Implement financial management approaches
You are the manager of Sales Team A. You manage a small team of sales team members. Your duties include accessing budget information for your team, explaining relevant aspects of budgets and features of budget documents to your team, and supporting team members to achieve performance goals.
You have determined that you will need to access budget information from the Senior Accountant to explain to your team. You will explain the overall financial objective of the business, provide an overview of the budget and explain how the budget translates to expense allocations for the team.
You have determined that one team member, Bill Goodale, will be responsible for tracking expenses and petty cash throughout the financial year. To meet organisational needs, this duty will need to be performed in accordance with policies and procedures.
You have determined that expenses will need to be divided equally and tracked by quarter. Bill will need to develop a spreadsheet to keep track of actual expenditure by account. To help you control expenses, the spreadsheet will need to provide an ongoing tally of expense by account.
Bill's skills include basic accounting. Bill needs to be informed of Big Red Bicycle policies and procedures for petty cash. Bill is familiar with Microsoft Excel but does not know how to use formula and functions to sum columns or rows of figures.
You are the Senior Accountant at Big Red Bicycle. A major component of your role is setting budgets and monitoring budgetary performance for the organisation.
The Managing Director, Tom Copeland has asked you to implement a process to monitor expenditure and income. He has asked you to prepare a spreadsheet to capture and compare actual income and expenditure to budgeted figures. Your spreadsheet must contain columns for each of the four quarters of the financial year. You are required to gather data from the relevant managers (your assessor) to complete a budget variation report.
The report should conform to organisational requirements in policies and procedures
? columns to show actual account values
? absolute variation
? percentage variation.
It has come to the attention of the managing director, Tom Copeland, that due to the current economic climate, sales volume may be 20% below target this financial year. Tom is worried that this may severely impact profit projections. The company can accept as much as a 10% variance in profit projections; however, more than this could severely affect the company's ability to pay obligations and invest. Reliable data to determine whether the risk has eventuated should be available by midway through the second quarter (Q2), when sales data for the company's product are in.
Consider the contingency plan and the implementation plan for the contingency below. You have already implemented a portion of the contingency plan, namely the monitoring of budget performance in the variation report you have prepared. You should now analyse the report to determine the effectiveness of the contingency plan and its implementation.
You have received the following feedback from team members:
? full-time workers and sales people resentful of time wasting and distracting contract employees
? overtime not used but employees resentful of suggestion it might not be approved if needed
? training suited the needs of many sales team members but was not relevant to about half
? sales team members were happy with the incentives program and tried hard to make sales in the third quarter (Q3); however they were also resentful at the threatening tone of emails and soon lost enthusiasm
? effect of one-day training wearing off
? 50 percent of direct wages costs are attributable to short-term contract employees whose contracts have expired and who are no longer needed
? employees concerned about lack of attention paid to wastage: water; electricity: paper; raw materials
? employees feel left out of budgetary decision-making in general.
The managing director would like you to submit a revised contingency plan and contingency plan implementation to bring income and expenses under more effective control.
Part 3: Review and evaluate financial management processes
You are the Senior Accountant. As part of your role, you will need to complete the following four activities.
As you are aware, one risk to the strategic plans of Big Red Bicycle (BRB) is bad debt and poor cash flow due to large trade debtors balances. Consider the following:
? according to its policies, Big Red Bicycles offers 30 day terms to debtors
? currently, BRB does not train sales staff on credit terms
? there is currently no enforcement of credit terms
? warehousing of stock is expensive at current leased premises
? many bicycles need to be thrown out if parts rust; this problem exacerbates the problem of waste expense.
You have the following information from the Statement of Financial Position and current ledger accounts in the electronic accounting system (MYOB AccountRight).
Complete the following.
1. Review the Statement of Financial Performance in the appendices to calculate:
a. The average debtor days
b. The average creditor days
c. The average stock turnover
d. Show calculations and results on your response document for this assessment task.
2. Consider the existing BRB ageing debtor's budget. On your response document, make two written recommendations for improvement to existing financial management processes to improve cash flow. To support your recommendations, refer to data sources, organisational needs, and analytical techniques, for example:
a. statement of financial performance
b. ledger accounts
c. scenario information
d. ageing debtors budget
3. On your response document, list three sources of information of use to complete this activity.
In addition to its Australian business, Big Red Bicycles is considering manufacturing a new range of cheaper bicycles in Indonesia. The following information is available:
? the Indonesian plant has capacity to manufacture 8000 units
? Big Red Bicycle's strategic goal is to generate a pretax profit of $1,000,000 for the next financial year for Indonesian operations
? clients will pay a maximum of $500 per bicycle
? possibility exists for move to Indian plant with capacity for 10,000 units
? market for bicycles is growing rapidly and BRB will be able to sell everything produced
? limited ability to renegotiate costs with suppliers
? pricing and cost information is as follows.
Bicycle price per unit
$500 (ex GST)
Current variable costs per unit
Complete the following.
1. On your response document, work out:
a. how many units at current variable cost would need to be produced to achieve profit target (show calculations)
b. what the variable costs per unit would need to be to achieve profit target at current manufacturing capacity (show calculations).
2. On your response document, make one written recommendation based on your analysis. To support your recommendation ensure you refer to the organisational needs or situation, and any analytical techniques used. You may also suggest possible actions for BRB to take depending on possible future scenarios.
3. On your response document, list three sources of information of possible use to complete this activity.
Soon you will need to prepare a business activity statement (BAS) for the first quarter on 2012/13.
Complete the following.
1. State how many years you will need to keep GST records in order to satisfy ATO requirements.
2. Complete the GST budget on the following page to anticipate GST liability.
Budgeted cash receipts incurring GST:
Cash revenue (besides sales)
Cash receipts from sale of assets (not stock)
Total receipts for GST
Budgeted non-cash receipts incurring GST:
Total non-cash receipts:
Total budgeted receipts incurring GST
Budgeted cash payments incurring GST
Cash purchases of stock
Total cash receipts incurring GST
Budgeted credit payments incurring GST
Credit purchases of stock incurring GST
Credit purchases of assets (besides stock)
Total cash payments incurring GST
Total budgeted cash payments incurring GST
GST cash budget calculations
a) Cash receipts
b) Cash payments
c) GST liability
Choose one of the recommendations from Activity 1 or 2 and develop an action plan to implement and monitor the recommendation. Ensure you include appropriate activities, monitoring, timelines and accountabilities.