1.Develop a profit budget, cash flow budget making sure that you use previous financial data to determine allocations for resources.

a.Use Excel to compile the profit budget for Finex and Sons for the year ended 30 June 2015.

b.Using Excel, compile a three-monthly cash flow budget for Finex and Sons by using the information listed on the following.

All book sales are for cash

Debtor payments are budgeted at Jul 2014 $155,500; Aug 2014 $180,000; Sep 2014 $195,000.

Direct wages are budgeted at Jul 2014 $74,000; Aug 2014 $77,000; Sep 2014 $79,000.

Cash purchases are budgeted at Jul 2014 $20,000; Aug 2014 $25,000; Sep 2014 $27,000.

Creditor payments are budgeted at Jul 2014 $130,000; Aug 2014 $141,000; Sep 2014 $152,000.

CAPEX budget is according to the business plan.

GST payable is budgeted at Jul 2014 $4,084; Aug 2014 $4,859; Sep 2014 $5,496.

Appendix 1: Case Study - Finex and Sons

Finex and Sons is a proprietary limited company owned 100% and operated by the CEO James Swartz in the city of Brisbane Queensland. The founder and employees of Finex and Sons are experienced and qualified professionals and are passionate about the activities Finex and Sons will promote and offer.

Finex and Sons has been operating since July 2011 providing consulting services in financial planning, business acquisition and contract bookkeeping and consists of four major departments. Each department is controlled and operated by a specialist manager. The four departments and their products are:

Financial planning - providing financial planning services to individual retirees including the sale of books and retirement kits.

Business acquisitions - assisting major clients expanding their chains and diversify their business investments. Also sells an internal market update report to subscribers.

Bookkeeping services - providing contract bookkeeping services for small businesses and includes the sale of business procedures manuals,

Admin/accountant - serves the other three departments by managing the accounting and administration functions of the practice. While the admin/accounting team manage the tax compliance, banking, payroll, accounts payable and the reception each department manager managers their own invoicing and accounts receivable.

You have been appointed as the finance manager to assist the CEO in setting up the budgets in accordance with the business plan and to evaluate the effectiveness of the financial management approaches taken by Finex and Sons.

Business plan - Executive summary

An opportunity for Finex and Sons' success exists because of the growth in retirement from an ageing population and the increased number of small and medium enterprise (SME) businesses requiring bookkeeping services with the complexity of government legislation.

Further, the market is growing at least 12% annually and there are no providers who specialise in the unique combination of complementary services. Finex and Sons is poised to take advantage of this growth and lack of competition with an experienced staff, excellent location, and effective management and marketing.

Goals

The company's goals over the next three years are:

1. Revenue target of $3.10 million in year ended June 2014 including $500,000 in book sales.
2. Revenue target of $3.30 million in the year June 2015 including a 20% growth in book sales.
3. Achieve a net profit% before tax and interest of 7% of total revenue by achieving GP% on Book sales of 50% and reducing direct labour costs to less than 35.0% of consultancy fees.
4. Appoint a Finance Manager for the company on $150,000 for the 2015 financial year.
5. Maintain an overhead ratio to total revenue of 55% or less.
6. Allocate $50,000 to upgrade the existing office equipment.

In order to achieve these goals Finex and Sons needs to focus on the three key areas of:

Successfully position ourselves as specialist consultants to business and retirees.

Communicate the differentiation and quality of our offering through personal interaction, media, and regional marketing.

Develop a repeat-business base of loyal customers in order to create sufficient revenue.

Increase our service offer by adding auditing in the bookkeeping department

Control our expenses and overheads via detailed departmental budgeting process for the 2015 year prepared and managed by a newly appointed finance manager.

2014/15 Impacts

Up until 2014, the 200floor space of Finex and Sons was allocated:

Financial planning - 100

Business acquisitions - 20

Bookkeeping services - 30

Admin/accountant - 50

The vast majority of the financial planning clients visit the office, where as the business acquisitions and bookkeeping teams mostly visit clients at their premises.

The new audit space will need 10 from 2014/15 year and will take that space from the financial planning department. This will allow the bookkeeping manager and client files to be accommodated in a secure office. The new area will need furniture and equipment that will cost about $20,000 paid equally over the two months prior at the start of the financial year.

Office equipment upgrades for the 2014/15 year include a new photocopier $7,000 for Administration in Aug 2014; extra motor vehicle $25,000 in September 2014 for Acquisitions department.

The finance manager will be accommodated within the Admin/accountant space and will be appointed to commence 1 July 2014. The filing room will be converted to the new office at a cost of about $5,000 spent in July 2014.