Assessment Task 1 (BSBFIM501)
Assessment Task 1 BSBFIM501 Manage budgets and financial plans
Plan financial management approaches
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 a
angement 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 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
and B.
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 unclea
. 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
. 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.
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 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 Directo
John Black
Chief Financial Officer (CFO)
Stuart LaRoux
Operations General Manage
Pat Roberts
Senior Accountant
Sam Gella
Sales General Manage
Charles Pierce
Production Manage
Holly Burke
HR Manage
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.
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 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 B
It has come to the attention of the Managing Director, Tom Copeland, that due to the cu
ent economic climate, sales volume may be 20% below target this financial year. Tom is wo
ied 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 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 co
elations 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 reports
All budgets must include the following details:
· name of the person who prepared it
· cost centre (if applicable)
· name of the budget
eport, i.e. sales, expenses, CAPEX, cash flow, budget variation report
· period of the budget.
Appendix 3 – Budgets and templates
Master budget with profit projections
Big Red Bicycle Pty Ltd
Master Budget FY 2011/2012
FY
Q1
Q2
Q3
Q4
REVENUE
Commissions (2% sales)
60,000
15,000
15,000
15,000
15,000
Direct wages fixed
200,000
50,000
50,000
50,000
50,000
Sales
3,000,000
750,000
750,000
750,000
750,000
Cost of Goods Sold
400,000
100,000
100,000
100,000
100,000
Gross Profit
2,340,000
585,000
585,000
585,000
585,000
EXPENSES
General & Administrative Expenses
Accounting fees
20,000
5,000
5,000
5,000
5,000
Legal fees
5,000
1,250
1,250
1,250
1,250
Bank charges
600
150
150
150
150
Office supplies
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
Marketing Expenses
Advertising
200,000
50,000
50,000
50,000
50,000
Employment Expenses
Superannuation
45,000
11,250
11,250
11,250
11,250
Wages & salaries
500,000
125,000
125,000
125,000
125,000
Staff amenities
20,000
5,000
5,000
5,000
5,000
Occupancy Costs
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
Wate
30,000
7,500
7,500
7,500
7,500
Waste removal
50,000
12,500
12,500
12,500
12,500
TOTAL EXPENSES
1,401,500
350,375
350,375
350,375
350,375
NET PROFIT (BEFORE INTEREST & TAX)
938,500
234,625
234,625
234,625
234,625
Income Tax Expense (25%Net)
234,625
58,656
58,656
58,656
58,656
NET PROFIT AFTER TAX
703,875
175,969
175,969
175,969
175,969
Sales cost centre expense budget
Sales Centre A
Sales Centre B
Sales Centre C
Commissions
$20,000
$20,000
$20,000
Wages
$100,000
$100,000
$100,000
Telephone
$3,000
$3,000
$3,000
Office supplies
$1,000
$1,000
$1,000
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
By when
By whom
© 2015 Innovation and Business Industry Skills Council Ltd 1st edition version: 1
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