Why is variance analysis important to Justin McCoy's company based on the interview?

Accounting in Action Transcript of Interview with Justin McCoy, Director of Financial Planning and Analysis, Dickies Brand, VF Corporation Recorded January 2019 Rasmussen: "Welcome to another episode of Accounting in Action. My name is Stephanie Rasmussen, and I am an Associate Professor of Accounting at the University of Texas at Arlington. Today, I am joined by Justin McCoy, a UTA grad, who is now the Director of Financial Planning and Analysis for the Dickies brand at the VF Corporation. Thank you for joining me, Justin." McCoy: "You bet." Rasmussen: "I expect that some of our listeners may not be familiar with the VF Corporation. Can you start by telling us a little bit about what your company does?" McCoy: "Yes, so VF Corporation is a publicly traded company, and it's a really sportfolio brand. So Dickies brand is the brand that I work for, but they have other brands such as Vans, North Face, Timberland, Wrangler, JanSport, to name a few. But they're all apparel organizations. It's based here in... actually, it's based in North Carolina, but it's a global company." Rasmussen: "Can you tell us a little bit about your educational background and your work history leading up to now?" McCoy: "Yes, so I went back to school, actually in my late 20's to get a Management degree after spending my 20's as a salesman. And I came back for a Management degree, and it eventually led to me getting an Accounting undergrad and master's degree right here at UTA. And then, I've been working for Dickies for about five years, started there as a financial analyst. 1 also spent some time in the general ledger group, which led me to where I am today in the financial planning and analysis group." Rasmussen: "Now, this recording is going to be listened to by managerial accounting students. The majority of them will be taking a Principles of Managerial Accounting class at UTA, but there will also be some students who are part of our online MBA program, who will be listening to this as well. So can you tell us a little bit about how you use managerial accounting on a dayto-day basis?" McCoy: "Absolutely. So part of my role is where I focus a lot of my attention, probably at least 50% of my time, is forecasting and analyzing our sales and margin for our business. So I spend a lot of time, so I am forecasting at standard what our margin is for the rest of the year and budgeting that as well. So, the simplest form, understanding variances to forecast or budget on a monthly basis for where we landed our margin. So, simple things like understanding sales volume variance and pricing variances and mixed variances and how that impacts and actually gives us variances from a month-to-month basis on our margin and profitability. And then, you even further that to understand, work on forecasting and explaining variances within our production variances as well." Rasmussen: "So you determine what... or, calculate these variances. Who within the organization do you share that information with?" McCoy: "So that's shared throughout. So we have an entire team of people that... it's a merchandising group, so, you know, they're especially interested in that, so they're our product managers, people that are responsible for the overall margin for our segments, different segments or businesses, like women's, kid's, things like that. So it's very important that they understand 2 these variances from a month-to-month basis. You know, as well as like, you know, we have to report that up through, you know, our divisional president needs to understand, that needs to be reported up, you know, our sales guys need to understand margin variances at standard, you know, and all the decisions that they're making in different mixed scenarios are changing our bottom line. So it's pretty widely, you know, reported and shared throughout the business." Rasmussen: "Now, another thing you mentioned when you were describing the variance analysis was, you mentioned the terms both forecast and budget. Can you explain to our listeners what the difference is between those two?" MeCoy: "Absolutely. So budget is an annual process; it's a one-time-a-year, you know, basically we're setting our budget right now for fiscal 2020. And once you get into the year that budget does not change throughout the year. That stays static and does not move throughout the year. We also forecast, reforecast our business every month, so, you know, at the end of the first month of the year, we will do the 1+11 forecast, which is one month of actuals plus a reforecasted view of the next 11 months of the business. So forecasts can change, and it does change throughout the year. And it's your updated view of where your business is headed for the year." Rasmussen: "So in terms of evaluating performance of managers and people who have budget responsibility, are they more concerned with meeting their budget or meeting this forecast?" McCoy: "Both. So, I mean, there are circumstances that can, you know, materially change, you know, a budget or have... a forecast can have a large variance on your budget throughout the year. So if we know there's something we didn't plan on that's maybe a one-time exception or something like that that can be different from what your budget is on your forecast, then it's more 3 of, okay, now we have a new forecast for our business, we need to go hit that. So, I would say, on an annual basis, budget is what you're looking to, that the managers are held to meet, and on a monthly basis it's to your forecast because that's the last and latest and greatest estimate that we have for your expenses." Rasmussen: "Okay, great. Now you ended up majoring in Accounting, so you likely expected to use accounting a lot in your day-to-day work. But thinking back to your accounting classes, what were your perceptions of them, and how has that perception changed over time?" McCoy: "Yeah, so, I mean, I would say, you know, my perception of accounting was I thought... Fd kind of pick and choose what I thought I would use and wouldn't use when I got out because I thought I was going to go one route, and, you know, you never really know exactly how your career path is going to be. You know, for me, like the managerial classes and cost classes, I didn't, you know, anticipate that I would be working for a manufacturing company and that this would directly apply to me. So, you know, I was, you know, just trying to quickly memorize different ratios and scenarios and move on to the next class. But my perception looking back on those classes is that it was very important and, you know, I wish I would have conceptualized some of that information while I was in class, because I've really had to go back and kind of relearn some of this information because it directly applies to my job on a day-to-day basis." Rasmussen: "Do you have any advice for college students? Now remember I said we might have an audience here that's a combination of both undergrads and master's students, and I know you have both an undergrad and a master's from UTA. So, any advice you have for those two groups of students?" McCoy: "Yeah, absolutely. You know, I would say, you know, my biggest piece of advice is that you're not in college to take a test. You know, you're really in college to conceptualize information and take information with you out into your profession. You know, spend this time to really learn, and don't be short-sighted on, you know, what you think you will and will not need when you get out of college because, you know, almost all of the classes I've taken, you know, there's something that's touched on those, you know, throughout my professional career so far. You know, spend time really learning and mastering Excel, PowerPoint, if you have any opportunities to learn any BI tools like Tableau or Cognos or anything like that, you know, take those opportunities now to learn those things because they're just going to make you more viable when you get out into your profession." Rasmussen: "And what was your perspective on group work as a student?" McCoy: "So I, you know, I hated group work. You know, I thought it was a waste of time and kind of a silly exercise to put students through. You know, looking back, I will say now that I've been, you know, working for a while now that basically every day of my job is a group project. So, you know, there are learnings that you can get because it's going to be, you know, how you have group projects now and, you know, how you interact with the people in your group is going to be very similar once you get out into your profession. So, you know, really take that time to learn how to work with different people and to communicate is key. So, you know, setting good expectations for the team and really communicating with each other on what the goal is and, you know, how you want to get there, it really is good practice for what you're going to see in your day-to-day work and life." Rasmussen: "Great. Well, thanks again, Justin. It was great to talk to you