Question:

Task 1:

Plan financial management approaches

Submission details

The assessment task is due on the date specified by your assessor. Any variations to this arrangement must be approved in writing by your assessor.

Submit this document with any required evidence attached. See specifications below
for details.

Performance objective

The candidate will demonstrate the ability to plan financial management approaches.

Assessment description

In response to the scenario provided, you will clarify budget plans with your manager and negotiate changes to the budget. You will then identify and analyse a risk to the budget and prepare a contingency plan to prevent or minimise the risk.

Procedure

1. Read through the scenario provided and tasks A and B.
2. Prepare to meet with your manager (assessor) to clarify budget and negotiate changes:
   1. identify areas of the budget that are not achievable, inaccurate or unclear
   2. prepare to negotiate necessary changes to the budget
   3. set up a time with your manager to meet.
3. Meet with your manager (assessor) to clarify budget and negotiate changes.
   1. identify at least two issues for clarification
   2. negotiate at least two changes.
4. Submit all documents required in the specifications below to your assessor. Ensure you keep a copy of all work submitted for your records.

Specifications

You must:

• meet with your assessor to clarify budget and negotiate changes
• provide a contingency plan.

Your assessor will be looking for:

• numeracy skills to read and understand a budget and negotiate budget re-allocations
• knowledge of basic accounting principles to identify and use account balances
• knowledge organisational requirements related to financial management such as contained in organisational policies and procedures
• knowledge of principles and techniques involved in budgeting.

Adjustment for distance-based learners

No variation of the task is required.

Documentation can be submitted electronically or posted in the mail.

Task:2

Implement financial management approaches

Submission details

The assessment task is due on the date specified by your assessor. Any variations to this arrangement must be approved in writing by your assessor.

Submit this document with any required evidence attached. See specifications below
for details.

Performance objective

The candidate will demonstrate the ability to implement financial management approaches.

Assessment description

In response to the scenario provided, you will access and communicate details of budget to a team member (assessor). You will then support the team member to perform their required role with respect to software resources and systems.

Procedure

1. Consider the scenario provided and tasks A and B
2. Prepare to meet with your team member (assessor) to communicate budget and then coach and train them in new role:
   1. access required budget information from assessor
   2. determine organisational needs
   3. identify coaching/training needs of team member
   4. plan coaching/ training session:
      1. Outcome : team member produces spreadsheet to meet management requirements
      2. Include activities/elements to instruct, practice, test, motivate
   5. Set up a time with your team member to have coaching/training session
3. Meet with your team member (assessor) to coach them in role:
   1. Explain budget and relevance to team member’s accountabilities
   2. Use appropriate coaching techniques or models such as grow
   3. Use appropriate motivational theory
   4. Train learner in required spreadsheet techniques. Include elements of instruction, practice and testing/feedback
4. Submit all documents required in the specifications below to your assessor. Ensure you keep a copy of all work submitted for your records.

Specifications

You must:

• meet with your assessor to role-play support of team member
• submit coaching/training plan.

Your assessor will be looking for:

• numeracy skills to read and understand a budget and to communicate a budget
• technology skills to use software associated with financial record keeping
• knowledge of basic accounting principles to identify and use account balances in communication and training
• knowledge of organisational requirements related to financial management such as contained in organisational policies and procedures
• requirements for organisational record keeping and auditing with respect to petty cash
• knowledge principles and techniques involved in budgeting and electronic spreadsheets.

Adjustment for distance-based learners

No variation of the task is required.

Documentation can be submitted electronically or posted in the mail.

Task:3

Monitor and control finances

Submission details

The assessment task is due on the date specified by your assessor. Any variations to this arrangement must be approved in writing by your assessor.

Submit this document with any required evidence attached. See specifications below for details.

Performance objective

The candidate will demonstrate the ability to monitor and control finances.

Assessment description

In response to the scenario provided, you will create a simple spreadsheet budget to capture monitoring information. Using information provided to you by your assessor, you will then use the budget spreadsheet to produce a report on expenditure in accordance with organisational policies and procedures. You will also modify a contingency plan.

Procedure

1. Read through the scenario provided and tasks A and B.
2. Design and develop a spreadsheet to capture budgeted and actual figures to produce a variance report.
3. Access actual budget figures from relevant managers and accounting systems (assessor).
4. Monitor and record actual figures.
5. Produce a variance report as per organisational requirements.
6. Consider the scenario information and contingency plan provided and analyse the variance report.
7. Modify the contingency and implementation plans provided in the scenario to improve effectiveness.
8. Submit all documents required in the specifications below to your assessor. Ensure you keep a copy of all work submitted for your records.

Specifications

You must provide:

• a budget spreadsheet
• a budget variation report
• a modified contingency plan and modified implementation plan.

Your assessor will be looking for:

• numeracy skills to read and understand a budget and to produce a variance report
• technology skills to use software associated with financial record-keeping
• knowledge of basic accounting principles to identify and use account balances
• knowledge of organisational requirements related to financial management
• knowledge of organisational requirements for records and reports
• knowledge of principles and techniques involved in budgeting, profit and loss statements, electronic spreadsheets.

Adjustment for distance-based learners

No variation of the task is required

A follow-up interview may be required (at the discretion of the assessor).

Documentation can be submitted electronically or posted in the mail.

Answer:

TASK 1:

TASK A:

A budget is defined as a long term plan which helps the business to estimate the level of expenses and the level of profit that the business will earn in the future years (Epstein, 2012). The organizations generally formulate different monetary plans and policies and make the expenses and the profits accordingly less or more to facilitate a new budget. The plan in the budget helps the company to make sales and demand forecast. According to Marsh (2012) importance of budget is as follows:

• To help the management to perform, review and control.
• To ensure that the business is moving according to the plan by comparing the actual results with the budgeted results.
• To take appropriate actions when disparity is noticed between the actual plan and the budgeted expenses.

When all these importance are kept in mind and actually a projected budget is prepared to achieve the target of the company, then it can be said that the estimated budget is accurate, achievable, fair and understandable (Manchester, 2012).

In the company, Big Red Bicycle, which is Bendigo Victoria based bicycle manufacturer company, the master budget and the cost centre budget which was prepared by Pat Roberts, the Senior Accountant of the company, was reviewed on the basis of some assumptions, to fulfill the target of the company to achieve at least $ 1000000 as a Net Profit Before Tax.

By calculating the projections, it can be said that, the new revised projected budget is accurate, achievable, fair and understandable. The reasons are as follows:

According to the master budget of the company, sales in each quarter were fixed, that is, $ 750000. But in the new projected budget, the sales in quarter 2 are $ 1000000 and 30 % less than quarter 2 in other quarters. That is, the sales in quarter 1, 3 and 4 are $ 700000 each. It is assumed that the sales decreased in the new projected budget as due to economic downturn, the sales may become poor.

From the sales of each quarter, direct wages are deducted and the amount is $ 50000, as it is fixed. Similarly the cost of goods sold is also deducted from the sales and the amount is kept same that is, $ 100000. But, the commission on sales percentage has been increased from 2 % of sales to 2.5 % of sales. Thus, accordingly, the commission on sales changes in all the quarters, i.e. $ 17500 for quarter 1, 3 and 4, and $ 25000 for quarter 2.

Thus, the gross profit for the year = $ (532500 + 852000 + 532500 + 532500)

= $ 2422500

All the expenses are kept same, thus the total expenses also remained same, that is, $ 1401500.

Therefore, Net Profit Before Interest and Tax = $ (2422500 – 1401500)

= $ 1021000

Therefore, it can be said that by new assumptions, the projected budget is drawn correctly and accurately to achieve the target of $ 1000000, as it is providing more than the target of the company.

TASK B:

Contingency plan template:

TASK 2:

TASK A:

The objective which is set up by a company and which can be measured in monetary terms, like – profit and loss amount, or the percentage of profit increased or decreased, or the percentage of loss occurred over a period of time is called financial objective of a firm (Berk, DeMarzo and Harford, 2012). For every firm, to keep the financial objectives is very important. The reasons are as follows:

• It helps in collection of maximum funds.
• It facilitates in fixing the most perfect capital structure.
• Helps to determine the right project for investing.
• Helps in operational activities.
• It is the base for controlling the financial matter.
• It helps to utilize finance properly.
• It helps to avoid business shocks and surprises.
• It helps in coordination.
• It creates a link between investment and financing decisions (Brealey, Myers and Marcus, 2012).

For the company, Big Red Bicycle, the financial objectives are –

• To reduce the total expenses.
• To achieve at least $ 1000000 as a Net Profit Before Tax.
• To compensate the reduced sales, that may occur due to economic downfall.

From the overview of the master budget of the company Big Red Bicycle, which has been provided as the data, it can be said that, the gross profit and the total expenses for all the four quarters is same. But the commission percentage should be reduced with the reduction in the sales amount (Marsh, 2012). In the projected budget, the sales are reduced due to the economic downfall of the country. In the master budget, the direct wages are fixed cost, so it fixed for every year. Among the expenses, the wages and salary expenses in the master budget are $ 125000 per quarter. But in the projected budget, the expenses of wages may be increased, due to time value of money and inflation. If the other expenses including the wages increases, then, the profit will decrease and the company will not be able to achieve its target of reaching $ 1000000 for net profit before interest and tax. Thus, the other expenses except wages and salaries should be reduced, like – legal fees by avoiding late fee, office supplies expenses by reducing wastage, repair and maintenance expenses, etc.

TASK B: To control the expenses, spreadsheet has been formulated as follows:

From the above projected expense control chart, it can be said that the projection is accurate and understandable and can be applied, as the total expenses are less than the expenses in the master budget. Therefore, it can be concluded that, the company will run smoothly as its expenses have reduced relatively.

TASK 3:

Task A:

The following budget has been prepared assuming the actual income and the expenses of Big Red Bicycle for the financial year 2011/ 2012 from the information given within the master budget. The company attempts to achieve net profit before tax at around $ 1,000,000 and the following budget is prepared with this objective.

TASK B:

As per the given contingency plan the flowing changes are required to be incorporated in the present contingency plan.

REFERENCES:

Barkakati, N. (2012). Financial management systems. Washington, DC: U.S. Govt. Accountability Office.

Jones, R. (2012). Budgetary Accounting in National Governments: Anglo versus American Accounting.Financial Accountability & Management, 28(3), pp.286-305.

Kanis, A. (2012). Parliamentary control of budget implementation. Brussels: European Parliament.

Marsh, C. (2012). Financial management for non-financial managers. London: Kogan Page.

Mohamed Ariff, Farrar, J. and Khalid, A. (2012). Regulatory failure and the global financial crisis. Cheltenham, Glos, UK: Edward Elgar Pub.

Nozaki, I. (2013). WHO’s budgetary allocation and disease burden. The Lancet, 382(9896), pp.937-938.

NYLINDER, P. (2011). Perception of budgetary control: a study of differences across managers in Swedish public primary healthcare related to professional background and sex. Journal of Nursing Management, 19(5), pp.664-672.

Publishing, O. (2013). OECD Journal on Budgeting, Volume 2012 Supplement 1. Paris: OECD Publishing.

Epstein, L. (2012). The business owner’s guide to reading and understanding financial statements. Hoboken, NJ: Wiley.

Manchester, J. (2012). The 2012 long-term budget outlook. [Washington, D.C.]: Congressional Budget Office.

Marsh, C. (2012). Financial management for non-financial managers. London: Kogan Page.

Berk, J., DeMarzo, P. and Harford, J. (2012). Fundamentals of corporate finance. Boston: Prentice Hall.

Brealey, R., Myers, S. and Marcus, A. (2012). Fundamentals of corporate finance. New York: McGraw-Hill/Irwin.

Marsh, C. (2012). Financial management for non-financial managers. London: Kogan Page.