CHOICE BUSINESS COLLEGE BSBFIM501ASSESSMENT SUMMARY / COVER SHEET
Assessor Comments and Feedback to student: __________________________________________________________________________
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Administrative use only Plan financial management approachesSubmission details The assessment task is due on the date specified by your assessor. Any variations to this arrangement must be approved in writing by your assessor. Submit this document with any required evidence attached. See specifications below Performance objective The candidate will demonstrate the ability to plan financial management approaches. Assessment description In response to the scenario provided, you will clarify budget plans with your manager and negotiate changes to the budget. You will then identify and analyse a risk to the budget and prepare a contingency plan to prevent or minimise the risk. Procedure 1. Read the scenario provided in Appendix 1 to this assessment task and tasks A 2. Prepare to meet with your manager (assessor) to clarify budget and negotiate changes: a. identify areas of the budget that are not achievable, inaccurate or unclear b. prepare to negotiate necessary changes to the budget 3. set up a time with your manager to meet. Meet with your manager (assessor) to clarify budget and negotiate changes: a. identify at least two issues for clarification b. negotiate at least two changes c. include discussion of basic accounting principles d. refer to relevant legislation and ATO requirements e. refer to principles and techniques of managing budget items f. take and keep notes of agreed changes. 4. Use the template provided in Appendix 3 to this assessment task to prepare a contingency plan document for persistent risks after budget changes 5. Submit all documents required in the specifications below to your assessor. Ensure you keep a copy of all work submitted for your records. Specifications You must: ● meet with your assessor to clarify budget and negotiate changes ● provide a contingency plan ● submit your notes. Your assessor will be looking for: ● numeracy skills to read and understand a budget and negotiate budget re-allocations ● knowledge of basic accounting principles to identify and use account balances ● knowledge organisational requirements related to financial management such as contained in organisational policies and procedures ● knowledge of principles and techniques involved in budgeting.
Appendix 1 –ScenarioBig Red Bicycle Pty Ltd is a bicycle manufacturer based in Bendigo, Victoria. The company produces bicycles which it sells to retailers in the domestic Australian market. The senior management structure of the company appears below.
According to company strategic plans, the company aims to achieve a net profit before tax of $1,000,000. The chief risks to this goal are: ● poor sales due to economic downturn ● increases in expenses such as wage expenses. In addition to Australian operations, the company is considering manufacturing overseas to take advantage of reduced costs. The company is also considering diversifying its product range to reduce exposure to poor sales of one product. RoleYou are the manager of Sales Centre A, based in Adelaide. The centre has achieved great success over the last year and consistently outsells other sales centres. In fact, due to the large number of accounts managed by your sales team and larger staff, your centre is expected to sell as much volume as the other two sales centres put together. Naturally, you expect cost allocations to reflect the both the needs and importance to the business of Cost Centre A. Task AThe Sales General Manager, Sam Gellar, has asked you to review the master budget and cost centre budgets prepared by the Senior Accountant. She would like you to meet with her to discuss the whether the budget projections are achievable, accurate, understandable and fair. She would like you to look closely at the budget for your cost centre, note any changes you think are necessary, develop an argument for the changes and negotiate those changes with her. Information you are aware of includes: ● Sales in the first quarter (Q1), third quarter (Q3), and the fourth quarter (Q4) are generally 30% less than the second quarter (Q2). ● Sales in Q2 depend on completion of 90% of repair and maintenance. ● Sales for Q2 have been estimated to be $1,000,000. ● Commission negotiated with members of the sales team is now at 2.5%. Task BIt has come to the attention of the Managing Director, Tom Copeland, that due to the current economic climate, sales volume may be 20% below target this financial year. Tom is worried that this may severely impact profit projections. The company can accept as much as a 10% variance in profit projections; however, more than this could severely affect the company’s ability to pay obligations and invest. Reliable data to determine whether the risk has eventuated should be available by mid Q2, when sales data for the company’s product are in. As a special project, the Managing Director has asked you to perform a risk assessment and develop a contingency plan to manage the risk of sales falling 20%. As per organisational policy you should use the contingency plan template provided.
Appendix 2 – Budgeting and finance policyBudget preparations● The business plan will set the key parameters for all financial budgeting. ● Variations to the business plan must be approved by the CEO and senior management strategic committee. ● Prior period results are to be analysed to identify the profit level of cost centres, identify correlations between financial statistics and to set key performance indicators and benchmarks for future budgets. ● The budget planning committee will meet prior to budgets being developed and agree on budget parameters. The committee will consist of all department managers plus the CEO and CFO. ● A CAPEX budget will be developed from the approved business plan. ● A detailed sales budget must be completed before completing the profit budget for the year. ● A cash flow budget covering the first three months will be prepared after the profit budget is completed. ● A master budget including profit projections will be completed from which cost centre allocations will be made. ● Budget notes that contain all the assumptions used in the budgets should accompany the master budget or be made available as a separate document. Where possible, the notes should justify the basis on which the estimates were made. ● Overheads (non-direct expenses) will be apportioned across the cost centres equally. Exceptions need to be negotiated with relevant authorities. ● All expenses and income will be spread equally throughout the year unless otherwise required by business needs or business environment. ● The financial cycle for budgeting purposes will be yearly ending 30 June. Financial delegations● Each manager is responsible for achieving the revenue budgets agreed to by the budget committee. ● Each manager is responsible to approve, by signing the necessary paperwork, all expenditures that fall within their area of responsibility. ● Expenditures must be within the budget guidelines for the individual departments. Format for budgets and reportsAll budgets must include the following details: ● name of the person who prepared it ● cost centre (if applicable) ● name of the budget/report, i.e. sales, expenses, CAPEX, cash flow, budget variation report ● period of the budget. Appendix 3 – Budgets and templatesMaster budget with profit projections
Sales cost centre expense budget
Contingency plan template
Assessment Task 1: Plan financial management approaches
Outcomes
Performance indicators
Comments/feedback to candidate
Implement financial management approachesSubmission details The assessment task is due on the date specified by your assessor. Any variations to this arrangement must be approved in writing by your assessor. Submit this document with any required evidence attached. See specifications below Performance objective The candidate will demonstrate the ability to implement financial management approaches. Assessment description In response to the scenario provided, you will access and communicate details of budget to a team member (assessor). You will then support the team member to perform their required role with respect to software resources and systems. This assessment adds to the assessment one and introduces the use of spread sheets and excel. Procedure 1. Read the scenario provided in Appendix 1 to this assessment task and tasks A 2. Prepare to meet with your team member (assessor) to communicate budget and then coach and train them in new role: a. access required budget information from assessor b. determine organisational needs. Consider describing how a budget is used to monitor work performance, variation and team/division outputs. c. identify coaching/training needs of team member. d. plan coaching/training session: i. outcome: team member produces spreadsheet to meet management requirements. Consider why organisations need accurate and timely financial information. ii. include activities/elements to instruct, practice, test, motivation techniques to help aid the team understand the importance of change and new measurement for the budget. iii. keep notes of your conversation with your assessor and write a summary of them on one page. e. Set up a time with your team member to have a coaching/training session. 3. Meet with your team member (assessor) to coach them in role: a. Explain budget and relevance to team member’s accountabilities b. Use appropriate coaching techniques or models such as GROW c. Use appropriate motivational theory d. Train learner in required spreadsheet techniques, include elements of instruction, practice and testing/feedback e. Include recordkeeping requirements for Australian Taxation Office (ATO) and auditing purposes, for items such as petty cash, and GST. 4. Submit all documents required in the specifications below to your assessor. Ensure you keep a copy of all work submitted for your records. SpecificationsYou must: ● meet with your assessor to role-play support of team member approx tens ● submit coaching/training plan for the team of the organisation. Your assessor will be looking for: ● numeracy skills to read and understand a budget and to communicate a budget ● technology skills to use software associated with financial recordkeeping ● knowledge of basic accounting principles to identify and use account balances in communication and training ● knowledge of organisational requirements related to financial management, such as those contained in organisational policies and procedures ● requirements for organisational recordkeeping and auditing with respect to petty cash ● knowledge of principles and techniques involved in budgeting and electronic spreadsheets.
Appendix 1 – ScenarioBig Red Bicycle Pty Ltd is a bicycle manufacturer based in Bendigo, Victoria. The company produces bicycles which it sells to retailers for on-sale in the domestic Australian market. The senior management structure of the company appears below:
According to company strategic plans, the company aims to achieve a net profit before tax of $1,000,000. The chief risks to this goal are: ● poor sales due to economic downturn ● increases in expenses such as wage expenses. In addition to Australian operations, the company is considering manufacturing overseas to take advantage of reduced costs. The company is also considering diversifying its product range to reduce exposure to poor sales of one product. RoleYou are the manager of Sales Team A. You manage a small team of sales team members. Your duties include accessing budget information for your team, explaining relevant aspects of budgets and features of budget documents to your team, and supporting team members to achieve performance goals. Task AYou have determined that you will need to access budget information from the Senior Accountant to explain to your team. You will explain the overall financial objective of the business, provide an overview of the budget and explain how the budget translates to expense allocations for the team. Task BYou have determined that one team member, Bill Goodale, will be responsible for tracking expenses and petty cash throughout the financial year. To meet organisational needs, this duty will need to be performed in accordance with policies and procedures. You have determined that expenses will need to be divided equally and tracked by quarter. Bill will need to develop a spreadsheet to keep track of actual expenditure by account. To help control expenses, the spreadsheet will need to provide an ongoing tally of expense by account. Bill’s skills include basic accounting. Bill needs to be informed of Big Red Bicycle policies and procedures for petty cash. Bill is familiar with Microsoft Excel but does not know how to use formula and functions to sum columns or rows of figures. Consider part of this process is the way organisations maintain business records. Think about computer based systems like excel that can be used effectively instead of the manual system The spreadsheet used is important and what sort of training is required to help the team members as if not used correctly there may be underlying errors that affect the accuracy of the accounts. Think why organisations need correct and timely information.
Appendix 2 – Financial policies and proceduresExpense reimbursementPurpose of the policyTo detail procedures to be followed in relation to expense reimbursement of expenses that have been incurred on behalf of the organisation. The policyBig Red Bicycle will reimburse staff for reasonable and authorised expenses that have been incurred by them on behalf of the organisation or in the course of conducting Big Red Bicycle business. Procedure1. Staff will not be reimbursed in the following circumstances: a. any late payment penalties, e.g. overdue interest on credit cards b. expenses that are usually recovered from a third party c. penalties and fines, e.g. parking, traffic d. those claims that should have been made using the purchase order system e. those expense claims made by staff as a tax deduction f. those expenses that were not made for business purposes. 2. Travel expenses claims: a. insurance for trip cancellation will be reimbursed b. mileage allowance will be given for the use of a staff member’s vehicle when used for work-related travel c. personal stopovers or indirect routes will not be reimbursed d. travel reimbursement is provided for the most direct and economical mode of travel available; circumstances will be considered on a ‘case-by-case’ basis. 3. Accommodation expenses: a. reimbursement will cover moderate accommodation expenses; circumstances will be considered on a ‘case-by-case’ basis b. items of a personal nature that are charged to a hotel account will not be reimbursed. 4. Employee’s own meals: a. employees on Big Red Bicycle business will be reimbursed for any reasonable and appropriate meal expenses. 5. All relevant and original source documents must be attached to the Expense Reimbursement Form. A statutory declaration may be required where these original documents are not provided. 6. Appropriate advance payments may be authorised. 7. Employees have authority to approve expenses up to the amount detailed in their individual jobdescription. Any expenditure claims above the level prescribed must be forwarded to supervisors for approval. 8. Employees incurring authorised expenditure must submit their reimbursement requests on a signedExpense Reimbursement Form. 9. Source documents (including tickets, receipts, vouchers, invoices) must be keptfor all purchases and expenses claims. 10. The CFOwill use discretion to reimburse reasonable but unauthorised expenses. 11. Those claims that have not been adequately prepared, have not been duly authorised, or are lacking in original documentation, will be returned to the employee with reasons that outline why the claim has not been processed. Petty cashPurpose of the policyTo detail procedures to be followed in relation to tracking petty cash expenditure. The policyBig Red Bicycle maintains a petty cash system to allow authorised personnel to pay for small expenditures in connection with business activity. Procedure1. One team member is authorised to disburse petty cash with one alternate in case of sickness or emergency. 2. Petty cash is to be kept secure, locked in safe. 3. Receipts for cash must be issued. 4. Receipts must be reconciled at the close of each business day. 5. Amounts over $800 must be banked. 6. Petty cash expense will be recorded as miscellaneous expense.
Answersfor task 2:
Marking Guide Assessment Task 2: Implement financial management approaches
Outcomes
Performance indicators
Comments/feedback to candidate
Monitor and control financesSubmission details The assessment task is due on the date specified by your assessor. Any variations to this arrangement must be approved in writing by your assessor. Submit this document with any required evidence attached. See specifications below for details. Performance objective The candidate will demonstrate the ability to monitor and control finances. Assessment description In response to the scenario provided, you will create a simple spreadsheet budget to capture monitoring information. Using information provided to you by your assessor, you will then use the budget spreadsheet to produce a report on expenditure in accordance with organisational policies and procedures. You will also modify a contingency plan. Procedure 1. Read through the scenario provided in Appendix 1 to this assessment task and tasks A and B. 2. Design and develop a spreadsheet to capture budgeted and actual figures to produce a variance report. 3. Access actual budget figures from relevant managers and accounting systems (assessor). 4. Monitor and record actual figures. 5. Consider feedback from team members. 6. Produce a variance report as per organisational requirements. 7. Consider the scenario information and contingency plan provided andanalysethe variance report. 8. Modify the contingency and implementation plans provided in the scenario to improve effectiveness. 9. Submit all documents required in the specifications below to your assessor. Ensure you keep a copy of all work submitted for your records.
Specifications You must provide: ● a budget variance report ● a modified contingency plan and modified implementation plan ● your notes on procedures. Your assessor will be looking for: ● numeracy skills to read and understand a budget and to produce a variance report ● technology skills to use software associated with financial recordkeeping ● knowledge of basic accounting principles to identify and use account balances ● knowledge of organisational requirements related to financial management ● knowledge of organisational requirements for records and reports ● knowledge of principles and techniques involved in budgeting, profit and loss statements, electronic spreadsheets.
Appendix 1 – ScenarioBig Red Bicycle Pty Ltd is a bicycle manufacturer based in Bendigo, Victoria. The company produces bicycles which it sells to retailers in the domestic Australian market. The senior management structure of the company appears below.
According to company strategic plans, the company aims to achieve a net profit before tax of $1,000,000. The chief risks to this goal are: ● poor sales due to economic downturn ● increases in expenses such as wage expenses. In addition to Australian operations, the company is considering manufacturing overseas to take advantage of reduced costs. The company is also considering diversifying its product range to reduce exposure to poor sales of one product. RoleYou are the Senior Accountant at Big Red Bicycle. A major component of your role is setting budgets and monitoring budgetary performance for the organisation. Task AThe Managing Director, Tom Copeland, has asked you to implement a process to monitor expenditure and income. He has asked you to prepare a spreadsheet to capture and compare actual income and expenditure to budgeted figures. Your spreadsheet must contain columns for each of the four quarters of the financial year. You are required to gather data from the relevant managers (your assessor) to complete a budget variance report. The report should conform to organisational requirements in policies and procedures ● columns to show actual account values ● absolute variance ● percentage variance. Task BIt has come to the attention of the Managing Director, Tom Copeland, that due to the current economic climate, sales volume may be 20% below target this financial year. Tom is worried that this may severely impact profit projections. The company can accept as much as a 10% variance in profit projections; however, more than this could severely affect the company’s ability to pay obligations and invest. Reliable data to determine whether the risk has eventuated should be available by midway through the second quarter (Q2), when sales data for the company’s product are in. Consider the contingency plan and the implementation plan for the contingency below. You have already implemented a portion of the contingency plan, namely the monitoring of budget performance in the variance report you have prepared. You should now analyse the report to determine theeffectiveness of the contingency plan and its implementation. You have received the following feedback from team members: ● Full-time workers and sales people are resentful of time wasting and distracting contract employees. ● Overtime not used but employees resentful of suggestion it might not be approved if needed. ● Training suited the needs of many sales team members but was not relevant to about half the team members. ● Sales team members were happy with the incentives program and tried hard to make sales in the third quarter (Q3); however, they were also resentful at the threatening tone of emails and soon lost enthusiasm. ● Effect of one-day training wearing off. ● Fifty percent of direct wages costs are attributable to short-term contract employees whose contracts have expired and who are no longer needed. ● Employees concerned about lack of attention paid to wastage: water; electricity: paper; raw materials. ● Employees feel left out of budgetary decision-making in general. The Managing Director would like you to submit a revised contingency plan and contingency implementation plan to bring income and expenses under more effective control. Contingency plan for Task B
Contingency implementation plan for Task B
Appendix 2 – Budgeting and finance policyBudget preparations● The business plan will set the key parameters for all financial budgeting. ● Variations to the business plan must be approved by the CEO and senior management strategic committee. ● Prior period results are to beanalysedto identify the profit level of costcentres, identify correlations between financial statistics and to set key performance indicators and benchmarks for future budgets. ● The budget planning committee will meet prior to budgets being developed and agree on budget parameters. The committee will consist of all department managers plus the CEO and Chief Financial Officer. ● A CAPEX budget will be developed from the approved business plan. ● A detailed sales budget must be completed before completing the profit budget for the year. ● A cash-flow budget covering the first three months will be prepared after the profit budget is completed. ● A master budget including profit projections will be completed from which cost centre allocations will be made. ● Budget notes that contain all the assumptions used in the budgets should accompany the master budget or be made available on a separate document. Where possible, the notes should justify the basis on which the estimates were made. ● Overheads (non-direct expenses) will be apportioned across the costcentresequally. Exceptions need to be negotiated with relevant authorities. ● All expenses and income will be spread equally throughout the year unless otherwise required by business needs or business environment. ● The financial cycle for budgeting purposes will be yearly ending 30 June. Reporting requirementsSoftware applications to be used in reporting: ● Environment – MS Windows. ● Accounting information system – MYOB AccountRight. ● Data analysis – Microsoft Excel 2007. Actual results will be produced monthly by the MYOB accounting system. Actual variances to budget will be produced using Excel with a report prepared for senior management for significant variances. Financial delegations● Each manager is responsible for achieving the revenue budgets agreed to in the budget committee. ● Each manager is responsible to approve, by signing the necessary paperwork, all expenditures that fall within their area of responsibility. ● Expenditures must be within the budget guidelines for the individual departments. Format for budgets and reportsAll budgets must include the: ● name of the person who prepared it ● cost centre (if applicable) ● name of the budget/report, i.e. sales, expenses, CAPEX, cash flow, budget ● period of the budget. Answersfor task 3:
Marking Guide Assessment Task 3: Monitor and control finances
Outcomes
Performance indicators
Comments/feedback to candidate
Thinking about your experience while participating in the training for this unit, please read the following statements and tick one response only.
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