BSB51915 Diploma of Leadership and Management BSBFIM501 Manage budgets and financial plans Portfolio of evidence Student name: _ Student number: _ Assessment number: 32026C/02   All terms mentioned in this text that are known to be trademarks or service marks have been appropriately capitalised. Use of a term in this text should not be regarded as affecting the validity of any trademark or service mark. © Open Colleges Pty Ltd, 2015 All rights reserved. No part of the material protected by this copyright may be reproduced or utilised in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the copyright owner. Requests for permission to make copies of any part of the work should be mailed to Copyright Permissions, Open Colleges, PO Box 1568, Strawberry Hills NSW 2012. 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Assessment submission When you are ready to submit your assessment, upload the file in OpenSpace using the assessment upload links in the relevant Study Period of your course. If you need further assistance, the Student Lounge provides a 'Quick Guide to Uploading Assessments'. Uploading assessments in OpenSpace enables Open Colleges to provide you with the fastest feedback and grading for your assessment. Please ensure that you keep a copy of all assessments you submit to Open Colleges. Unit description This unit describes the skills and knowledge required to undertaking financial management within a work team in an organisation. It includes planning and implementing financial management approaches, supporting team members whose role involves aspects of financial operations, monitoring and controlling finances and reviewing and evaluating effectiveness of financial management processes.   Introduction For this assessment, you are required to demonstrate your ability to: • clarify budget plans with your manager and negotiate changes to the budget • identify and analyse a risk to the budget • prepare a contingency plan to prevent or minimise the risks • access and communicate details of the budget to a team member • support your team member to perform their role with respect to software resources and systems. Assessment Description 32026C/02 Portfolio of evidence Case Study Company overview Babies on the Go is a pram manufacturer based in Perth, Western Australia. The company produces prams which it sells to retailers in the domestic Australian market. The senior management structure of the company appears below. Person Position Jan Goodwin CEO Henry George Managing Director Anita Tran CFO Anna Peters Operations General Manager George Floro Senior Accountant Sam Georges Sales General Manager Brett Price Production Manager Taylor Jones HR Manager According to company's strategic plans, the company aims to achieve a net profit before tax of $1,000,000. The main risks to this goal are: 1. poor sales due to economic downturn 2. increase in expenses such as wage expenses. In addition, Babies on the Go 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. Task 1. You are the manager of Sales Centre A, based in Perth. 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, your centre is expected to sell as much volume as the other two sales centres put together. Naturally, you expect cost allocations to reflect both the needs of Sales Centre A and its importance to the business. The Sales General Manager, Sam Georges, 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 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 has now increased from 2% to 2.5%. a. Access and review the budgets and financial plans for Babies on the Go Pty Ltd. i. As background information, you may want to familiarise yourself with Appendix 1 - Budgeting and finance policy. ii. Review the Appendix 2 - Master budget and profit projections, identify and write down all the errors. b. Record a one or two-minute audio/video of you conducting a meeting with your manager to clarify and negotiate the two identified issues in relation to the budget and financial plans. Ensure that documented outcomes are achievable, accurate and comprehensible. 2. It has come to the attention of the Managing Director, Henry George, that due to the current economic climate, sales volume may be 20% below target this financial year. Henry 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 expenses 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 by 20%. Prepare the contingency plan in line with the organisational policy. a. Consult with your manager to prepare a contingency plan, using the Appendix 3 – Contingency plan template, in the event that the initial plans need to be varied. 3. Refer to the budget information in the appendices and the Contingency Plan you have developed in the previous question. Determine what information you will need to communicate to your team. a. Write a draft email to your team to 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. (Take a screen shot and submit it with your assessment.) 4. You have identified that one team member, Claire Francis, 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 concluded that expenses will need to be tracked by quarter. Claire 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 expenses by account. Claire's skills include basic accounting and needs to be informed of Babies on the Go policies and procedures for petty cash. She is familiar with Microsoft Excel but does not know how to use formula and functions to sum columns or rows of figures. a. Develop a strategy that will enable you to support Claire in performing her role and developing spreadsheets using the information in Appendix 4 – Financial policies and procedures.   Appendices Appendix 1 – 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 cashflow 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 ● accounting information system – MYOB AccountRight plus ● data analysis – 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 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/report, i.e. sales, expenses, CAPEX, cashflow, budget variation report ● period of the budget.   Appendix 2 – Budgets and templates Master budget with profit projections Babies on the Go Master Budget FY 2014/2015 FY Q1 Q2 Q3 Q4 REVENUE Sales 3,200,000.00 700,000.00 1,000,000.00 750,000.00 750,000.00 Cost of Goods Sold 420,000.00 105,000.00 105,000.00 105,000.00 105,000.00 Gross Profit 2,502,000.00 527,500.00 821,750.00 576,400.00 576,350.00 EXPENSES General & Administrative Expenses Commissions (% sales) 78,000 17,500 23,250 18,600 18,600 Direct wages fixed 200,000 50,000 50,000 50,000 50,000 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 and 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 and 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 and 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 Water 30,000 7,500 7,500 7,500 7,500 Waste removal 50,000 12,500 12,500 12,500 12,500 TOTAL EXPENSES 1,679,500 417,875 423,625 418,975 418,975 NET PROFIT (BEFORE INTEREST AND TAX) 822,500 109,625 398,125 157,425 157,375 Income Tax Expense (25%Net) 205,625 27,406 99,531 39,356 39,344 NET PROFIT AFTER TAX 618,37 175,969 175,969 175,969 175,969 Sales centres 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   Appendix 3 – Contingency Plan Template Contingency Plan Company name: Babies on the Go Person developing the plan: Name Position Risk identified: Strategies/activities to minimise the risk By when By whom   Appendix 4 – 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 Babies on the Go 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 Babies on the Go 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 Babies on the Go 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 Babies on the Go 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 alternative 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.