Performance objective

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

Assessment description

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

Procedure

1. Consider the scenario provided and tasks A and B

2. Prepare to meet with your team member (assessor) to communicate budget and then coach and train them in new role:

a. access required budget information from assessor

b. determine organisational needs

c. identify coaching/training needs of team member

d. plan coaching/ training session:

i. Outcome : team member produces spreadsheet to meet management requirements

ii. Include activities/elements to instruct, practice, test, motivate

e. Set up a time with your team member to have coaching/training session

3. Meet with your team member (assessor) to coach them in role:

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

4. Submit all documents required in the specifications below to your assessor. Ensure you keep a copy of all work submitted for your records.

Specifications

You must:

? meet with your assessor to role-play support of team member

? submit coaching/training plan.

Your assessor will be looking for:

? numeracy skills to read and understand a budget and to communicate a budget

? technology skills to use software associated with financial record keeping

? knowledge of basic accounting principles to identify and use account balances in communication and training

? knowledge of organisational requirements related to financial management such as contained in organisational policies and procedures

? requirements for organisational record keeping and auditing with respect to petty cash

? knowledge principles and techniques involved in budgeting and electronic spreadsheets.

Adjustment for distance-based learners

? No variation of the task is required.

? Documentation can be submitted electronically or posted in the mail.

Appendix 1 - Scenario

Big Red Bicycle 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:

Person Position

Michelle Yeo CEO

Tom Copeland Managing Director

John Black 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 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.

Role

You 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 A

You 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 B

You 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 you 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.

Appendix 2 - Financial policies and procedures

Expense Reimbursement

Purpose of the policy

To detail procedures to be followed in relation to expense reimbursement that has been incurred on behalf of the organisation.

The policy

Dolly's Delight 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 Dolly's Delight business.

Procedure

1. Will not reimburse staff 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 Dolly's Delight 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 when 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 job description. Any expenditure claims above the level prescribed must be forwarded to supervisors for approval.

8. Employees incurring authorised expenditure must submit their requests on a signed Expense Reimbursement Form.

9. Source documents (including tickets, receipts, vouchers, invoices) must be kept for all purchases and expenses claims.

10. The Financial Controller will 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 Cash

Purpose of the policy

To detail procedures to be followed in relation to tracking petty cash expenditure

The policy

Big Red Bicycle maintains a petty cash system to allow authorised personnel to pay for small expenditures in connection with business activity.

Procedure

1. 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 nightly.

5. Amounts over $800 must be banked.

6. Petty cash expense will be recorded as miscellaneous expense.

Adelaide Institute of Management & Technology BSBFIM501A Manage budgets and financial plans Assessment Task 1 BSBFIM501 Assessment Tools Page 1 of 57 Plan financial management approaches BSBFIM501 Assessment Tools Page 2 of 57 Submission details Candidate's name Phone no. Assessor's name Phone no. Assessment site Assessment date/s Time/s 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. BSBFIM501 Assessment Tools Page 3 of 57 Performance objective The candidate will demonstrate the ability to plan financial management approaches. BSBFIM501 Assessment Tools Page 4 of 57 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. BSBFIM501 Assessment Tools Page 5 of 57 Procedure 1. 2. Read through the scenario provided and tasks A and B. 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 c. set up a time with your manager to meet. 3. 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. 4. Submit all documents required in the specifications below to your assessor. Ensure you keep a copy of all work submitted for your records. BSBFIM501 Assessment Tools Page 6 of 57 Specifications You must: meet with your assessor to clarify budget and negotiate changes provide a contingency plan. Your assessor will be looking for: numeracy skills to read and understand a budget and negotiate budget re-allocations knowledge of basic accounting principles to identify and use account balances knowledge organisational requirements related to financial management such as contained in organisational policies and procedures knowledge of principles and techniques involved in budgeting. Adjustment for distance-based learners No variation of the task is required. Documentation can be submitted electronically or posted in the mail. BSBFIM501 Assessment Tools Page 7 of 57 Appendix 1 - Big Red Bicycle Pty Ltd scenario Big Red Bicycle 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 CEO Tom Copeland Managing Director John Black 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 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. Role You 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. BSBFIM501 Assessment Tools Page 8 of 57 Task A The 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 at the budget for your cost centre closely, 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 B It 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. BSBFIM501 Assessment Tools Page 9 of 57 Appendix 2 - Budgeting and finance policy Budget 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 finance manager. 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 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. Reporting requirements Software applications to be used in reporting. environment - Windows BSBFIM501 Assessment Tools Page 10 of 57 accounting Information System - BRB will use MYOB AccountRight plus data analysis - BRB will use Microsoft Excel 2007. Actual results will be produced monthly by the MYOB accounting system. Actual variances to budget will be performed by 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 reports All 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. BSBFIM501 Assessment Tools Page 11 of 57 Appendix 3 - Budgets and templates Master budget with profit projections Big Red Bicycle Pty Ltd Master Budget FY 2011/2012 FY Q1 Q2 Q3 60,000 Q4 15,000 15,000 15,000 15,000 200,000 50,000 50,000 50,000 50,000 3,000,00 0 750,000 750,00 0 750,00 0 750,00 0 400,000 100,000 100,00 0 100,00 0 100,00 0 2,340,00 0 585,000 585,00 0 585,00 0 585,00 0 20,000 5,000 5,000 5,000 5,000 5,000 1,250 1,250 1,250 1,250 600 150 150 150 150 5,000 1,250 1,250 1,250 1,250 Postage & printing 400 100 100 100 100 Dues & subscriptions 500 125 125 125 125 Telephone 10,000 2,500 2,500 2,500 2,500 Repairs & maintenance 50,000 12,500 12,500 12,500 12,500 Payroll tax 25,000 6,250 6,250 6,250 6,250 200,000 50,000 50,000 50,000 50,000 45,000 11,250 11,250 11,250 11,250 500,000 125,000 125,00 0 125,00 0 125,00 0 20,000 5,000 5,000 5,000 5,000 Electricity 40,000 10,000 10,000 10,000 10,000 Insurance 100,000 25,000 25,000 25,000 25,000 Rates 100,000 25,000 25,000 25,000 25,000 Rent 200,000 50,000 50,000 50,000 50,000 Water 30,000 7,500 7,500 7,500 7,500 Waste removal 50,000 12,500 12,500 12,500 12,500 350,37 350,37 350,37 REVENUE Commissions (2% sales) Direct wages fixed Sales Cost of Goods Sold Gross Profit EXPENSES General & Administrative Expenses Accounting fees Legal fees Bank charges Office supplies Marketing Expenses Advertising Employment Expenses Superannuation Wages & salaries Staff amenities Occupancy Costs TOTAL EXPENSES BSBFIM501 Assessment Tools 1,401,50 350,375 Page 12 of 57 0 5 NET PROFIT (BEFORE INTEREST & TAX) 938,500 234,625 Income Tax Expense (25%Net) 234,625 58,656 NET PROFIT AFTER TAX 703,875 175,969 234,62 5 58,656 175,96 9 5 5 234,62 5 234,62 5 58,656 58,656 175,96 9 175,96 9 Sales cost centre expense budget Sales Centre A Sales Centre B Sales Centre C $20,000 $20,000 $20,000 $100,000 $100,000 $100,000 Telephone $3,000 $3,000 $3,000 Office supplies $1,000 $1,000 $1,000 Commissions Wages BSBFIM501 Assessment Tools Page 13 of 57 Contingency plan template Contingency Plan Company name: Big Red Bicycle Pty Ltd Person developing the plan: Name Position Risk identified: Strategies/activities to minimise the risk BSBFIM501 Assessment Tools By when Page By whom 14 of 57 BSBFIM501 Assessment Tools Page 15 of 57 Assessment Task 2 BSBFIM501 Assessment Tools Page 16 of 57 Implement financial management approaches BSBFIM501 Assessment Tools Page 17 of 57 Submission details Candidate's name Phone no. Assessor's name Phone no. Assessment site Assessment date/s Time/s 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. BSBFIM501 Assessment Tools Page 18 of 57 Performance objective The candidate will demonstrate the ability to implement financial management approaches. BSBFIM501 Assessment Tools Page 19 of 57 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. BSBFIM501 Assessment Tools Page 20 of 57 Procedure 1. Consider the scenario provided and tasks A and B 2. Prepare to meet with your team member (assessor) to communicate budget and then coach and train them in new role: a. access required budget information from assessor b. determine organisational needs c. identify coaching/training needs of team member d. plan coaching/ training session: i. Outcome : team member produces spreadsheet to meet management requirements ii. Include activities/elements to instruct, practice, test, motivate e. Set up a time with your team member to have coaching/training session 3. a. Meet with your team member (assessor) to coach them in role: 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 4. Submit all documents required in the specifications below to your assessor. Ensure you keep a copy of all work submitted for your records. BSBFIM501 Assessment Tools Page 21 of 57 Specifications You must: meet with your assessor to role-play support of team member submit coaching/training plan. Your assessor will be looking for: numeracy skills to read and understand a budget and to communicate a budget technology skills to use software associated with financial record keeping knowledge of basic accounting principles to identify and use account balances in communication and training knowledge of organisational requirements related to financial management such as contained in organisational policies and procedures requirements for organisational record keeping and auditing with respect to petty cash knowledge principles and techniques involved in budgeting and electronic spreadsheets. Adjustment for distance-based learners No variation of the task is required. Documentation can be submitted electronically or posted in the mail. BSBFIM501 Assessment Tools Page 22 of 57 Appendix 1 - Scenario Big Red Bicycle 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: Person Position Michelle Yeo CEO Tom Copeland Managing Director John Black 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 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. Role You 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 A You have determined that you will need to access budget information from the Senior Accountant to explain to your team. You will explain the overall BSBFIM501 Assessment Tools Page 23 of 57 financial objective of the business, provide an overview of the budget and explain how the budget translates to expense allocations for the team. Task B You 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 you 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. BSBFIM501 Assessment Tools Page 24 of 57 Appendix 2 - Financial policies and procedures Expense Reimbursement Purpose of the policy To detail procedures to be followed in relation to expense reimbursement that has been incurred on behalf of the organisation. The policy Dolly's Delight 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 Dolly's Delight business. Procedure 1. Will not reimburse staff 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. BSBFIM501 Assessment Tools Page 25 of 57 4. Employee's own meals: a. employees on Dolly's Delight 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 when 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 job description. Any expenditure claims above the level prescribed must be forwarded to supervisors for approval. 8. Employees incurring authorised expenditure must submit their requests on a signed Expense Reimbursement Form. 9. Source documents (including tickets, receipts, vouchers, invoices) must be kept for all purchases and expenses claims. 10. The Financial Controller will 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 Cash Purpose of the policy To detail procedures to be followed in relation to tracking petty cash expenditure The policy Big Red Bicycle maintains a petty cash system to allow authorised personnel to pay for small expenditures in connection with business activity. Procedure 1. 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 nightly. 5. Amounts over $800 must be banked. 6. Petty cash expense will be recorded as miscellaneous expense. BSBFIM501 Assessment Tools Page 26 of 57 BSBFIM501 Assessment Tools Page 27 of 57 Assessment Task 3 BSBFIM501 Assessment Tools Page 28 of 57 Monitor and control finances BSBFIM501 Assessment Tools Page 29 of 57 Submission details Candidate's name Phone no. Assessor's name Phone no. Assessment site Assessment date/s Time/s 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. BSBFIM501 Assessment Tools Page 30 of 57 Performance objective The candidate will demonstrate the ability to monitor and control finances. BSBFIM501 Assessment Tools Page 31 of 57 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. BSBFIM501 Assessment Tools Page 32 of 57 Procedure 1. Read through the scenario provided and tasks A and B. 2. Design and develop a spreadsheet to capture budgeted and actual figures to produce a variance report. 3. Access actual budget figures from relevant managers and accounting systems (assessor). 4. Monitor and record actual figures. 5. Produce a variance report as per organisational requirements. 6. Consider the scenario information and contingency plan provided and analyse the variance report. 7. Modify the contingency and implementation plans provided in the scenario to improve effectiveness. 8. Submit all documents required in the specifications below to your assessor. Ensure you keep a copy of all work submitted for your records. BSBFIM501 Assessment Tools Page 33 of 57 Specifications You must provide: a budget spreadsheet a budget variation report a modified contingency plan and modified implementation plan. Your assessor will be looking for: numeracy skills to read and understand a budget and to produce a variance report technology skills to use software associated with financial record- keeping knowledge of basic accounting principles to identify and use account balances knowledge of organisational requirements related to financial management knowledge of organisational requirements for records and reports knowledge of principles and techniques involved in budgeting, profit and loss statements, electronic spreadsheets. Adjustment for distance-based learners No variation of the task is required. A follow-up interview may be required (at the discretion of the assessor). Documentation can be submitted electronically or posted in the mail. BSBFIM501 Assessment Tools Page 34 of 57 Appendix 1 - Scenario: Big Red Bicycle Pty Ltd Big Red Bicycle 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 CEO Tom Copeland Managing Director John Black 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 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. Role You 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 A The 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 BSBFIM501 Assessment Tools Page 35 of 57 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 variation report. The report should conform to organisational requirements in policies and procedures and contain: columns to show actual account values absolute variation percentage variation. Task B It 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 variation report you have prepared. You should now analyse the report to determine the effectiveness of the contingency plan and its implementation. You have received the following feedback from team members: full-time workers and sales people 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 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 50 percent of direct wages costs are attributable to short-term contract employees whose contracts have expired and who are no longer needed BSBFIM501 Assessment Tools Page 36 of 57 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 plan implementation to bring income and expenses under more effective control. BSBFIM501 Assessment Tools Page 37 of 57 Contingency plan for Task B Contingency Plan Company name: Big Red Bicycle Pty Ltd Person developing the plan: Name : Tom Copeland Position: Managing Director Risk identified: Profit for FY more than 10% less than budgeted Strategies/activities to minimise the risk By when By whom Produce quarterly variation reports to identify income/ expenditure and profit shortfalls over 10%. Q2 PR Implement sales training/coaching. Q2 PR Implement incentives 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 Perso n/s Monitor variance. Completion of report: Q2. PR Analysis of report to identify issues. Management report: Q2. PR Email to warn employees of risk to jobs. Monitoring of variation report results: Q4. PR Email to announce rise of commission from 2% to 2.5%. Monitoring of variation report results: Q3. PR Email to inform employees that overtime will no longer be approved. Monitoring of variation report results: Q3. PR Email to inform employees of mandatory sales skills Monitoring of variation report PR BSBFIM501 Assessment Tools Page 38 of 57 training: set program. Mandatory training conducted. BSBFIM501 Assessment Tools results: Q3. Monitoring of variation report results: Q3. PR Page 39 of 57 Appendix 2 - Budgeting and finance policy Budget 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 finance manager. 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 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. Reporting requirements Software applications to be used in reporting. environment - Windows BSBFIM501 Assessment Tools Page 40 of 57 accounting Information System - BRB will use MYOB AccountRight plus data analysis - BRB will use Microsoft Excel 2007. Actual results will be produced monthly by the MYOB accounting system. Actual variances to budget will be performed by 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 reports All 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. BSBFIM501 Assessment Tools Page 41 of 57 Assessment Task 4 BSBFIM501 Assessment Tools Page 42 of 57 Review and evaluate financial management processes BSBFIM501 Assessment Tools Page 43 of 57 Submission details Candidate's name Phone no. Assessor's name Phone no. Assessment site Assessment date/s Time/s 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. BSBFIM501 Assessment Tools Page 44 of 57 Performance objective The candidate will demonstrate the ability to review and evaluate financial management processes. BSBFIM501 Assessment Tools Page 45 of 57 Assessment description Using the scenario information supplied, you will respond to a number of scenario tasks. You will collect and analyse financial data and make recommendations to improve existing processes. You will also create a plan to implement and monitor solutions. BSBFIM501 Assessment Tools Page 46 of 57 Procedure 1. Consider the four scenario activities below along with the scenario background information and financial information contained in the appendices of this assessment task. 2. On a separate electronic document, provide written responses to the following four scenario activities. 3. Submit a document containing your responses to your assessor as per the specifications outlined below. Ensure you keep a copy of all work submitted for your records. BSBFIM501 Assessment Tools Page 47 of 57 Specifications You must: provide responses to the four scenario activities provided in this assessment task submit answers on an electronic document such as Word. Your assessor will be looking for: numeracy skills to read and understand a budget and perform cost accounting calculations knowledge of basic accounting principles to identify and use account balances knowledge of organisational requirements related to financial management knowledge of current requirements of the Australian Taxation Office with respect to GST knowledge of principles and techniques involved in: budgeting cash flows electronic spreadsheets GST ledgers and financial statements profit and loss statements. Adjustment for distance-based learners No variation of the task is required. A follow-up interview may be required (at the discretion of the assessor). Documentation can be submitted electronically or posted in the mail. BSBFIM501 Assessment Tools Page 48 of 57 Appendix 1 - Scenario background information Big Red Bicycle 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 CEO Tom Copeland Managing Director John Black 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 plans, the company had aimed to achieve a net profit before tax of $1,000,000. Actual figures showed the company fell about $175,000 short of goals. After successful labour cost cutting measures and improved sales team performance, the company aims to generate a net profit before tax of $1,200,000 from Australian operations alone. This year, 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. The board of directors of Big Red Bicycles feels that more cash will be needed to make investments to achieve strategic aims. One chief risk to plans is bad debt and poor cash flow due to large and unsustainable trade debtors balances quarter by quarter. Note: Strategic plans dictate that Big Red Bicycles must reduce its debt levels and so additional financing to increase cash flow is not an option. BSBFIM501 Assessment Tools Page 49 of 57 Role You are the Senior Accountant. As part of your role, you will need to complete the following four activities. Activity 1 As you are aware, one risk to the strategic plans of Big Red Bicycle (BRB) is bad debt and poor cash flow due to large trade debtors balances. Consider the following: according to its policies, Big Red Bicycles offers 30 day terms to debtors currently, BRB does not train sales staff on credit terms there is currently no enforcement of credit terms warehousing of stock is expensive at current leased premises many bicycles need to be thrown out if parts rust; this problem exacerbates the problem of waste expense. You have the following information from the Statement of Financial Position and current ledger accounts in the electronic accounting system (MYOB AccountRight). Account Trade debtors $ 362,500 Trade creditors 80,000 Opening stock 100,000 Closing stock 300,000 Purchases 1,000,000 Complete the following. 1. Review the Statement of Financial Performance in the appendices to calculate: a. The average debtor days ______________ b. The average creditor days _____________ c. The average stock turnover ___________ d. Show calculations and results on your response document for this assessment task. BSBFIM501 Assessment Tools Page 50 of 57 2. Consider the existing BRB ageing debtor's budget. On your response document, make two written recommendations for improvement to existing financial management processes to improve cash flow. To support your recommendations, refer to data sources, organisational needs, and analytical techniques, for example: a. statement of financial performance b. ledger accounts c. scenario information d. ageing debtors budget e. ratios. 3. On your response document, list three sources of information of use to complete this activity. BSBFIM501 Assessment Tools Page 51 of 57 Activity 2 In addition to its Australian business, Big Red Bicycles is considering manufacturing a new range of cheaper bicycles in Indonesia. The following information is available: the Indonesian plant has capacity to manufacture 8000 units Big Red Bicycle's strategic goal is to generate a pretax profit of $1,000,000 for the next financial year for Indonesian operations clients will pay a maximum of $500 per bicycle possibility exists for move to Indian plant with capacity for 10,000 units market for bicycles is growing rapidly and BRB will be able to sell everything produced limited ability to renegotiate costs with suppliers pricing and cost information is as follows. Bicycle price per unit Current variable costs per unit Fixed costs $500 (ex GST) $250 $1,280,000 Complete the following. 1. On your response document, work out: a. how many units at current variable cost would need to be produced to achieve profit target (show calculations) b. what the variable costs per unit would need to be to achieve profit target at current manufacturing capacity (show calculations). 2. On your response document, make one written recommendation based on your analysis. To support your recommendation ensure you refer to the organisational needs or situation, and any analytical techniques used. You may also suggest possible actions for BRB to take depending on possible future scenarios. 3. On your response document, list three sources of information of possible use to complete this activity. BSBFIM501 Assessment Tools Page 52 of 57 Activity 3 Soon you will need to prepare a business activity statement (BAS) for the first quarter on 2012/13. Complete the following. 1. State how many years you will need to keep GST records in order to satisfy ATO requirements. 2. Complete the GST budget on the following page to anticipate GST liability. BSBFIM501 Assessment Tools Page 53 of 57 July August Septemb er 20,000 10,000 10,000 Cash revenue (besides sales) 0 0 0 Cash receipts from sale of assets (not stock) 0 0 0 20,000 10,000 10,000 180,000 230,000 150,000 Total non-cash receipts: 180,000 230,000 150,000 Total budgeted receipts incurring GST 200,000 240,000 160,000 0 0 0 4,300 5,200 5,250 4,300 5,200 5,250 Credit purchases of stock incurring GST 25,000 30,000 25,000 Credit purchases of assets (besides stock) 4,300 5,200 5,250 Total cash payments incurring GST 29,300 35,200 30,250 Total budgeted cash payments incurring GST 33,600 40,400 35,500 Budgeted cash receipts incurring GST: Cash sales Total receipts for GST Budgeted non-cash receipts incurring GST: Debtors sales Budgeted cash payments incurring GST Cash purchases of stock Cash expenses Total cash receipts incurring GST Budgeted credit payments incurring GST GST cash budget calculations a) Cash receipts BSBFIM501 Assessment Tools Page 54 of 57 b) Cash payments c) GST liability Activity 4 Choose one of the recommendations from Activity 1 or 2 and develop an action plan to implement and monitor the recommendation. Ensure you include appropriate activities, monitoring, timelines and accountabilities. BSBFIM501 Assessment Tools Page 55 of 57 Appendix 2 - Financial information Statement of Financial Performance Big Red Bicycle Statement of Financial Performance For the year ended 30 June 2012 REVENUE Sales 2,900,000 Less direct wages and Commissions 272,500 Opening stock 100,000 Purchases 300,000 Closing stock Less cost of goods sold Gross Profit 20,000 380,000 2,247,500 EXPENSES General & Administrative Expenses Travel Legal fees Bank charges Office supplies 22,000 4,500 700 4,000 Postage & printing 500 Dues & subscriptions 600 Telephone 11,200 Repairs & maintenance 45,000 Payroll tax 25,000 Marketing Expenses Advertising 208,000 Employment Expenses Superannuation Wages & salaries Staff amenities 45,000 500,000 23,000 Occupancy Costs Electricity 38,000 Insurance 100000 Rates 100,000 Rent 200,000 Water 35,000 Waste Removal 60,000 TOTAL EXPENSES NET PROFIT (BEFORE INTEREST & TAX) BSBFIM501 Assessment Tools 1,422,500 825,000 Page 56 of 57 Income Tax Expense 206,250 NET PROFIT AFTER TAX 618,750 Ageing Debtors budget Big Red Bicycle AGED DEBTORS BUDGET 2011/12 TOTAL Qtr 1 Qtr 2 Qtr 3 Qtr 4 2,900,00 0 600,00 0 900,00 0 800,00 0 600,00 0 50% 50% 50% 50% 100% 300,00 0 450,00 0 400,00 0 300,00 0 Current 65% 195,00 0 292,50 0 260,00 0 195,00 0 30 Days 20% 60,000 90,000 80,000 60,000 60 Days 12% 36,000 54,000 48,000 36,000 90 Days 3% 9,000 13,500 12,000 9,000 Sales % Debtors Sales Total Debtors BSBFIM501 Assessment Tools Page 57 of 57