Monitor/check and control finances

Submission details

Student's name

Student no.

Assessor's name

Assessment site

Assessment date/s

The assessment task is due on the date your assessor has told you. Any changes 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 student will show skill and knowledge to monitor/check and control finances.

Assessment description

In reply to the situation provided, you will create simple spreadsheet budget to show monitoring/checking information. Using information provided to you by your assessor, you will then use the budget spreadsheet to produce a report on expenditure/expenses in line with organizational/company policies and procedures. You will also adjust any backup/ contingency plans.

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 record budgeted/planned and actual/real figures to produce a variance/report on differences report.

3.Get real budget/financial plan figures from relevant/appropriate managers and accounting systems (assessor).

4.Monitor/check and record actual/real figures.

5.Consider feedback from team members.

6.Produce a variance/differences report as per organisational requirements.

7.Consider the scenario information and contingency/backup plan provided and analyse/study the variance/differences report.

8.Modify/adjust the contingency/backup and implementation/completion plans provided in the scenario to improve effectiveness/response.

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 (i.e a report showing any differences from the actual budget figures)

a modified contingency plan and modified implementation plan (i.e backup and completion plans)

your notes on procedures.

Your assessor will be looking for:

numeracy skills (reading and understanding figures) to read and understand a budget and to produce a variance report

technology skills to use software associated with financial recordkeeping. (i.ecomputer skills)

knowledge of basic accounting principles to identify and use account balances (understanding accounting basics to account pluses and minuses)

knowledge of organisational requirements related to financial management (i.e what the company wants in relation to moniey/finances)

knowledge of organisational requirements for records and reports

knowledge of principles and techniques (basics and ways) involved in budgeting, profit and loss (making or losing money) statements, electronic spreadsheets (i.e computer software files).

Appendix 1 - Scenario

Big 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.

Person

Position

Michelle Yeo

Chief Executive Officer (CEO)

Tom Copeland

Managing Director

John Black

Chief Financial Officer (CFO)

Stuart LaRoux

Operations General Manager

Pat Roberts

Senior Accountant

Sam Gellar

Sales General Manager

Charles Pierce

Production Manager

Holly Burke

HR Manager

According to company strategic/goals 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 (the business (economy) is not doing well)

increases in expenses such as wage expenses.

In addition to Australian operations, the company is considering manufacturing overseas as it is cheaper to manufacture. The company is also thinking of expanding into different products and not to have risk of poor sales of one product.

Role

You are the Senior Accountant at Big Red Bicycle. A major component/part of your role is setting budgets and monitoring budgetary performance for the organisation. (i.e how well the company is doing financially)

Task A

The Managing Director, Tom Copeland, has asked you to implement/put together a process/method to monitor/check expenditure/expenses and income/sales revenue. He has asked you to create spreadsheet to capture/record and compare/check against actual/real income and expenditure to what is recorded in the budget (i.e 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 budget variance/adjustment-differences report.

The report should conform to organisational requirements in policies and procedures

and contain:

columns to show actual account values

absolute variance (the actual/real change)

percentage variance (how much of the total amount, ie. percentage changed)

Task B

It has come to the attention of the Managing Director, Tom Copeland, that due to the current economic climate (i.e the state of business in the country or state is not all that good), sales volume may be 20% below target this financial year. Tom is worried that this may affect the planned profit (profit projections). The company can accept as much as a 10% variance/change in profit projections; however, more than this could make it difficult for company to pay its bills and put money into other areas and departments. Correct information to about the risks will only be available by mid Q2, when sales data for the company's product are in.

Consider the contingency plan and the implementation plan (backup and putting together plan) for the contingency/emergency-risk below. You have already implemented/put in place a part of the contingency plan, namely the watching and checking of how well the budget is performing and compare it to the variance/differences report you have prepared. You should now analyse/look at - study the report to determine the effectiveness of the contingency plan and its implementation/you putting it into place.

You have received the following feedback from team members:

Full-time workers and sales people are resentful/upset of time wasting and distracting/taking the attention of contract (on an special arrangement) employees.

Overtime (extra work) not used but employees resentful/upset 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/bonus program and tried hard to make sales in the third quarter (Q3); however, they were also resentful at the threatening/bullying tone of emails and soon lost enthusiasm/interest.

Effect of one-day training wearing off. (i.e what they learnt in the one day training is forgotten)

Fifty percent of direct wages costs (extra pay) are attributable/linked to short-term contract employees (people hired for special reasons) whose contracts have expired/finished and who are no longer needed.

Employees concerned about lack of attention paid to wastage: water; electricity: paper; raw materials. (i.e staff misusing services like water and electricity)

Employees feel left out of budgetary decision-making in general. (i.e management did not consult with employees when setting budgets)

The Managing Director would like you to submit a revised/changed contingency plan and contingency implementation plan (backup plans) to bring income and expenses under more effective control.

Contingency plan for Task B

Contingency Plan

Company name: Big Red Bicycle Pty Ltd

Person developing the plan:

Name : Tom CopelandPosition: Managing Director

Risk identified: Profit for FY (financial year) more than 10% less than budgeted

Strategies/activities to minimize/reduce the risk

By when

By whom

Produce quarterly variance/differences reports to identify income/ expenditure and profit shortfalls over 10%.

Q2

PR

Implement sales training/coaching.

Q2

PR

Implement incentives/bonus program.

Q2

PR

Reduce overtime.

Q2

PR

Contingency implementation plan for Task B

Risk identified: Profit for FY more than 10% less than budgeted

Activity

Monitoring activity and date

Person/s

Monitor variance (differences)

Completion of variance report: Q2.

PR

Analysis of report to identify issues.

Management report: Q2.

PR

Email to warn employees of risk to jobs.

Monitoring of variance report results: Q4.

PR

Email to announce rise of commission from 2% to 2.5%.

Monitoring of variance report results: Q3.

PR

Email to inform employees that overtime will no longer be approved.

Monitoring of variance report results: Q3.

PR

Email to inform employees of mandatory/compulsory sales skills training: set program.

Monitoring of variance report results: Q3.

PR

Mandatory/compulsory training conducted.

Monitoring of variance report results: Q3.

PR

Appendix 2 - Budgeting and finance policy

Budget preparations

The business plan will set the key/important parameters/settings for all financial budgeting.

Variations/changes to the business plan must be approved by the CEO and senior management strategic committee (high level planning).

Prior period (previous months or years) results are to be studied to show the profit level of cost centres/section of the business, identify correlations/connections between financial statistics (financial information) and to set key performance indicators [1] and benchmarks/standards for future budgets.

The budget planning committee will meet before budgets are developed and agree on budget parameters/settings. The committee will consist of all department managers plus the CEO and CFO.

A CAPEX [2] budget will be developed from the approved business plan.

A detailed sales budget (sales income) must be completed before completing the profit budget for the year.

A cash flow budget [3] covering the first three months will be prepared after the profit budget [4] is completed.

A master budget [5] including profit projections (profit plans) will be completed from which cost centre allocations will be made.

Budget notes that contain all the assumptions (something that is believed to be true but no proof) used in the budgets should accompany/be with the master budget or be made available as a separate document. Where possible, the notes should justify/prove the basis on which the estimates/guesses were made.

Overheads (non-direct expenses) will be apportioned/spread across the cost centres equally. Exceptions/not a general rule need to be negotiated/discussed with relevant/concerned authorities.

All expenses and income will be spread equally throughout the year unless otherwise required by business needs or business environment.

The financial cycle (ups and downs of income and expenses) for budgeting purposes will be yearly ending 30 June.

Reporting requirements

Software applications to be used in reporting:

Environment (i.e computers and systems available) - MS Windows.

Accounting information system - MYOB AccountRight.

Data analysis - Microsoft Excel 2007.

Actual/real results will be produced monthly by the MYOB accounting system. Actual variances (real changes/differences) to budget will be produced using Excel with a report prepared for senior management for any important differences (i.e significant variances).

Financial delegations

Each manager is responsible for achieving the revenue budgets (sales income) 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 reports

All 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

variance report

period of the budget.

[1] KPIs - Key Performance Indicators evaluate the success of an organization or of a particular activity in which it engages

[2] CAPEX - Capital expenditures(CAPEXorcapex) areexpenditures altering the future of the business. A capital expenditure is incurred when a business spends money either to buyfixed assetsor to add to the value of an existing fixed asset

[3] Cash flow budget - An estimation of the cash inflows and outflows for a business or individual for a specific period of time

[4] Profit budget - A planned financial forecast for the net income of a business.

[5] Master budget - The master budget is a collection of all smaller budgets used within a company.

Monitor/check and control finances

Submission details

Student's name

Student no.

Assessor's name

Assessment site

Assessment date/s

The assessment task is due on the date your assessor has told you. Any changes 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 student will show skill and knowledge to monitor/check and control finances.

Assessment description

In reply to the situation provided, you will create simple spreadsheet budget to show monitoring/checking information. Using information provided to you by your assessor, you will then use the budget spreadsheet to produce a report on expenditure/expenses in line with organizational/company policies and procedures. You will also adjust any backup/ contingency plans.

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 record budgeted/planned and actual/real figures to produce a variance/report on differences report.

3.Get real budget/financial plan figures from relevant/appropriate managers and accounting systems (assessor).

4.Monitor/check and record actual/real figures.

5.Consider feedback from team members.

6.Produce a variance/differences report as per organisational requirements.

7.Consider the scenario information and contingency/backup plan provided and analyse/study the variance/differences report.

8.Modify/adjust the contingency/backup and implementation/completion plans provided in the scenario to improve effectiveness/response.

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 (i.e a report showing any differences from the actual budget figures)

a modified contingency plan and modified implementation plan (i.e backup and completion plans)

your notes on procedures.

Your assessor will be looking for:

numeracy skills (reading and understanding figures) to read and understand a budget and to produce a variance report

technology skills to use software associated with financial recordkeeping. (i.ecomputer skills)

knowledge of basic accounting principles to identify and use account balances (understanding accounting basics to account pluses and minuses)

knowledge of organisational requirements related to financial management (i.e what the company wants in relation to moniey/finances)

knowledge of organisational requirements for records and reports

knowledge of principles and techniques (basics and ways) involved in budgeting, profit and loss (making or losing money) statements, electronic spreadsheets (i.e computer software files).

Appendix 1 - Scenario

Big 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.

Person

Position

Michelle Yeo

Chief Executive Officer (CEO)

Tom Copeland

Managing Director

John Black

Chief Financial Officer (CFO)

Stuart LaRoux

Operations General Manager

Pat Roberts

Senior Accountant

Sam Gellar

Sales General Manager

Charles Pierce

Production Manager

Holly Burke

HR Manager

According to company strategic/goals 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 (the business (economy) is not doing well)

increases in expenses such as wage expenses.

In addition to Australian operations, the company is considering manufacturing overseas as it is cheaper to manufacture. The company is also thinking of expanding into different products and not to have risk of poor sales of one product.

Role

You are the Senior Accountant at Big Red Bicycle. A major component/part of your role is setting budgets and monitoring budgetary performance for the organisation. (i.e how well the company is doing financially)

Task A

The Managing Director, Tom Copeland, has asked you to implement/put together a process/method to monitor/check expenditure/expenses and income/sales revenue. He has asked you to prepare spreadsheet to capture/record and compare/check against actual/real income and expenditure to what is recorded in the budget (i.e 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 budget variance/adjustment-differences report.

The report should conform to organisational requirements in policies and procedures

and contain:

columns to show actual account values

absolute variance (the actual/real change)

percentage variance (how much of the total amount, ie. percentage changed)

Task B

It has come to the attention of the Managing Director, Tom Copeland, that due to the current economic climate (i.e the state of business in the country or state is not all that good), sales volume may be 20% below target this financial year. Tom is worried that this may affect the planned profit (profit projections). The company can accept as much as a 10% variance/change in profit projections; however, more than this could make it difficult for company to pay its bills and put money into other areas and departments. Correct information to about the risks will only be available by mid Q2, when sales data for the company's product are in.

Consider the contingency plan and the implementation plan (backup and putting together plan) for the contingency/emergency-risk below. You have already implemented/put in place a part of the contingency plan, namely the watching and checking of how well the budget is performing and compare it to the variance/differences report you have prepared. You should now analyse/look at - study the report to determine the effectiveness of the contingency plan and its implementation/you putting it into place.

You have received the following feedback from team members:

Full-time workers and sales people are resentful/upset of time wasting and distracting/taking the attention of contract (on an special arrangement) employees.

Overtime (extra work) not used but employees resentful/upset 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/bonus program and tried hard to make sales in the third quarter (Q3); however, they were also resentful at the threatening/bullying tone of emails and soon lost enthusiasm/interest.

Effect of one-day training wearing off. (i.e what they learnt in the one day training is forgotten)

Fifty percent of direct wages costs (extra pay) are attributable/linked to short-term contract employees (people hired for special reasons) whose contracts have expired/finished and who are no longer needed.

Employees concerned about lack of attention paid to wastage: water; electricity: paper; raw materials. (i.e staff misusing services like water and electricity)

Employees feel left out of budgetary decision-making in general. (i.e management did not consult with employees when setting budgets)

The Managing Director would like you to submit a revised/changed contingency plan and contingency implementation plan (backup plans) to bring income and expenses under more effective control.

Contingency plan for Task B

Contingency Plan

Company name: Big Red Bicycle Pty Ltd

Person developing the plan:

Name : Tom CopelandPosition: Managing Director

Risk identified: Profit for FY (financial year) more than 10% less than budgeted

Strategies/activities to minimize/reduce the risk

By when

By whom

Produce quarterly variance/differences reports to identify income/ expenditure and profit shortfalls over 10%.

Q2

PR

Implement sales training/coaching.

Q2

PR

Implement incentives/bonus program.

Q2

PR

Reduce overtime.

Q2

PR

Contingency implementation plan for Task B

Risk identified: Profit for FY more than 10% less than budgeted

Activity

Monitoring activity and date

Person/s

Monitor variance (differences)

Completion of variance report: Q2.

PR

Analysis of report to identify issues.

Management report: Q2.

PR

Email to warn employees of risk to jobs.

Monitoring of variance report results: Q4.

PR

Email to announce rise of commission from 2% to 2.5%.

Monitoring of variance report results: Q3.

PR

Email to inform employees that overtime will no longer be approved.

Monitoring of variance report results: Q3.

PR

Email to inform employees of mandatory/compulsory sales skills training: set program.

Monitoring of variance report results: Q3.

PR

Mandatory/compulsory training conducted.

Monitoring of variance report results: Q3.

PR

Appendix 2 - Budgeting and finance policy

Budget preparations

The business plan will set the key/important parameters/settings for all financial budgeting.

Variations/changes to the business plan must be approved by the CEO and senior management strategic committee (high level planning).

Prior period (previous months or years) results are to be studied to show the profit level of cost centres/section of the business, identify correlations/connections between financial statistics (financial information) and to set key performance indicators [1] and benchmarks/standards for future budgets.

The budget planning committee will meet before budgets are developed and agree on budget parameters/settings. The committee will consist of all department managers plus the CEO and CFO.

A CAPEX [2] budget will be developed from the approved business plan.

A detailed sales budget (sales income) must be completed before completing the profit budget for the year.

A cash flow budget [3] covering the first three months will be prepared after the profit budget [4] is completed.

A master budget [5] including profit projections (profit plans) will be completed from which cost centre allocations will be made.

Budget notes that contain all the assumptions (something that is believed to be true but no proof) used in the budgets should accompany/be with the master budget or be made available as a separate document. Where possible, the notes should justify/prove the basis on which the estimates/guesses were made.

Overheads (non-direct expenses) will be apportioned/spread across the cost centres equally. Exceptions/not a general rule need to be negotiated/discussed with relevant/concerned authorities.

All expenses and income will be spread equally throughout the year unless otherwise required by business needs or business environment.

The financial cycle (ups and downs of income and expenses) for budgeting purposes will be yearly ending 30 June.

Reporting requirements

Software applications to be used in reporting:

Environment (i.e computers and systems available) - MS Windows.

Accounting information system - MYOB AccountRight.

Data analysis - Microsoft Excel 2007.

Actual/real results will be produced monthly by the MYOB accounting system. Actual variances (real changes/differences) to budget will be produced using Excel with a report prepared for senior management for any important differences (i.e significant variances).

Financial delegations

Each manager is responsible for achieving the revenue budgets (sales income) 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 reports

All 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

variance report

period of the budget.

[1] KPIs - Key Performance Indicators evaluate the success of an organization or of a particular activity in which it engages

[2] CAPEX - Capital expenditures(CAPEXorcapex) areexpenditures altering the future of the business. A capital expenditure is incurred when a business spends money either to buyfixed assetsor to add to the value of an existing fixed asset

[3] Cash flow budget - An estimation of the cash inflows and outflows for a business or individual for a specific period of time

[4] Profit budget - A planned financial forecast for the net income of a business.

[5] Master budget - The master budget is a collection of all smaller budgets used within a company.