheet changes + depreciation & amortization.

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When performing projections, how are the custom accounts forecasted?

Forecasted values for the custom accounts are calculated by holding constant the relationship between the custom account and the main account. For example, if the user adds a custom "Internet Sales" account under the main "Sales" account, and "Internet Sales" are 10% of "Sales" in the historical periods, then "Internet Sales" will be forecasted as 10% of sales.

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Where do the industry averages come from?

The industry averages used in Analyst represent weighted factors from industry research that we have performed, including: surveys of CPAs and bankers; reviews of data from other organizations; and the expert judgment of our professional services team. We also incorporate statistics gathered from our own growing aggregate database -- we review the data that is collected when Analyst reports are run.

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How are the numerical scores determined for each section of an Analyst Narrative report?

In order to construct an Analyst report, we look at a number of financial factors and metrics. We "score" these metrics by: 1. Comparing a company's scores against industry statistics. 2. Evaluating trends, either positive or negative. In the Analyst Narrative report, a company can receive a numerical score for each of the five sections of the report, a score from 1 to 100, based upon the company's performance. 100 is the top score, 1 is the lowest score. Scoring is determined by weighting each of the metrics we evaluate in an area and then assigning to each metric a score from 1 to 100. Even though the scoring facility of the program is fairly complex, it can only be a rough measure of overall performance in the section since you, as a user, may place more or less emphasis on one/some of the metrics than we do in scoring all metrics. Please call us at (866) 603-7029 option 1 or email us at support@sageworksinc.com should you have any particular questions on how we calculate scores.

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What do the stars on the Analyst Narrative reports indicate?

Analyst analyzes and evaluates business performance in five areas: Liquidity, Profits & Profit Margin, Sales, Borrowing, and Assets.  Each area is assigned a star "score" based upon the business' performance.  The score range is as follows:

One Star:  

May need improvement

Three Stars:  

About average

Five Stars:  

Good

Where do the industry averages come from?
The industry averages used in ProfitCents represent weighted factors from industry research that we have performed, including: surveys of CPAs and bankers; reviews of data from other organizations; and the expert judgment of our professional services team. We also incorporate statistics gathered from our own growing aggregate database -- we review the data that is collected when ProfitCents reports are run.

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How are the numerical scores for each ProfitCents Extreme and Analytical Procedures report section determined?
In order to construct a ProfitCents report, we look at a number of financial factors and metrics. We "score" these metrics by: 1. Comparing a company's scores against industry statistics. 2. Evaluating trends, either positive or negative. In the Extreme and Analytical Procedures report, a company can receive a numerical score for each of the six sections of the report, a score from 1 to 100, based upon the company's performance. 100 is the top score, 1 is the lowest score. Scoring is determined by weighting each of the metrics we evaluate in an area and then assigning to each metric a score from 1 to 100. Even though the scoring facility of the program is fairly complex, it can only be a rough measure of overall performance in the section since you, as a user, may place more or less emphasis on one/some of the metrics than we do in scoring all metrics. Please call us at 866.603.7029 option 1 or email us at support@sageworksinc.com should you have any particular questions on how we calculate scores.

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What do the stars on the ProfitCents report indicate?
ProfitCents analyzes and evaluates business performance in six areas: Liquidity, Profits & Profit Margin, Sales, Borrowing, Assets, and Employees.  Each area is assigned a star "score" based upon the business' performance.  The score range is as follows:

One Star:  

May need improvement

Three Stars:  

About average

Five Stars:  

Good

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In the graph area, why do some of the numbers not appear?
Numbers that are too large to display on the chart will not appear on the chart. In these cases, the relative scale of the charted values is still preserved.

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How can I protect the confidentiality of my client's financial information?
Our Web site uses the industry standard SSL technology to encrypt data. Therefore, communication with your browser is secure and your client's information is safe. Secure Server Software (SSL) encrypts all of the information that is entered into ProfitCents. A VeriSign security certificate is also applied on the Web site.

Additionally, you can choose to enter an alias or number rather than the company's real name when generating the report. You can subsequently insert the company name into the report when you are customizing it in Microsoft Word.

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