Fluent Essays

you have to first read the learning guide then answer the workbook.  it must be sufficient answers.  N(8) Cash Flow for Period Ended: Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Receipts Cash Sales (inclusive of GST) 1000 1200 Credit Sales 11645 11895 Total Cash Receipts 12645 13095 Payments (inclusive of GST) Purchases 5500 6000 New Plant and equipment 2200 2200 General expenses 1100 1100 Company Tax 700 700 700 700 Wages (GST free) 3200 3200 GST BAS transfer payments (quarterly) from worksheet Total Cash Payments 9800 10300 Cash at Bank Opening Balance -1000 1845 4640 TC Receipts - TC Payments 2845 2795 Closing Balance 1845 4640 Case Study – (page 3) c) Determine the total labour required for a standard month’s production and for the additional production in March. You are advised that the total labour availability is 2,400 hours based on normal working hours. Since the existing labour force is nearly fully utilised, are there any issues for John? If so, what options would you investigate and what would you recommend given that overtime is costed at $75 per hour? HOURS Standard Month Additional Basic 300 (150 x 2hrs) 60 Standard Plus 750 (3hrs) 150 Deluxe 800 (4hrs) 40 Super Deluxe 500 (5hrs) 25 2,350 275 Total: 2,625 hours Total overtime cost: 225 hours x $75 $16,875 Casuals at $50 per hour - $11,250 Casuals at $60 per hour - $13,500 d) What other issues might John face? List at least three. For each issue, suggest a contingency plan that you would expect to be in place. GST BAS Calculation Worksheet Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec GST received from: A. Sales (incl GST) 1000 1200 1100 1200 1300 1350 1350 1400 1500 1400 1550 1550 B. Credit Sales incl GST 1650 – O 3450 – N 6545 - D 1725 – N 3570 – D 6600 - J D J F J F M F M A M A M A M J M J J J J A J A S A S O S O N Total Sales 12645 13095 GST on Sales 1150 1190 GST ITC paid on expenses Purchases with GST 5500 6000 General expenses – with GST 1100 1100 Plant & equipment GST $ 2200 2200 Total expenses 6600 7100 GST on Expenses 600 645 GST Amount to be paid GST to be received 550 545 Case Study (Page 2) Production for March will now be the usual monthly production as per February previous page plus the new contract commitment. Prepare a sales budget for March using a spreadsheet program based on the table provided below: Product Units Unit price ($) Value ($) Usual Monthly Production Basic 150 250 37,500 Standard Plus 250 500 125,000 Deluxe 200 750 150,000 Super Deluxe 100 1000 100,000 Total Monthly Production 700 - $412,500 Special Order (March) Basic 30 275 8,250 Standard Plus 50 550 27,500 Deluxe 10 750 7,500 Super Deluxe 5 900 4,500 Total Special Order 95 - $47,750 Total March Production 795 - $460,250 Using the information provided, determine the budgeted cost of production (labour, materials and overheads) and the profit per item that can be expected for the normal production and for each item to be produced for the special order. What is the total profit expected for March? Normal Special Order Basic 40 (250 – 210) 65 (275 – 210) Standard Plus 80 (500 – 420) 130 (550 – 420) Deluxe 36 (750 – 714) 36 (750 – 714) Super Deluxe 107 (1000 – 893) 7 (900 – 893) PROFIT OVERALL Normal Special Order Basic 6,000 1,950 Standard Plus 20,000 6,500 Deluxe 7,200 360 Super Deluxe 10,700 35 Total: $ 43,900 $ 8,845 Total Profit for both Normal and Special Order: $52,745 Case Study – Shower Screens John works for a company that manufacturers shower screens. He is the Cost Centre Manager for the production area. For the four products they manufacture, sales at the end of February are in the table below: Product Unit Value ($) Basic 150 37,500 (250 per unit) Standard Plus 250 125,000 (500 per unit) Deluxe 200 150,000 (750 per unit) Super Deluxe 100 100,000 (1,000 per unit) The above production is standard from month to month and the costs involved are below: Product Labour per unit (hours) Material cost per unit ($) Overhead contribution per unit ($) Basic 2.0 100 10 Standard Plus 3.0 250 20 Deluxe 4.0 480 34 Super Deluxe 5.0 600 43 Labour is costed at $50 per hour and includes contributions to leave entitlements and superannuation. Material costs are fixed with a supply contract for the standard quantities required each month. John is advised that the company is just one extra order for the supply of shower screens for a refit of a hotel, and the products are required by the end of March. The quantities and the agreed price per unit are below. Product Required units Price agreed per unit ($) Basic 30 275 Standard Plus 50 550 Deluxe 10 750 Super Deluxe 5 900 Good and Services Tax GST What is it? GST is the Goods and Services Tax It is a broad based tax on the supply of most goods and services and anything else consumed and sold in Australia. Some products and services are GST exempt and these include basic foods, some education courses, some medication and health services GST is charged at the current rate of 10\% and is calculated at the point of sale. You must register for GST if your business turnover is $75,000 per annum or over ($150,000 for a non-profit organisation) Example If I sell a Career Report for $90.00 I need to add 10\% GST, so the Invoice will be $99.00 This will either be termed $90.00 plus GST - $99.00 Or $99.00 (including GST) Businesses then complete a BAS (Business Activity Statement) on a regular basis. (I do this quarterly) I will tally the GST amount received (owed to Tax Office) and the GST spent (owed to me). And the difference will either be paid to the Tax Office, or paid to me Example – GST in When calculating the amount of GST in total income you need to divide by 11, not 10. The example I used earlier of the $99 Invoice that I sent was $90 plus GST. But if I divide the Invoice amount by 10, the GST amount is $9.90 which is not correct. If I divide by 11 the amount of GST is $9 which is what I added in the first place My total income for the quarter is $68,000 (incl GST) To calculate GST divide $68,000 by 11. The GST received will be $6,182 GST – out I spend $23,000 on legitimate expenses for the quarter so the GST I paid out is $23,000 divided by 11 - $2,091 Therefore I received $6,182 in GST and paid out $2,091 in GST The GST coming in ($6,182) less the GST going out ($2,091) The difference is $4,091 which I need to pay to the Tax Office. If I paid out more in GST than I received in the Q, the Tax Office would owe me the difference. Page | 18 BSBFIM501 Manage budgets and financial plans Learner Workbook Table of Contents Table of Contents 2 Candidate Details 3 Assessment – BSBFIM501: Manage budgets and financial plans 3 Competency Record to be completed by Assessor 4 Activities 7 Activity 1 7 Activity 2 8 Activity 3 9 Activity 4 10 Activity 5 13 Activity 6 14 Activity 7 15 Activity 8 16 Activity 9 17 Activity 10 18 Activity 11 19 Activity 12 20 Skills and Knowledge Activity 21 Major Activity A 23 Major Activity B 25 Candidate Details Assessment – BSBFIM501: Manage budgets and financial plans Please complete the following activities and hand in to your trainer for marking. This forms part of your assessment for BSBFIM501: Manage budgets and financial plans. Remember to always keep a copy of your assessment before submitting. Name: _____________________________________________________________ Email: _____________________________________________________________ Employer: _____________________________________________________________ Declaration I declare that no part of this assessment has been copied from another person’s work with the exception of where I have listed or referenced documents or work and that no part of this assessment has been written for me by another person. Signed: ____________________________________________________________ Date: ____________________________________________________________ If activities have been completed as part of a small group or in pairs, details of the learners involved should be provided below: This activity workbook has been completed by the following persons and we acknowledge that it was a fair team effort where everyone contributed equally to the work completed. We declare that no part of this assessment has been copied from another person’s work with the exception of where we have listed or referenced documents or work and that no part of this assessment has been written for us by another person. Learner 1: ____________________________________________________________ Signed: ____________________________________________________________ Learner 2: ____________________________________________________________ Signed: ____________________________________________________________ Learner 3: ____________________________________________________________ Signed: ____________________________________________________________ Competency Record to be completed by Assessor Learner Name: __________________________ Date of Submission: __________________________ Date of Assessment: __________________________ The learner has been assessed as competent in the elements and performance criteria and the evidence has been presented as: Satisfactory (S) Non-Satisfactory (NS) Assessor Initials Activities 1 - 12 Skills and Knowledge Questions Major Project A Major Project B Learner is deemed: COMPETENT NOT YET COMPETENT (Please Circle/Highlight) 1. Resubmission Date: ________________________ 2. Resubmission Date: ________________________ 3. Resubmission Date: ________________________ Comments from Trainer / Assessor: ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Assessor Signature: ___________________________ Date: _______________________ Observation/Demonstration Throughout this unit, you will be expected to show your competency of the elements through observations or demonstrations. Your instructor will have a list of demonstrations you must complete or tasks to be observed. The observations and demonstrations will be completed as well as the activities found in this workbook. An explanation of demonstrations and observations: Demonstration is off-the-job A demonstration will require: Performing a skill or task that is asked of you Undertaking a simulation exercise Observation is on-the-job The observation will usually require: Performing a work based skill or task Interaction with colleagues and/or customers Your instructor will inform you of which one of the above they would like you to do. The demonstration/observation will cover one of the unit’s elements. The observation/demonstration will take place either in the workplace or the training environment, depending on the task to be undertaken and whether it is an observation or demonstration. Your instructor will ensure you are provided with the correct equipment and/or materials to complete the task. They will also inform you of how long you have to complete the task. You should be able to demonstrate you can: 1. Plan financial management approaches 2. Implement financial management approaches 3. Monitor and control finances 4. Review and evaluate financial management processes. You should also demonstrate the following skills: Reading Writing Oral communication Numeracy Navigate the world of the work Interact with others Get the work done. Activities Activity 1 Estimated Time 40 Minutes Objective To provide you with an opportunity to access budget/financial plans for the work team; clarify budget/financial plans with relevant personnel within the organisation to ensure that documented outcomes are achievable, accurate and comprehensible; negotiate any changes required to be made to budget/financial plans with relevant personnel within the organisation. Activity How would you go about accessing the budget and financial plans for your organisation/department? – attach the latest budget When are budgets completed within your organisation/department? What if any changes have occurred in your organisation/department since the last budget was prepared, that might impact on the next budget? Which personnel would you need to consult and what issues might need to be addressed? ( minimum 500 words) Activity 2 Estimated Time 25 Minutes Objective To provide you with an opportunity to prepare contingency plans in the event that initial plans need to be varied. Activity What is the purpose of a contingency plan? Note five possible contingencies related to your organisation / department that may be required due to recent or potential changes. · · · · · Using one of the risks identified above, complete a contingency plan table using the template below: Company Name: Risk identified: Plan prepared by: Key stakeholders consulted: Strategy to minimise risk Staff responsible Due date Review date: Activity 3 Estimated Time 25 Minutes Objective To provide you with an opportunity to disseminate relevant details of the agreed budget/financial plans to team members. Activity Who might you need to inform about budget/financial plans in your organisation / department – include an organisational chart? What information would the respective people need to know?(minimum 500 words) Activity 4 Estimated Time 40 Minutes Objective To provide you with an opportunity to provide support to ensure that team members can competently perform required roles associated with the management of finances. Case study Activity BJS White Goods BJS is a medium-sized business which manufactures a range of white goods and household appliances. It comprises a factory located in the western suburbs of Melbourne with several offices for the administrative staff. There are 56 permanent staff, with casuals being employed in busy periods. Stock is sold in bulk to retailers, with Sales Clerks processing orders and sending out invoices for payment. Materials are ordered by the Purchasing Officer from a variety of suppliers locally, interstate and overseas. Personnel Support you would provide to assist with financial management Sales Clerk Manufacturing Manager Accounts Payable Officer Human Resources Officer Purchasing Officer As the business has grown, it has become apparent that a new role is required. Management have decided to create a Sales Coordinator role to oversee the team of Sales Clerks. This role will also administer petty cash, supervise the processing of invoices and purchase orders, supervise the banking and daily reconciliation, develop monthly sales reports and report against weekly and monthly sales targets. Use the following table to develop recommendations for the resources, information and support that will be needed once this new staff member commences work at BJS White Goods. Duties Specific organisational information, resources and support to be provided Management of Sales Clerks Invoicing Purchase Orders Banking Daily reconciliation Monthly sales reports Petty cash Reporting against sales targets After a successful round of advertising and recruitment, the General Manager at BJS White Goods has decided to hire Stacey Harrison as the new Sales Coordinator and she will be commencing on August 26th. Use the table below to outline how Stacey should be supported in relation to her new responsibilities for financial management: Activity By Whom Due Date What types of support does your organisation offer to team members in completing their required roles in regards to managing finances? Describe how you have provided this type of support to the team within the last 12 months. Why was this support needed? What resources or personnel did you draw on? What sort of training, coaching or mentoring did you provide? (minimum 250 words) Activity 5 Estimated Time 30 Minutes Objective To provide you with an opportunity to determine and access resources and systems to manage financial management processes within the work team. Activity Outline the following resources and systems, as they pertain to your organisation: · Hardware and software · Human, physical or financial resources · Record keeping systems (electronic and paper-based) · Specialist advice or support. Why are they needed? How do you access them? Is there any current discussion within your organisation to change any of these resources? What impact will that have? (minimum 500 words) Activity 6 Estimated Time 30 Minutes Objective To provide you with an opportunity to implement processes to monitor actual expenditure and to control costs across the work team. Activity Access the general ledger of your organisation and choose a month to analyse – where are most of your costs coming from and are they generating a viable return? – attach general ledger for that month and your analysis, describing what processes you have used to monitor the expenditure. What processes could you implement to control costs? ( minimum 500 words) Activity 7 Estimated Time 20 Minutes Objective To provide you with an opportunity to monitor expenditure and costs on an agreed cyclical basis to identify cost variations and expenditure overruns. Activity Create a list of all the areas of expenditures and costs within your department/team that you typically need to monitor each year. Have these changed much over the last three years? Note the quarter for which these expenditures and costs are traditionally at their highest value. Identify areas where expenditure has exceeded the budget in the past and why. ( minimum 300 words) Activity 8 Estimated Time 60 Minutes Objective To provide you with an opportunity to implement, monitor and modify contingency plans as required to maintain financial objectives. Activity Case Study What processes are involved in the monitoring of a contingency plan? What processes does your organisation use? Describe your role in the implementation of the contingency plans. (Minimum 300 words) Susie’s Sweet Shop Susie’s Sweet Shop is a small retail shop on a busy road in the outer eastern suburbs of Melbourne. Operating since 2004, it has a commercial kitchen at the rear in which most of the sweets are produced. Some sweets are also brought in from a supplier in the UK. It is staffed by a team of 4 which includes 2 customer service staff and 2 confectionary chefs. The business is owned by Susie herself and whilst she no longer works in the store, she handles all the financial management, business planning and marketing. Identify 3 contingencies that Susie should consider. · · · Recently her supplier in the UK has emailed her to let her know that all prices will be going up by 3\% next year. How should Susie plan for this? How should she implement her contingency plans? How will she know if her plan is successful? What modifications might be needed? (Minimum 200 words) Activity 9 Estimated Time 45 Minutes Objective To provide you with an opportunity to report on budget and expenditure in accordance with organisational protocols. Activity Outline the sources of data you might use for creating reports and give three examples of specific reports your organisation will create. – attach these. Choose a month and analyse the expenditure against the budget. Describe your findings by preparing a report in line with the reporting protocols of your organisation. Use charts, graphs or tables where possible. Activity 10 Estimated Time 20 Minutes Objective To provide you with an opportunity to collect and collate for analysis, data and information on the effectiveness of financial management processes within the work team. Activity What financial records does your organisation keep and what methods of storage/organisation does it use? Collect and collate data about the effectiveness of your financial management processes. What data can you use? Consult with relevant staff to seek feedback on the effectiveness of your organisation’s financial management processes – who did you ask? What was their feedback? Are these methods effective? How would you suggest they be improved? (minimum 300 words) Activity 11 Estimated Time 25 Minutes Objective To provide you with an opportunity to analyse data and information on the effectiveness of financial management processes within the work team and identify, document and recommend any improvements to existing processes. Activity Outline the following terms: · Earnings growth · Earnings stability · Return on equity. How might you determine your companys performance regarding the above? What processes could be improved? Provide a snapshot of your organisation against these three criteria. (minimum 500 words) Activity 12 Estimated Time 25 Minutes Objective To provide you with an opportunity to implement and monitor agreed improvements in line with financial objectives of the work team and the organisation. Activity What monitoring and reporting processes does your organisation use? How do you know if the implemented changes have been successful? Describe your involvement in this process over the last 12 months, outlining how you have implemented and monitored the agreed improvements. (minimum 250 words) Skills and Knowledge Activity Estimated Time 90-120 Minutes Objective To provide you with an opportunity to demonstrate your knowledge of the foundation skills, knowledge evidence and performance evidence. Activity Complete the following individually and attach your completed work to your workbook. The answers to the following questions will enable you to demonstrate your knowledge of: · Financial skills to work with and interpret budgets, ageing summaries, cash flow, petty cash, Goods and Services Tax (GST), and profit and loss statements · Communicate with relevant people to clarify budget/financial plans, negotiate changes and disseminate information · Prepare, implement and modify financial contingency plans · Monitor expenditure and control costs · Support and monitor team members · Report on budget and expenditure · Review and make recommendations for improvements to financial processes · Meet record keeping requirements for the Australian Taxation Office (ATO) and for auditing purposes · Reading skills · Writing skills · Oral communication skills · Numeracy skills · Navigate the world of work · Interact with others · Get the work done · Describe basic accounting principles · Identify and explain the relevant legislation and current requirements of the Australian Taxation Office, including the Goods and Services Tax (GST) · Explain the key requirements for financial record keeping and auditing · Describe the principles and techniques involved in managing: · budgeting · cash flows · electronic spreadsheets · GST · ledgers and financial statements · profit and loss statements. Answer the questions in as much detail as possible, considering your organisational requirements for each one. 1. As a project, for your organisation manage and monitor producing budget requirements with your team, include the following: · Evidence of your financial skills working with budgets and financial planning, including relevant principles and techniques as per the table below Principles and techniques Budgeting Cash flows Electronic spreadsheets GST Ledgers and financial statements Profit and loss statements · The key requirements of financial record keeping and auditing, relevant legislation and current requirements of the Australian Taxation Office · Evidence of working with and supporting your team and how you have disseminated relevant details to them · Produce a final budget(s) and financial plan which includes recommendations and contingency plans for presenting to the appropriate senior person(s) in your organisation. 2. Present and discuss your budget(s) and financial plan with the appropriate senior person(s), with the aim of clarifying, reviewing and making recommendations for improvements to financial management processes. (Minimum 1500 words analysis) Major Activity A Estimated Time 60-90 Minutes Objective To provide you with an opportunity to demonstrate your knowledge of the entire unit. Activity The attached 2014 budgeted cash flow figures from DL Services are to be used for this activity. Use the data in the income statement to complete the actual figures for DL Services for 2014. Examine the cash flows and analyse if this is sustainable for the business. Calculate the variances. Document any outstanding variances and identify possible explanations for these variances. What improvements would you make to help control these costs in 2015? Line item 2014 Budget $ 2014 Actuals $ \% Variance Cash sales 230000 Payments from debtors 250000 Interest received 2100 Payments to creditors -140000 Salaries -23000 Interest paid -4100 Operating expenses -22000 Proceeds from sale of assets 0 Purchase of vehicle 0 Purchase of shares -17000 Proceeds from call on shares 12000 Loan from Commonwealth Bank 0 Repayments of loan -14000 Payment of dividends -16000 Collected GST 16200 GST Paid -18400 GST settlement paid to ATO -2200 Net change in cash Income Statement 2014 Line item Debit $ Credit $ Cash sales 21000 Payments from debtors 215000 Interest received 2350 Payments to creditors 132000 Salaries 29700 Interest paid 6200 Operating expenses 37000 Proceeds from sale of assets 18200 Purchase of vehicle 37000 Purchase of shares 17000 Proceeds from call on shares 9000 Loan from Commonwealth Bank 150000 Repayments of loan 14000 Payment of dividends 37000 Collected GST 16000 GST Paid 14000 GST settlement paid to ATO 2000 Net change in cash Is the cash source in 2014 sustainable? Explain your reasons. What correct measures would you implement for 2015? Who could you speak to within the organization to clarify the budget and financial plans? Who might you need to negotiate with? What would be the key steps involved in implementing these corrective actions? Who would you communicate this to? What resources and systems would you use and how could you access these? What data would you analyse to see if your changes were effective? Where would you get this data? Mention key personnel and reports you could use. What contingencies should be considered for 2015? Major Activity B Estimated Time 60-90 Minutes Objective To provide you with an opportunity to demonstrate your knowledge of the entire unit. Activity This is a major activity Attach your completed answers to the workbook. You must individually, answer the following questions in full to show your competency of each element: 1. Plan financial management approaches 2. Implement financial management approaches 3. Monitor and control finances 4. Review and evaluate financial management processes 1. Create a draft contingency plan for your financial management system. 2. Communicate to your team members the relevant details of current budget/financial plans for carrying out work tasks. If you need to negotiate further changes to the budget/plans, ensure this is done with the relevant person(s)? How would you support your team to perform their financial roles? 3. For your organisation’s financial planning requirements produce the following: · A flow chart to show how you review and evaluate financial management processes · A mind map to outline the planning approaches for financial management. No Need To Do this question 4. Provide information and evidence of monitoring processes that you use at your place or work, to ensure finances and budget are meeting their targets? (Minimum 2000 words of analysis) MSA Training and Professional Development Phone: 03 9905 3180 Room 159, 21 Chancellors Walk Website: msatraining.edu.au Monash University Clayton, Vic 3800 BSBFIM501 Manage budgets and financial plans V3.2 27.05.20 Page | 64 BSBFIM501 Manage budgets and financial plans Learner Guide BSBFIM501 Manage budgets and financial plans Table of Contents Table of Contents 3 Unit of Competency 6 Performance Criteria 7 Foundation Skills 8 Assessment Requirements 9 Housekeeping Items 10 Objectives 10 1. Plan financial management approaches 11 Basic principles of accounting 12 1.1 – Access budget/financial plans for the work team 13 1.2 – Clarify budget/financial plans with relevant personnel within the organisation to ensure that documented outcomes are achievable, accurate and comprehensible 13 1.3 – Negotiate any changes required to be made to budget/financial plans with relevant personnel within the organisation 13 Budget/financial plans 13 Long-term planning 14 Medium-term planning 15 Option appraisal 15 Budgeting 16 Budget structure 18 Computer-based budget management 18 Closing accounts 19 Managing joint budgets 20 Activity 1 21 1.4 – Prepare contingency plans in the event that initial plans need to be varied 22 Contingency plans 22 Activity 2 24 2. Implement financial management approaches 25 2.1 – Disseminate relevant details of the agreed budget/financial plans to team members 26 Communication 26 Who is informed? 26 Traditional ways to inform about budget allocations 28 Goods and services tax (GST) 28 Activity 3 29 2.2 – Provide support to ensure that team members can competently perform required roles associated with the management of finances 30 Support for team members 30 Activity 4 32 2.3 – Determine and access resources and systems to manage financial management processes within the work team 33 Hardware and software 33 Human, physical or financial resources 33 Record keeping systems (electronic and paper-based) 35 Specialist advice or support 36 Activity 5 37 3. Monitor and control finances 38 3.1 – Implement processes to monitor actual expenditure and to control costs across the work team 39 Ledgers and financial statements 39 Activity 6 41 3.2 – Monitor expenditure and costs on an agreed cyclical basis to identify cost variations and expenditure overruns 42 Organisational record keeping and auditing 42 Record keeping requirements of Australian Taxation Office 42 Minimum tax-keeping records 43 Activity 7 45 3.3 – Implement, monitor and modify contingency plans as required to maintain financial objectives 46 Implementing, monitoring and modifying contingency plans 46 Activity 8 47 3.4 – Report on budget and expenditure in accordance with organisational protocols 48 The need for reports 48 Report components 48 Sources of information 50 Forward reports 51 Activity 9 52 4. Review and evaluate financial management processes 53 4.1 – Collect and collate for analysis, data and information on the effectiveness of financial management processes within the work team 54 Cash flows 54 Profit and loss statements 55 Petty cash 55 Activity 10 56 4.2 – Analyse data and information on the effectiveness of financial management processes within the work team and identify, document and recommend any improvements to existing processes 57 Identify, document and recommend improvements 57 58 Activity 11 59 4.3 – Implement and monitor agreed improvements in line with financial objectives of the work team and the organisation 60 Monitoring and reporting budgets 60 Forecasting expenditure trends 61 Activity 12 62 Skills and Knowledge Activity 63 Major Activity – An opportunity to revise the unit 64 Unit of Competency Application This unit describes the skills and knowledge required to undertake financial management within a work team in an organisation. It includes planning and implementing financial management approaches, supporting team members whose role involves aspects of financial operations, monitoring and controlling finances and reviewing and evaluating effectiveness of financial management processes. It applies to managers in a wide range of organisations and sectors who have responsibility for ensuring that work team financial resources are used effectively and are managed in line with financial objectives of the team and organisation. No licensing, legislative or certification requirements apply to this unit at the time of publication. Unit Sector Finance – Financial Management Performance Criteria Element Elements describe the essential outcomes. Performance Criteria Performance criteria describe the performance needed to demonstrate achievement of the element. 1. Plan financial management approaches 1.1 Access budget/financial plans for the work team 1.2 Clarify budget/financial plans with relevant personnel within the organisation to ensure that documented outcomes are achievable, accurate and comprehensible 1.3 Negotiate any changes required to be made to budget/financial plans with relevant personnel within the organisation 1.4 Prepare contingency plans in the event that initial plans need to be varied 2. Implement financial management approaches 2.1 Disseminate relevant details of the agreed budget/financial plans to team members 2.2 Provide support to ensure that team members can competently perform required roles associated with the management of finances 2.3 Determine and access resources and systems to manage financial management processes within the work team 3. Monitor and control finances 3.1 Implement processes to monitor actual expenditure and to control costs across the work team 3.2 Monitor expenditure and costs on an agreed cyclical basis to identify cost variations and expenditure overruns 3.3 Implement, monitor and modify contingency plans as required to maintain financial objectives 3.4 Report on budget and expenditure in accordance with organisational protocols 4. Review and evaluate financial management processes 4.1 Collect and collate for analysis, data and information on the effectiveness of financial management processes within the work team 4.2 Analyse data and information on the effectiveness of financial management processes within the work team and identify, document and recommend any improvements to existing processes 4.3 Implement and monitor agreed improvements in line with financial objectives of the work team and the organisation Foundation Skills This section describes language, literacy, numeracy and employment skills incorporated in the performance criteria that are required for competent performance. Skill Performance Criteria Description Reading 1.1, 1.2, 2.1, 2.3, 3.1-3.4, 4.2, 4.3 · Interprets and analyses information to determine activities required Writing 1.1, 1.4, 4.1-4.3 · Records information in correct forms and prepares materials which convey detailed and factual content in accordance with internal procedures Oral Communication 1.2, 1.3, 2.1-2.3 · Presents information about financial issues and requirements to a range of audiences using structure and language to suit the audience · Uses active listening and questioning to clarify information and to confirm understanding Numeracy 1.1-1.3, 2.1-2.3, 3.1-3.4, 4.1-4.3 · Uses a wide range of mathematical calculations to analyse numeric information in budgets or financial plans Navigate the world of work 2.2, 3.3, 3.4, 4.3 · Recognises, understands and adheres to organisational requirements in undertaking own work Interact with others 1.2, 1.3, 2.1, 2.2, 3.1, 2.3, 4.2, 4.3 · Uses a range of strategies to connect, collaborate and cooperate with other work colleagues in activities requiring collective effort and diverse skills and knowledge Get the work done 1.1, 1.4, 2.3, 3.1-3.4, 4.1-4.3 · Uses logical processes in planning, implementing and evaluating complex tasks and developing alternative strategies in achieving goals and timelines · Uses a range of digital technologies to access, filter, compile, integrate and logically present complex information from multiple sources Assessment Requirements Performance Evidence Evidence of the ability to: · Use financial skills to work with and interpret budgets, ageing summaries, cash flow, petty cash, Goods and Services Tax (GST), and profit and loss statements · Communicate with relevant people to clarify budget/financial plans, negotiate changes and disseminate information · Prepare, implement and modify financial contingency plans · Monitor expenditure and control costs · Support and monitor team members · Report on budget and expenditure · Review and make recommendations for improvements to financial processes · Meet record keeping requirements for the Australian Taxation Office (ATO) and for auditing purposes. Knowledge Evidence To complete the unit requirements safely and effectively, the individual must: · Describe basic accounting principles · Identify and explain the relevant legislation and current requirements of the Australian Taxation Office, including the Goods and Services Tax (GST) · Explain the key requirements for financial record keeping and auditing · Describe the principles and techniques involved in managing: · budgeting · cash flows · electronic spreadsheets · GST · ledgers and financial statements · profit and loss statements. Assessment Conditions Assessment must be conducted in a safe environment where evidence gathered demonstrates consistent performance of typical activities experienced in the financial management field of work and include access to: · Resources and documentation used in the workplace · Workplace policies and procedures · Workplace budgets and financial plans · Business technology · Case studies and, where available, real situations. Assessors must satisfy NVR/AQTF assessor requirements. Links Companion volumes available from the IBSA website: http://www.ibsa.org.au/companion_volumes Housekeeping Items Your trainer will inform you of the following: · Where the toilets and fire exits are located, what the emergency procedures are and where the breakout and refreshment areas are. · Any rules, for example asking that all mobile phones are set to silent and of any security issues they need to be aware of. · What times the breaks will be held and what the smoking policy is. · That this is an interactive course and you should ask questions. · That to get the most out of this workshop, we must all work together, listen to each other, explore new ideas, and make mistakes. After all, that’s how we learn. · Ground rules for participation: · Smile · Support and encourage other participants · When someone is contributing everyone else is quiet · Be patient with others who may not be grasping the ideas · Be on time · Focus discussion on the topic · Speak to the trainer if you have any concerns Objectives · Discover how to plan financial management approaches · Know how to implement financial management approaches · Learn how to monitor and control finances · Understand how to review and evaluate financial management processes Gain the skills and knowledge required for this unit. 1. Plan financial management approaches 1.1 Access budget/financial plans for the work team 1.2 Clarify budget/financial plans with relevant personnel within the organisation to ensure that documented outcomes are achievable, accurate and comprehensible 1.3 Negotiate any changes required to be made to budget/financial plans with relevant personnel within the organisation 1.4 Prepare contingency plans in the event that initial plans need to be varied Basic principles of accounting When dealing with accounts, it is essential to know the basic principles – known as generally accepted accounting principles. They are as follows: Revenue Revenue is made when a sale is made. This is when legal ownership of the goods passes from the seller to the buyer. It is not simply when you collect cash for something. Expense This is when a business uses goods or services i.e. the opposite of revenue. Expenses become active as soon as you receive the goods or services, not when you actually pay for them. Matching This is when you match revenue to expenses – only counting expenses on the day that you get revenue for them, not when you initially buy them. So if, you buy stock in bulk, only count expenses when you sell individual items. Cost Costs of items will only be measured at their value for the time you initially bought them – you should not adjust them in the accounting system to reflect current market values. Objectivity All data in the accounting system should be objective, factual and verifiable. Continuity assumption Accounts should assume that the business will continue to operate in the future; otherwise, none of the assets have any definite value. Unit-of-measure assumption The domestic currency should be used by a business in its accounting system, regardless of inflation and deflation effects on that currencys purchasing power. Separate entity assumption The business is a separate thing from its owner; a partnership is also a separate entity to the partners who own the business. Therefore, the financial records of the business and those of the owners/partnership are entirely separate. 1.1 – Access budget/financial plans for the work team 1.2 – Clarify budget/financial plans with relevant personnel within the organisation to ensure that documented outcomes are achievable, accurate and comprehensible 1.3 – Negotiate any changes required to be made to budget/financial plans with relevant personnel within the organisation Budget/financial plans Budget/ financial plans are an essential part of any business – without them, it is impossible to plan and monitor income and expenditure. They can include any of the following aspects: Cash flow projections Long-term budgets/plans Operational plans Short-term budgets/plans Spreadsheet-based financial projections Targets or key performance indicators for production, productivity, wastage, sales, income and expenditure The types of people that budget/financial plans must be clarified with include the following personnel: Financial managers, accountants or financial controllers Supervisors, other frontline managers Financial plans need to achieve the following: Analyse the past Compare customer demand to company spending Identify the sources of cash flow Compare the financial performance against the performance indicators set at the start of the financial year Analyse audit results and accountant reports for ways to improve Plan for the future Identify future cash flow sources and their potential impact Analyse organisational policies and their impact of organisational operations Look at spending trends and their potential impact Implement new strategies for the future Analyse organisational policies and create new ones Account for existing strategies when financial planning Examine existing staff and their skill levels – determine whether goals can be achieved at their current level Assess all available options Get the opinions of stakeholders in decisions Set annual budgets Arrange plans to set a budget Budgets should be centred around financial plans Involve budget managers in setting budgets Ensure work meets budgeting organisational standards Plan for contingencies Set budgets for certain departments of the organisation Provide a structure to budgets Monitor work to ensure it complies with budgets Take long and short-term arrangements into account Long-term planning Looking long-term is essential with financial planning and it should be integrated into the overall strategy of the organisation. While short-term planning is also required, doing only this will result in a lack of security and financial problems in the future. The benefits of long-term financial plans are: You can estimate the funding required Budget allocations increase in accuracy Trends in demand can be identified Change is easier to implement Financial consequence of major programs/changes can be planned Change can be implemented more easily You can forecast how the market is likely to change and account for this You can plan for human resources changes Staffing needs and resources can be calculated and planned Medium-term planning This is the go-between for short and long-term planning. For this stage, you need to: Identify likely sources of cash flow Create a cash flow forecast statement, identifying the major changes of income sources Think what things may occur based on what you know will happen Identify future spending levels Consult with stakeholders for their opinions on what the major changes could be Analyse the impact of proposed changes of future finances This approach will do the following: Helps management deal with cost cutting, budget cuts, resource allocation and resource levels Allow changes to be more easily planned rather than being impulsive reactions Helps managers plan for the future – if they know their budget and budget forecasts, they can assess whether change is viable Option appraisal The idea of this is to make decisions based on the advantages and disadvantages of the options available. It is a useful tool for allocating limited resources; for example, if budget is limited, you can decide the most effective part of the organisation for it to be invested in. Budgeting When budgeting, there are various people who play a role in managing them. Management They are accountable for their own budgets. However, their accountability depends on their level in the organisation. Within budgets, the following should be made clear: The difference between managers and financial support staff Who is responsible for setting and analysing each budget The delegation of roles (and their levels) Budgets must be built upon current pricing levels, with price changes and inflation allowed and accounted for. This involves: Anticipating the type and extent of possible price changes, allowing for if they become a reality Contingency planning for price changes Consultation with staff and experts to determine accountability and allowances When changes in accountability are possible, you must make sure: Everyone is aware of them and their impact Decisions are only made by the top-level people in the budgeting process Accountability is not with the original budget holders anymore Budget holders These people contribute to setting budgets and provide the information that is used to calculating exact figures. They are responsible for: Identifying trends and determining areas of change for budgets Dealing with budget reports Determining corrective actions for problems identified in budget reports (and implementing them) Reporting any issues which cannot be resolved to senior managers Analysing data with support staff Providing expertise for support staff Finance and support staff Their role is to: Set budgets in collaboration with budget holders Implement monitoring of: Budgets Reporting processes Timeframes of processing changes Reporting procedures Analyse financial data Examine data that impacts budget holders Provide advice to budget holders Be accountable for the quality of financial data they create Implement monitoring and reporting processes for financial decisions Be accountable for the quality and relevance of financial data used for budget monitoring Budget structure The overall budget of an organisation, as previously discussed, should be divided into separate budget for different departments etc. However, these should be grouped together so that related budgets are under the responsibility of one person. It should also be clear who is responsible and accountable for each budget, to avoid confusion. Computer-based budget management In the modern age, most systems in an organisation have become computerised – this includes budget management. A budget tracking system allows monitoring/recording of: Organisational spending Budgets Organisational income Debtor and creditor records Payment processing Budget management Contract management Financial analysis The system you use needs to do the following: Work in collaboration with the other information systems you use Allow comparison of accounts (automatically) Maintain and update budget management information Transfer information between budgets Enable easy billing Facilitate financial analysis Record actual income and outgoings Record expenditure commitments over time Make creditor payments easy Record costs individually Allow for easy forecasting Provide required reports Export data to spreadsheets Facilitate easy sharing of data Closing accounts This involves having a set point where all data into accounts is frozen and recorded, so it can be analysed accurately over a set time period. It allows decisions and performance measurement to be made from a set point. Having this closure allows decisions to be made on: Whether under/over-spends can be carried forward How budget managers can examine results If any under-spend can be given back If over-spend needs to be given back (at a later date) Whether performance variances between actual and desired performance can be assigned to future projects When dealing with variances: Have your approach set out in writing at the beginning of each cycle, to ensure everyone is clear about expectations Ensure that the approach aligns with the overall financial strategies and approaches Keep the approach in line with responsibility levels People feel in control of dealings with variances Ensure that everyone is aware of the levels of variance that will instigate an investigation Make sure that investigations are done by those external to the department they concern Managing joint budgets These are also known as pooled budgets. Make sure that: Contribution levels of managers is clear The acceptable level of variance is set The methods of dealing with variances are clear to all staff People involved in a joint budget know the management strategy for it Reporting responsibilities are allocated Accountabilities are assigned Management responsibilities are outlined Activity 1 1.4 – Prepare contingency plans in the event that initial plans need to be varied Contingency plans Contingency plans need to be present in budgets and budget forecasts, in the event that things do not go to plan and the initial plan needs to be altered. There can be any number of unexpected variances, such as your main supplier going bankrupt, power cuts, data corruption etc. Examples of contingency plans include: Contracting out or outsourcing human resources and other functions or tasks Diversification of outcomes Finding cheaper or lower quality raw materials and consumables Increasing sales or production Recycling and re-using Rental, hire purchase or alternative means of procurement of required materials, equipment and stock Restructuring of organisation to reduce labour costs Risk identification, assessment and management processes Seeking further funding Strategies for reducing costs, wastage, stock or consumables Succession planning Every organisation will have contingency plans in place for various situations. If a workplace event doesn’t go according to plan – or if another solution is required – than a contingency plan will be required. There should be risk management plans and contingency plans in place for almost anything that can go wrong. A contingency plan does not mean that you expect things to go wrong but rather are planning ahead for all eventualities, which is incredibly sensible in the business world. Contingency plans can help to save time, money and a great deal of stress. A contingency plan may be put in place from day one or it may be something that needs to be implemented following a situation that did not go according to plan first time round. A contingency plan doesn’t necessarily have to focus on risk management or health and safety issues (although both are very important); it can include finding alternative resources or gaining further funding, for example. A contingency plan does not necessarily mean your current plan has not worked; it just might need certain alterations. Contingency plans should be part of the organisational policies and procedures and be seen as flexible and adaptable as every situation will be different. Contingency plans may need to cover situations such as: Broken/malfunctioning equipment Staff quitting or needing time off due to illness, holidays etc Health and safety issues Natural disasters (i.e. floods, earthquake etc) Theft, fraud or other security issues Contingency plans should be flexible enough that last minute changes can be implemented. They should provide an opportunity for action to take place so that an immediate solution can be found and utilised. Contingency plans may need to include the following information: The situation needing action Personnel to be involved Contact numbers for personnel, resources etc. Legislative, organisational and ethical requirements to consider How it will impact on the organisation Costs that may occur – including how to resolve the issue Solutions – these can be as many as necessary for different outcomes How the solution will be implemented and by who A deadline Activity 2 2. Implement financial management approaches 2.1 Disseminate relevant details of the agreed budget/financial plans to team members 2.2 Provide support to ensure that team members can competently perform required roles associated with the management of finances 2.3 Determine and access resources and systems to manage financial management processes within the work team 2.1 – Disseminate relevant details of the agreed budget/financial plans to team members It is important that all relevant personnel receive relevant details about the agreed budget/financial plans. Communication It is vital that price changes and pricing policies are communicated to staff members to ensure they are all on the same page and can work cohesively. Most of this communication will be verbal; however written communication can be useful for the purposes of: Ensuring everyone gets the same message Ensuring there is a record of communication People can refer to the contents of the communication later (if need be) Pricing policies and changes are likely to be communicated in stores on a vertical level – the manager should hold a staff meeting to inform employees of this information. When informing staff, you need to bear the following in mind: Be clear and concise – dont leave room for interpretation Check they understand – make sure your instructions have been understood and provide clarification Consider cultural differences – use suitable languages and avoid slang Who is informed? After the budget/financial plans have been agreed, you will now need to divulge the relevant details to team members. People who may be informed include: Senior management – they will need to see the full details of the budget/financial plans (as they are responsible for it). The accounts department – so that they can enter the figures into appropriate software and create the necessary budget lines, etc. Budget committee – where the (usually large) establishment has a budget committee, they will be responsible for ongoing monitoring of income and revenue against projections. Their role may also extend beyond this overseeing role, into proposals for increasing revenue streams and limiting/reducing expenditures, as appropriate. Managers – middle level management (people such as heads of department) commonly have daily control over the revenue raising areas of the property and power over relevant areas of expenditure. It is predominantly these individuals who are responsible for generating the bulk of the income, and whose decisions have immense impact on the profitability and viability of the premises; while they operate under direction from senior management, they make numerous day-to-day and on-the-spot decisions that have the potential to greatly impact on budget figures. Establishment staff – the head of department usually explains the latest budget allocations to departmental staff. This news is traditionally passed on verbally in a formal departmental meeting – as well as written information being distributed. The head of department commonly sets the scene by explaining the general budgetary context and the trading situation the establishment finds itself in – general statements are normally used to describe the current situation as it compares to the last period. Next, further general statements are made about what management expects from the department (and by association, the staff); it is not common to pass on exact dollar figures to the staff as this is seen as material that is commercial in confidence. Staff may be told that there is an expectation that, for example, they are expected to increase revenue in the upcoming 12-month period by an average of 10\% over the previous year: this indicates management requirements without disclosing the actual figures involved. Staff may be informed, for example, that there is an expectation for expenses to be reduced by five per cent. It is always important to convey this sort of news within a positive context, wherever possible, to reduce the possibility of staff disillusionment and the likelihood that staff may misinterpret economic imperatives as signals that their job is in jeopardy. When staff pick up this sort of message they commonly start looking for employment elsewhere because they can see the writing on the wall. Traditional ways to inform about budget allocations Departmental meetings where information is delivered verbally and face-to-face (as described above) All staff meetings where a series of overhead projections (or a PowerPoint presentation) is used Internal memos or emails sent to staff Paper-based documentation that outlines, without being too specific, the requirements that have been decided on. Certainly, where staff are informed and involved (wherever that is possible), it creates a situation that will lead to greater work satisfaction, higher levels of productivity and enhanced staff commitment to organisational goals. Also, ensure that team members are made aware of relevant legislation, including: Goods and services tax (GST) This is a tax of ten per cent on most goods, services and other items sold or consumed in Australia. In terms of pricing, this is usually factored into the price of sales to customers; this business then claims credits for GST included in the price of business purchases. All businesses that reach the registration threshold for GST will only register for this once. Businesses must fill in an activity statement to report and pay the GST the business has brought in and claim GST credits. Reporting and payments can be made either monthly, quarterly or annually – most businesses choose to pay GST quarterly. GSP can be calculated in one of two ways: Derived from accounts methods – using the GST amounts from business records. This method is easier if you have recorded the GST amounts for sales and purchases separately. Calculated sheet method – using a step-by-step worksheet For both methods, you need to keep valid tax invoices of transactions to support your claims. If something happens that requires adjustment of a previous activity statement (e.g. returned goods/cancellation of sale), you will need to lodge a revised activity statement with the Australian Taxation Office Full details and a calculation worksheet for GST can be found at www.ato.gov.au. Activity 3 2.2 – Provide support to ensure that team members can competently perform required roles associated with the management of finances Support for team members Team members will need support in the workplace, to adequately perform their roles and to facilitate improvement. The types of support that can be offered include: Access to specialist advice – an advice service or someone on hand to answer any specialist questions that team members will save time and ensure that roles are performed in a uniform manner. Documentation of procedures – keeping records of procedures is a useful tool in retrospectively identifying problems or issues. The documentation process also makes you more aware of what you are doing, so you are less likely to become casual in your role/make errors. Help desk or identified experts within the organisation – having specific personnel to use as a first port of call for any queries will save time and make the problem solving process more efficient. Information briefings or sessions – having meetings where finance management is explicitly discussed is a great way to clarify the roles of team members and provides an opportunity for staff to raise any issues they might have. Intranet-based information – having an online resource for all employees to access at anytime is extremely useful. It is a more efficient way of explaining processes and can provide comprehensive guides to certain roles and situations. Training including mentoring, coaching and shadowing – having tailored demonstration, monitoring and feedback on roles will ensure that each employee is performing their role to the best of their abilities and in line with organisational policies. The required roles which team members may need support with include: Arranging for use of corporate credit cards Banking Debt collection Ensuring security, accuracy and currency of financial operations Invoicing clients, customers and consumers Maintaining journals, ledgers and other record keeping systems Maintaining petty cash system Purchasing and procurement Wages and salaries payments and record keeping Activity 4 2.3 – Determine and access resources and systems to manage financial management processes within the work team The resources and systems needed to manage financial management processes within the work team may include: Hardware and software Human, physical or financial resources Record keeping systems (electronic and paper-based) Specialist advice or support Hardware and software The majority of businesses in the developed world now use some form of computerisation – with financial management, this offers many advantages. You will need to determine the type of hardware – such as computers and necessary accessories – that will fulfil the minimum requirements of financial management software. The types of software you will need for financial management will include: A universal ledger – covering your general ledger, accounts payable, accounts receivable, fixed assets, project accounting and other financial reporting requirements End to end spend management program – to allow the control of purchasing activity and to organise it in one document Budgeting, planning and forecasting program Reporting program – to analyse the efficiency of the business processes Process and control automation program – to allow all operations to be managed and organised into an auditable format Human, physical or financial resources Human resources This includes all of the skill-sets that the business already has within its personnel. They need to be sufficient to meet the needs of business in achieving its strategy – if they arent, can staff be trained efficiently, or do new personnel need to be acquired? Existing resources may include: Amount of staff in each role (take into account location, grade, experience, qualifications, pay) Rate of staff loss Training standards for key roles Intangibles e.g. morale, business culture, work relationships Changes to resources may be needed when strategies change. Consider: What the change of strategy is e.g. change of location, extra locations, new products/product lines The human resources required for these changes Sources of fulfilling the human resource requirements Physical resources These include the following facilities: Production facilities – location, maintenance requirements, production processes, efficiency of facilities for meeting business requirements Marketing facilities – distribution channels and marketing management process Information technology (IT) – what programs and equipment is used? How is it integrated with customers and suppliers? Financial resources This refers to the ability of a business to fund its chosen strategies – it includes the existing funds, and the ability to source new funds. Existing funds include: Cash balances Loans Bank overdraft Shareholders capital Capital invested in the business e.g. stocks, debtors Creditors e.g. suppliers, government New funds may depend on: The reputation and strength of the business and its management team Relationships with existing investors/lenders The attractiveness of the market your business deals with (is it appealing to investors) Listing on a quoted Stock Exchange Record keeping systems (electronic and paper-based) Businesses will need accurate and efficient record keeping systems to allow them to collect revenue, pay employees and suppliers, and pay taxes in a timely manner and using the correct processes. Paper-based record keeping Also known as manual record keeping, this involves keeping a paper-based journal of transactions for each financial year. It is divided into the following types of sections: Receipts Payments Wages and superannuation Bank reconciliation Inventory This system requires a cash accounting approach, where you record revenue and expenses when transactions actually occur – so, for example, when you receive the money as opposed to when you send the invoice. Electronic record keeping These are an efficient way of maintaining financial records, providing a comprehensive way of managing all accounts under one program and giving the option of using accrual accounting (recording revenue and expenses when they are incurred) – this means a sale is recording when an invoice is created and sent as opposed to when you receive the payment from the client. Computer-based accounting programs can create the following: Orders Invoices Aged debtor reports Financial statements Employee pay records Inventory reports Some programs have the ability to send (via direct email): Invoices to clients Orders to suppliers BAS returns to the Australian Taxation Office Others can also produce financial forecasts and allow you to monitor business performance. Whichever system you use, you need to make sure it is compatible with the systems of your book-keeper and accountant. Also, consider the costs of keeping the software up-to-date and any training costs for staff to use it. Specialist advice or support This advice/support can be internal or external to the company – examples include: Accountants Book-keepers Finance seminars Mentors The areas they advise on are those which require specialist and technical knowledge. Trying to manage finances of a business without the proper information is a huge risk and can lead to many problems down the line. While it may seem like a high initial cost for advice, in the long-term it should save you far more than it costs you. Activity 5 3. Monitor and control finances 3.1 Implement processes to monitor actual expenditure and to control costs across the work team 3.2 Monitor expenditure and costs on an agreed cyclical basis to identify cost variations and expenditure overruns 3.3 Implement, monitor and modify contingency plans as required to maintain financial objectives 3.4 Report on budget and expenditure in accordance with organisational protocols 3.1 – Implement processes to monitor actual expenditure and to control costs across the work team The processes to monitor actual expenditure and to control costs across the work team include the reporting of: Assets Consumables Equipment Expenditure Income Stock Wastage Ledgers and financial statements A general ledger is the main accounting record of a company – it contains a complete record of financial transactions over the entire life of a company. It is used to prepare financial statements and includes the following accounts: Assets Liabilities Owners equity Revenues Expenses Generally, businesses employ a double-entry book-keeping method – each financial transaction is posted twice (as a credit and a debit). Therefore, the total of all debits is equal to the total of all credits. Balance sheet ledger accounts These record each asset, liability and equity component of the financial position statement. For example a receivable ledger account may look something like this: Receivable account Debit $ Credit $ Balance b/d 1 250 Cash 3 250 Sales 2 750 Balance c/d 4 750 1000 1000 Income statement ledger accounts These record incomes and expenditures of businesses; for example, the ledger may look something like this: Gas expense account Debit $ Credit $ Cash 1 500 Income statement 2 500 500 500 Activity 6 3.2 – Monitor expenditure and costs on an agreed cyclical basis to identify cost variations and expenditure overruns Organisational record keeping and auditing The Australian government will review your financial affairs each year in a tax or superannuation review to check you: Have declared all the assessable income you receive Are entitled to the deductions and tax offsets you have claimed on your tax return Have met all your regulatory obligations With regards to employees the following are required by all businesses: Registering for pay as you go (PAYG) withholding when they take on staff for the first time Registering for GST when their turnover exceeds the threshold Making superannuation payments for their employees The types of audits that may be undertaken include: Reviewing compliance with registration, lodgement and payment obligations Specific-issue audits or reviews Comprehensive audits or reviews Transfer pricing reviews and audits for businesses with international operations Pre-lodgement compliance reviews for larger businesses Record keeping requirements of Australian Taxation Office You need to be aware of and comply with the record-keeping requirements of the Australian Taxation Office. When keeping a self-managed super fund (SMSF), you need to keep accurate tax and super funds – not only is this a legal requirement, it will also help you manage your money efficiently. You should keep records of all investment decisions, including: Why a particular investment was chosen Whether all trustees agreed with the decision This allows for security of individuals, should other trustees take action against you if an investment fails – if they have signed the minutes of the meeting when the decision was made, this is proof that they agreed with you. For the purposes of the SMSF auditor, the following records need to be kept for at least five years: Accurate and accessible accounting records that explain the transactions and financial position of your SMSF An annual operating statement and an annual statement of your SMSF’s financial position Copies of all SMSF annual returns lodged Copies of any other statements you are required to lodge with us or provide to other super funds Also, the following records need to be kept for a minimum of ten years: Minutes of trustee meetings and decisions Records of all changes of trustees Trustee declarations recognising the obligations and responsibilities for any trustee, or director of a corporate trustee, appointed after 30 June 2007 Members’ written consent to be appointed as trustees Copies of all reports given to members Documented decisions about storage of collectables and personal-use assets Minimum tax-keeping records Recording every sale The date it occurred The amount that was exchanged Retain a detailed record for at least a month Keep a months worth (minimum) of records of individual transactions – this helps verify the summary records are accurate. Retain a summary record Cash registers or point of sales systems: maintaining detailed daily records or tapes (these can be discarded after one month) reconciliations to account for cash drawings and expenses paid in cash retaining reconciliation records for a statutory period of five years retaining rolls of tape for five years if reconciliations are not undertaken Receipt or invoice books (for business not using electronic record-keeping systems): conduct a reconciliation between your bank statement and receipt book at least on a monthly basis businesses that conduct a daily reconciliation of sales may discard individual sales records (receipts) after one month If you do not perform a daily sales reconciliation, you must keep individual sales records for five years Bank records and receipt books must be retained for five years If it is not practicable to record every sale Sometimes, cash registers cannot be used and it is impossible to record individual transactions – this can be for businesses that deal with high volume/low value transactions and do not operate from a permanent residence e.g. market stall holders. In this case: Summary records must be made at regularly defined intervals – for example, at the end of each day or shift Reconciliations must take into consideration any cash earned that a business uses for other purposes and should show total cash at day end plus drawings and expenses less the opening float amount Activity 7 3.3 – Implement, monitor and modify contingency plans as required to maintain financial objectives Implementing, monitoring and modifying contingency plans As outlined in 1.4, examples of contingency plans include: Contracting out or outsourcing human resources and other functions or tasks Diversification of outcomes Finding cheaper or lower quality raw materials and consumables Increasing sales or production Recycling and re-using Rental, hire purchase or alternative means of procurement of required materials, equipment and stock Restructuring of organisation to reduce labour costs Risk identification, assessment and management processes Seeking further funding Strategies for reducing costs, wastage, stock or consumables Succession planning Once you have developed the contingency plan, it needs to be implemented, monitored and modified (where necessary). As a business changes, the plans will need to be reviewed and updated to make sure that any new potential problems are accounted for. To maintain a contingency plan, you must do the following: Communicate the details of it to everyone in the organisation Tell people their roles and responsibilities in the contingency plan Provide training (if necessary) for people to perform their roles Perform training drills periodically (to test the contingency plan) Use training drills to identify and implement any necessary changes Review the plan any time there are personnel, operational and technological changes Distribute amended plans throughout the company (discard the old plan) Make and store copies off-site that can be easily accessed if need be Perform audits on the plan from time to time. They should: Reassess business risks Compare actual performance levels to desired performance levels in the contingency plan Identify changes and implement them, if necessary Activity 8 3.4 – Report on budget and expenditure in accordance with organisational protocols In line with the requirements of the Australian Taxation Office, you must report on budget and expenditure. Reporting may include data from: Bank statements Credit card statements Financial reports Invoices and receipts Ledgers and journals Logs Petty cash records Spreadsheet-based records The need for reports Operational reports can be seen as providing: A communication link between management and staff – in an organisation where, say, the business operates every hour of every day, no-one can be there all the time; so, these reports provide one way of making sure everyone gets vital information A historical database which builds into a useful management tool that can help future predictions Data to managers which can inform and assess operational performance against budgets Report components A typical report probably does not exist as their format and content varies widely, but reports will contain certain basic elements: A statement of purpose – identifying the type of report and its intention so that readers are quite clear about what this specific report is all about Subject topic – a note explaining the exact focus of the document The nature of the contributory evidence – explanation or verification of sources, information and the period used as the basis for the report A conclusion – a plan of action formulated from the evidence provided in the report Identification as to who generated the report, together with its intended target audience (by individual names or positions/titles) Authorisation – an indication as to who has authorised the report Date of the report – reports can be regular in nature (every month) or they can be ad hoc to respond to a particular issue The precise types of reports will vary from venue to venue (as will the names of the reports); also, how venues calculate their version of them may differ (some may include certain aspects/figures that others dont). Photocopies of original source documents may accompany the report to validate the figures. Accompanying explanatory notes may also be attached. Sample reports include: Sales summaries – these can provide total figures (units and/or dollars) for a given period as well as trends by day/hour, together with brand/product/item trends. Some reports may also provide a sales by staff member breakdown which reflects the selling records of each team member Daily, weekly or monthly transactions – outlining and providing an overview of the statistics, progress and acceptability of the operation of the nominated department or revenue centre; while profitability will be very important, turnover may also be a major concern Department expenditures – this report will focus exclusively on expenditure and is likely to highlight cost of goods sold figures, wages and overheads Commission earnings – in some properties, especially those in high tourist areas or those who belong to a chain, the income from earnings may be a critical key performance indicator (KPI). This may not be so much as a revenue earner, but more as an indicator of how well you are promoting other allied agencies/properties. This report will highlight not only the revenue earned but also the commissions paid out, and a breakdown of both commission income and expenditure (such as travel agents, airlines, cars, other venue, etc.) Marketing activities – this report will detail promotions and publicity campaigns, identifying the response in terms of dollars to these activities Accident reports – detailing accidents for the period under consideration and updating the report recipients regarding post-accident events (possible legal action, out of court settlements, action taken to address the cause, training proposed) Sources of information Typical sources of information used to develop financial reports are: Internal sales analysis figures from each department and/or revenue source – this will include dockets, cash register audit tapes, daily takings sheets, debtor accounts Actual staff rosters for each revenue centre – these must be costed and, where a role extends across a more than one revenue centre, there must be a breakdown of wage allocation for each area/centre Internal stock movement sheets on a revenue centre basis – this will require costed requisitions, purchases records, goods received books, interdepartmental transfer sheets General and specific financial statistics and data – this embraces budgets in for the period, and year-to-date formats together with comparisons with performance, say, last month, and same month last year. These reports should provide: A snapshot of the current position – a financial and operational picture of the business showing where you are and how youre doing A prompt for action – they should provide the basis on which to make some planning/action decisions A reliable foundation for upcoming planning – by supplying data that shows trends The reports should also be prepared to be: Easy to read and interpret – the information and statistics contained shouldn’t clutter the main objectives Well-timed – they must be distributed as soon as possible after the data they contain is captured Truthful and precise – they must be double checked to ensure that the information they contain is accurate in all respects Sufficient data relevant to the issue(s) under consideration – the points made in organisational statements should be covered by the reports so that there is a link from planning through to actual operation. For example, if a statement was made that you aimed to achieve X per cent increase in sales in the Y department by the end of the year, then this – and other similar figures and percentages – must be covered in the report Similar in layout and style to all other reports – so that where people are promoted or transferred, they remain familiar with the format of the report. Forward reports Reports and recommendations may need to be forwarded to: Senior management Owners Personnel manager Sales manager Finance manager Heads of departments Supervisors General staff Activity 9 4. Review and evaluate financial management processes 4.1 Collect and collate for analysis, data and information on the effectiveness of financial management processes within the work team 4.2 Analyse data and information on the effectiveness of financial management processes within the work team and identify, document and recommend any improvements to existing processes 4.3 Implement and monitor agreed improvements in line with financial objectives of the work team and the organisation 4.1 – Collect and collate for analysis, data and information on the effectiveness of financial management processes within the work team Before you can analyse the effectiveness of financial management processes, you will first need to collect data and information related to financial management processes. Data and information on the effectiveness of financial management processes may include records (paper-based and electronic) related to: Bank account records Cash flow data Contracts Credit card receipts Employee timesheets Files of paid purchase and service invoices Income and expenditure Insurance reports Invoices Job costings Petty cash receipts Quotations Taxation records Wages/salaries books The information should be collected and filed on an ongoing basis to make it easily accessible for when the time comes that you need to use it. It should be ordered chronologically and by department – this will make searching for specific data much easier. Much of the figures for the above information can be found in the general ledger, but original copies of all the documents should still be filed as evidence and for clarification purposes. Cash flows Cash flow describes the movement of money in or out of a business – it is measured over a specified time period. It is calculated by adding non-cash charges (e.g. depreciation) to net income after taxes. The cash flow of a company can indicate its financial strength and is essential for it to remain solvent e.g. having enough available money to finance its operations. If a companys statement of cash flow shows that the company is performing well, the available remaining cash can be reinvested into the business to generate more profit. Profit and loss statements These financial statements summarise the revenues, costs and expenses of a company over a specific time – this is usually a fiscal quarter or year. They will provide information to show a companys ability to make profit via increasing revenue and reducing costs. It does this by subtracting the costs of running the business from the revenue to show net income (profit). The cost of running a business includes: Stock expenses Operational expenses Tax expenses Interest expenses Along with the balance sheet and income statement, it is the most important financial statement produced by a business; together, they can be analysed to give a complete overview of a companys finances. Petty cash This is a small amount of money which is kept on hand and used to pay for small amounts owed, as opposed to writing cheques. It is usually assigned to a petty cash custodian – employees must than refer to this person if they need to use petty cash or be reimbursed for a company expense they have paid for out of their own pocket. When the petty cash fund gets low, the custodian can request the cashing of a cheque to top it up. The reason for petty cash is that is simpler than the writing, signing and cashing cheques for minor transactions. For example, think about paying a delivery man costs due on delivery (these can be under a dollar) – it is not worth recording this individual transaction individually – therefore, recording small transactions collectively as petty cash makes the accounting process simpler. The custodian must still keep a record of individual petty cash expenditure by issuing petty cash vouchers for each transaction, complete with an invoice and receipt. These vouchers and the amount of cash to hand must always equal the original fund. They should also keep a petty cash daybook to keep a record of petty cash transactions over time. Because of the easiness with which petty cash can be abused, it needs to be kept under close monitoring. Activity 10 4.2 – Analyse data and information on the effectiveness of financial management processes within the work team and identify, document and recommend any improvements to existing processes Now the information has been gathered and collated, it now needs to be analysed to determine the effectiveness of your financial management processes. This information can be used to create the following: Cost/benefit analysis (of individual processes) Profit statements Electronic spreadsheets Budgeting forecasts Ledgers and financial statements Profit and loss statements Ageing summaries Identify, document and recommend improvements From this, these documents must be analysed to see if productivity/profitability is going up or down. The things that you want to see include: Earnings growth – over the previous year, quarter or month. You also want to strive for growth to be above the market average. Earnings stability – you want steady, predictable growth as opposed to spikes of revenue and periods of inactivity. This makes it easier to predict the financial position of the company in the future. Return on equity – you want to turn a profit on the money invested The findings of your analysis should be documented and reported to the appropriate personnel in your organisation. The specific nature and methods of this, as well who you report your findings to, will depend on your organisational policies and procedures. The people you discuss the findings with may include: Colleagues Supervisors Managers Financial advisors Accountants Industry experts Departmental specialists Activity 11 4.3 – Implement and monitor agreed improvements in line with financial objectives of the work team and the organisation The purpose of analysis is not only to see how the business is performing in relation to its targets, but to identify areas for improvement. These improvements will need to be made and monitored in line with the financial objectives and organisational requirements of the work team and organisation. Find out who is responsible in your organisation for implementing any agreed improvements. The people you may need to talk to include: Management Budget holders Finance and support staff Monitoring and reporting budgets Budgets must be monitored and reported on, to ensure that they are meeting expectation and to identify any problems that need rectifying. Monitoring and reporting processes should cover the following: Set timetables and deadlines for monitoring and setting up of budgets Having a system to ensure data is up-to-date and accurate Reports should be made available for to management Reports should be done at least monthly Data should be inputted into your records regularly, to allow for better budgetary planning Reports should be produced as soon as possible to ensure they are relevant Reporting should happen from the bottom up – it should include: Actual expenditure Forecasted expenditure Expected changes Monitoring should happen from management downwards Monitoring processes should be reviewed regularly (to check they are working) Forecasting expenditure trends This is usually the responsibility of budget holders as they provide the information that is required for forecasts themselves. Forecasts should: Account for all expenses Assign expenses to the correct budget Ensure expenses are accounted for over the correct time period Detail the correct length of time for financial commitments Account for delays Account for the level of activity required Remember that budgets must be inherently flexible, as its impossible to predict exactly what will happen. Therefore, there needs to be in place a system for adjustment, should any changes occur. Activity 12 Skills and Knowledge Activity Nearly there... Major Activity – An opportunity to revise the unit At the end of your Learner Workbook, you will find an activity titled ‘Major Activity’. This is an opportunity to revise the entire unit and allows your trainer to check your knowledge and understanding of what you have covered. It should take between and 1-2 hours to complete and your trainer will let you know whether they wish for you to complete it in your own time or during session. Once this is completed, you will have finished this unit and be ready to move onto the next, well done! Congratulations! You have now finished the unit ‘Manage budgets and financial plans MSA Training and Professional Development Phone: 03 9905 3180 Room 159, 21 Chancellors Walk Website: msatraining.edu.au Monash University Clayton, Vic 3800 BSBFIM501 V3 24.01.19 BSBFIM501 Manage budgets and financial plans 2 Housekeeping Emergency procedures Mobiles, security issues Break times/smoking policy This course is “interactive” – ask questions Respect, confidentiality, practice Ground rules 3 Objectives Discover how to plan financial management approaches Know how to implement financial management approaches Learn how to monitor and control finances Understand how to review and evaluate financial management processes Gain the skills and knowledge required for this unit. FIVE MAJOR FUNCTIONS OF BUSINESS MANAGEMENT 1. Planning 2. Organising 3. Staffing 4. Directing 5. Controlling Budgeting is about Planning and Controlling Planning and Budgeting Planning and budgeting are essential for management control. Effective planning and budgeting require looking at the organization as a system and understanding the relationship among its components. Planning consists of developing the objectives, timetables, and performance standards needed to implement the organizations strategy and assigning individual accountability for results. Budgeting involves identifying, prioritizing, acquiring, and allocating the resources needed to carry out the plan. Basic principles of accounting Revenue Expense Matching Cost Objectivity Continuity assumption Unit-of-measure assumption Separate entity assumption Cash v Accrual Accounting Accrual accounting is the practice used by most businesses, and matches the revenue earned in a period, against the expenses incurred to generate that income in the period. Revenue is recognised when the transaction takes place, rather than when the cash is collected. Expenses are recognised when they are incurred, not when they are actually paid. Clearer overall picture of the performance of the business The notion of receiving or paying cash is not relevant in determining profit Cash v Accrual Accounting Cash accounting basis means: Revenues are recorded when they are actually received Expenses are recorded when cash is paid Clearer picture of ‘cash flow’ Plan financial management approaches 1.1 Access budget/financial plans for the work team 1.2 Clarify budget/financial plans with relevant personnel within the organisation to ensure that documented outcomes are achievable, accurate and comprehensible 1.3 Negotiate any changes required to be made to budget/financial plans with relevant personnel within the organisation 10 Strategic Plan and Budget A business needs to have both a strategic plan and a budget. The strategic plan lays out the direction and goals of the business and guidelines for actions to achieve those goals The budget looks at the money needed to support achieving those goals. Budgeting is only one part of the strategic planning process. Budget A budget is a forecast of all income and expenses, and helps a business identify future financial needs and plans based on expected profit, expenses and cash flow. If a business doesnt have the budget to support its strategic plan, the business needs to either modify its plan or find the financial means to support the plan. Budget/financial plans Cash flow projections Long-term budgets/plans Operational plans Short-term budgets/plans Spreadsheet-based financial projections Targets or key performance indicators for production, productivity, wastage, sales, income and expenditure Aims of financial plans Analyse the past Plan for the future Implement new strategies for the future Set annual budgets Long-term planning benefits You can estimate the funding required Budget allocations increase in accuracy Trends in demand can be identified Change is easier to implement Financial consequence of major programs/changes can be planned Change can be implemented more easily You can forecast how the market is likely to change and account for this You can plan for human resources changes Staffing needs and resources can be calculated and planned Medium-term planning benefits Identify likely sources of cash flow Create a cash flow forecast statement, identifying the major changes of income sources Think what things may occur based on what you know will happen Identify future spending levels Consult with stakeholders for their opinions on what the major changes could be Analyse the impact of proposed changes of future finances Budgeting roles When budgeting, there are various people who play a role in managing them: Management They are accountable for their own budgets. However, their accountability depends on their level in the organisation Budget holders These people contribute to setting budgets and provide the information that is used to calculating exact figures. Finance and support staff Computer-based budget management A budget tracking system allows monitoring/recording of: Organisational spending Budgets Organisational income Debtor and creditor records Payment processing Budget management Contract management Financial analysis Closing accounts This involves having a set point where all data into accounts is frozen and recorded, so it can be analysed accurately over a set time period. It allows decisions to be made on: Whether under/over-spends can be carried forward How budget managers can examine results If any under-spend can be given back If over-spend needs to be given back (at a later date) Whether performance variances between actual and desired performance can be assigned to future projects Activity 1 – P 11 - 20 20 Plan financial management approaches 1.4 Prepare contingency plans in the event that initial plans need to be varied 21 Contingency plans Contingency plans may need to cover situations such as: Broken/malfunctioning equipment Staff quitting or needing time off due to illness, holidays etc Health and safety issues Natural disasters (i.e. floods, earthquake etc) Theft, fraud or other security issues Contingency plans should cover: The situation needing action Personnel to be involved Contact numbers for personnel, resources etc. Legislative, organisational and ethical requirements to consider How it will impact on the organisation Costs that may occur Solutions How the solution will be implemented and by who A deadline Contingency Plans Outsourcing Diversifying outcomes Cheaper consumables Increasing output Recycling/Re-using Procurement options Restructuring Additional funding Reducing costs Activity 2 – p22 - 23 25 Implement financial management approaches 2.1 Disseminate relevant details of the agreed budget/financial plans to team members 26 Types of Budgets Sales budget Revenue budget Cost of Goods & Services sold budget Cash flow projection Inventory budget Project budget Marketing budget Projected Profit & Loss / Balance Sheet Who is informed? After the budget/financial plans have been agreed, you will now need to divulge the relevant details to team members. People who may be informed include: Senior management The accounts department Budget committee Managers Establishment staff Who’s Involved? Organisational and team budgets are developed by senior managers, then distributed to team members by their team leaders. Some organisational budget information may be sensitive and available only to senior management. However, ‘operational’ budgets are usually kept by the team leader in a particular department or section, and used to set targets and detail individual responsibilities Consultation Be aware of the people in your organisation who have responsibilities for financial planning Understand your own responsibilities and who you are accountable to, regardless of whether: - You are producing a budget Helping to prepare a budget Or implementing a budget Traditional ways to inform about budget allocations Departmental meetings where information is delivered verbally and face-to-face (as described above) All staff meetings where a series of overhead projections (or a PowerPoint presentation) is used Internal memos or emails sent to staff Paper-based documentation that outlines, without being too specific, the requirements that have been decided on. Communication Methods Formal Meetings Group Meetings/Sessions Written Communications Face-to-face Presentations Electronic Communication Activity 3 – p25 - 28 33 Organisational Chart Implement financial management approaches 2.2 Provide support to ensure that team members can competently perform required roles associated with the management of finances 35 Support for team members Access to specialist advice Documentation of procedures Help desk or identified experts within the organisation Information briefings or sessions Intranet-based information Training including mentoring, coaching and shadowing Roles/activities that may need support Arranging for use of corporate credit cards Banking Debt collection Ensuring security, accuracy and currency of financial operations Invoicing clients, customers and consumers Roles that may need support Maintaining journals, ledgers and other record keeping systems Maintaining petty cash system Purchasing and procurement Wages and salaries payments and record keeping Activity 4 – p30 - 31 39 Implement financial management approaches 2.3 Determine and access resources and systems to manage financial management processes within the work team 40 Resources and systems of financial management processes The resources and systems needed to manage financial management processes within the work team may include: Hardware and software Human, physical or financial resources Record keeping systems (electronic and paper-based) Specialist advice or support Activity 5 p33-36 42 Monitor and control finances 3.1 Implement processes to monitor actual expenditure and to control costs across the work team 43 Ledgers and financial statements A general ledger is the main accounting record of a company – it contains a complete record of financial transactions over the entire life of a company. It is used to prepare financial statements and includes the following accounts: Assets Liabilities Owners equity Revenues Expenses Chart of Accounts Classifies and codes all the financial transactions of the organisation and the effect they have in two categories. 1. Balance Sheet items – assets & liabilities 2. Profit & Loss items – revenues (sales) and expenses Profit and Loss If the revenue (income) exceeds the expenses (outgoings) the business has made a profit. If expenses exceed revenue it’s a loss, and it is represented in financial statements in brackets Eg $10,000 – Profit $ (10,000) – Loss Profit and Loss Template Assets Current Assets Economic benefits consumed by the organisation within the accounting period (usually 12 months) eg: cash, debtors, inventory Fixed (non – current) Assets Benefit extends beyond the current accounting period eg: buildings, vehicles, machinery, office equipment Liabilities Current Liabilities - Due inside/within a year Non – Current Liabilities - Not due in the present accounting year Journal Entry - example Activity 6 – p38 - 40 51 Monitor and control finances 3.2 Monitor expenditure and costs on an agreed cyclical basis to identify cost variations and expenditure overruns 52 Organisational record keeping and auditing The Australian government will review your financial affairs each year in a tax or superannuation review to check you: Have declared all the assessable income you receive Are entitled to the deductions and tax offsets you have claimed on your tax return Have met all your regulatory obligations Record-keeping requirements of Australian Taxation Office For the purposes of the SMSF auditor, the following records need to be kept for at least five years: Accurate and accessible accounting records that explain the transactions and financial position of your SMSF An annual operating statement and an annual statement of your SMSF’s financial position Copies of all SMSF annual returns lodged Copies of any other statements you are required to lodge with us or provide to other super funds Record-keeping requirements of Australian Taxation Office The following records need to be kept for a minimum of ten years: Minutes of trustee meetings and decisions Records of all changes of trustees Trustee declarations recognising the obligations and responsibilities for any trustee, or director of a corporate trustee, appointed after 30 June 2007 Members’ written consent to be appointed as trustees Copies of all reports given to members Documented decisions about storage of collectables and personal-use assets Key Regulatory Bodies ASIC Australian Securities & Investments Commission (Public – Audited accounts, half yearly results which include Income, Expenditure, Profit, Balance Sheet and Cash Flow Australian Tax Office (Private – less stringent and annually reporting) (Income Tax / Sales Tax) ASX Australian Stock Exchange (On going disclosure by public companies) Paul Armstrong (PA) - TAX Company tax Goods and Services Tax (GST) Pay As You Go (PAYG) PAYG Instalments Fringe Benefits Tax (FBT) Superannuation Guarantee Levy Payroll Tax ATO Reporting All companies with a valid ABN are required to report activity to the ATO as outlined: Monthly - annual turnover exceeds $20m - PAYG (>$25k - <$1m) Quarterly - annual turnover is less than $20m - PAYG is less than $25k Sample Budget Activity 7 60 Monitor and control finances 3.3 Implement, monitor and modify contingency plans as required to maintain financial objectives 61 Maintaining contingency plans Communicate the details of it to everyone in the organisation Tell people their roles and responsibilities in the contingency plan Provide training (if necessary) for people to perform their roles Perform training drills periodically (to test the contingency plan) Use training drills to identify and implement any necessary changes Review the plan any time there are personnel, operational and technological changes Maintaining contingency plans Distribute amended plans throughout the company (discard the old plan) Make and store copies off-site that can be easily accessed if need be Perform audits on the plan from time to time. They should: Reassess business risks Compare actual performance levels to desired performance levels in the contingency plan Identify changes and implement them, if necessary Activity 8 – p46 64 Monitor and control finances 3.4 Report on budget and expenditure in accordance with organisational protocols 65 Report on budget and expenditure Reporting may include data from: Bank statements Credit card statements Financial reports Invoices and receipts Ledgers and journals Logs Petty cash records Spreadsheet-based records Types of reports Sales summaries Daily, weekly or monthly transactions Department expenditures Commission earnings Marketing activities Accident reports Activity 9 – p48 - 51 68 Review and evaluate financial management processes 4.1 Collect and collate for analysis, data and information on the effectiveness of financial management processes within the work team 69 Data on the effectiveness of financial management processes Bank account records Cash flow data Contracts Credit card receipts Employee timesheets Files of paid purchase and service invoices Income and expenditure Data on the effectiveness of financial management processes Insurance reports Invoices Job costings Petty cash receipts Quotations Taxation records Wages/salaries books Activity 10 – p 53 - 55 72 Review and evaluate financial management processes 4.2 Analyse data and information on the effectiveness of financial management processes within the work team and identify, document and recommend any improvements to existing processes 73 Identify, document and recommend improvements The things that you want to see include: Earnings growth – over the previous year, quarter or month. You also want to strive for growth to be above the market average. Earnings stability – you want steady, predictable growth as opposed to spikes of revenue and periods of inactivity. This makes it easier to predict the financial position of the company in the future. Return on equity – you want to turn a profit on the money invested Activity 11 – p57 - 58 75 Review and evaluate financial management processes 4.3 Implement and monitor agreed improvements in line with financial objectives of the work team and the organisation 76 Monitoring and reporting budgets Monitoring and reporting processes should cover the following: Set timetables and deadlines for monitoring and setting up of budgets Having a system to ensure data is up-to-date and accurate Reports should be made available for to management Reports should be done at least monthly Data should be inputted into your records regularly, to allow for better budgetary planning Monitoring and reporting budgets Reports should be produced as soon as possible to ensure they are relevant Reporting should happen from the bottom up – it should include: Actual expenditure Forecasted expenditure Expected changes Monitoring should happen from management downwards Monitoring processes should be reviewed regularly (to check they are working) Activity 12 p60 - 61 79 Skills and Knowledge Activity 80 Major Activity This activity should take anywhere between an 1-2 hours to complete and can be found at the end of your workbook. Your instructor will let you know whether they wish for you to complete it in session time or your own time. Summary and Feedback Did we meet our objectives? How did you find this session? Any questions? 82 Congratulations! You have now finished the unit… ‘Manage budgets and financial plans’ 83