You are required to provide detailed responses including examples to support your explanations to questions below. One or two line responses will not be acceptable.

Instruction:

2. Explain what is meant by the term 'Budget'
4. Assume you are employed by a white goods distributor and have been asked to make a list of Controllable factor (those things that the business can directly influence) and Uncontrollable factor (those things that the business can't directly influence) that might affect the sales of refrigerators in the coming year. Supply a list for the next management meeting.You must supply at least 3 controllable and 3 uncontrollable factors in detailed response with examples to each factor.
6. Explain the principles of double-entry bookkeeping and how they affect the budgeting process. (approx..one hundred words).

D With reference to Staples Pty Ltd 's Policies and Procedure (Appendix A),

What are the key features of organisational policies and procedures in reference to Financial Administration and Budgeting

Provide in detail 4 critical procedures to be followed in preparing budgets for this organisation.

E Identify two (2) key principles of budgetary control. In your own , briefly explain how each principle is applied to the business.

EXTRACT - POLICIES & PROCEDURES

Procedure for Financial Administration and Budgeting

Policy

Staples Pty Ltd a Retail Business has implemented this policy to ensure that financial administration is completed in accordance with legal, ethical and accounting requirements.

Processing of financial transactions

AllEmployees must ensure financial transactions are recorded accurately and timely.

Confidentiality

Employees should perform their duties with honesty and integrity.

Financial Reporting

Financial statements should be prepared in accordance with the Australian Accounting Standards AASB101.

Accrual basis

All transactions should be prepared on an accruals basis and are based on historical costs.

Budgets

Staples Pty Ltd budget process will include consultation and communication with managers from all departments.

Quantitative forecasting methods are applied usingstatistical measures to project future outcomes and trends.Forecasting techniques also includeinternal/controllable factors and external /uncontrollable factors. Final results are purely affected by the numbers inputted and therefore, a high degree of accuracy of financial reporting is required by the Board of Directors

Set Timelines

Budgets will be monitored weekly to identify all Key Performance Indicators.

All Budgets must be prepared 6 months prior to the start of the next financial year.

Budgetary Control

The Board of directors prepares a strategic plan for the future. This is the most important feature of a budgetary planning and control system. The plan enables the board of directors to:

• Look ahead, set out detailed plans to achieve the targets for each department, operation and (ideally) each manager, anticipate and give the organisation purpose and direction.
• Promote coordination and communication with the divisional mangers.
• Clearly define areas of responsibility, so all managers responsible for the budget are made accountable to achieve by using the management by exception principle for Variance reporting.
• budget targets for the operations under their personal control.

The Board of Directors applies control techniques by comparing actual results with budgets. Variances from the budget should be investigated. The reasons for the differences can be divided into controllable and non-controllable factors and prompt remedial action should be taken for variances.

The budgeting process is also used to motivate staff, improve resources allocation processes and time management by using the management by exception principle for Variance reporting.

Performance review

Significant performances (plus or minus 3%) and/or financial variances are to be reported monthly as a formal short report to the Board of directors. This report should include a description of the variance, the reasons behind it, the steps taken to remedy it (if required) and future steps to be taken to prevent the variance from recurring.

From the monthly variance reports, all significant variances a will be sent to the key manager who can exercise, monitor and find the reasons for the variance and make revisions to the budgets with the approval of the Board of directors

Key Performance Indicator (KPI), is another tool Staple's Board of Directors use to keep track of a company's financial performance. KPIs are measures by which the Board can monitor its progress throughout a specified period of time, namely a financial year. The KPIs also help the directors to plan future spending. Focus in areas in the business that may need improvement, identify any opportunities and challenges and assess whether the customers are happy or not.

The KPIs fixed to monitor financial performance are:

Revenue Growth

Revenue per customer segment (credit and Cash),

Profitability: Gross profit margins & Net profit margins

Working Capital Ratio: Current Assets, Current Liabilities 2:1

Debtors ageing

Creditors ageing

Net Cash Flow

Exceptional Circumstances

If circumstances arise internally/externally during the financial year, which may have a significant impact on current financial year budget estimates, a revised budget is to be prepared immediately for the Board of directors' approval.

Errors and Omissions

All errors and omissions detected in financial reports must be referred to the company accountant or immediate supervisor before any corrections are attempted.