BSBFIM501 Manage budgets and financial plans

Assessment Task 3 BSBFIM501 Manage budgets and financial plans
Choice Business College
RTO 41297 | CRICOS 03444C Page 1 of 7
Dec 2017 version: 2.0
Monitor and control finances
Submission details
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.
Performance objective
The candidate will demonstrate the ability to monitor and control finances.
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.
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 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. Consider feedback from team members.
6. Produce a variance report as per organisational requirements.
7. Consider the scenario information and contingency plan provided and analyse the
variance report.
8. Modify the contingency and implementation plans provided in the scenario to
improve effectiveness.
9. Submit all documents required in the specifications below to your assessor. Ensure
you keep a copy of all work submitted for your records.
Assessment Task 3 BSBFIM501 Manage budgets and financial plans
Choice Business College
RTO 41297 | CRICOS 03444C Page 2 of 7
Dec 2017 version: 2.0
Specifications
You must provide:
● a budget variance report
● a modified contingency plan and modified implementation plan
● your notes on procedures.
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 recordkeeping
● 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.
Assessment Task 3 BSBFIM501 Manage budgets and financial plans
Choice Business College
RTO 41297 | CRICOS 03444C Page 3 of 7
Dec 2017 version: 2.0
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 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 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 variance
report.
Assessment Task 3 BSBFIM501 Manage budgets and financial plans
Choice Business College
RTO 41297 | CRICOS 03444C Page 4 of 7
Dec 2017 version: 2.0
The report should conform to organisational requirements in policies and procedures
and contain:
● columns to show actual account values
● absolute variance
● percentage variance.
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 variance 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 are 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 the team members.
● 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.
● Fifty percent of direct wages costs are attributable to short-term contract employees
whose contracts have expired and who are no longer needed.
● 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
implementation plan to bring income and expenses under more effective control.
Assessment Task 3 BSBFIM501 Manage budgets and financial plans
Choice Business College
RTO 41297 | CRICOS 03444C Page 5 of 7
Dec 2017 version: 2.0
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 variance 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
Person/s
Monitor variance.
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
sales skills training: set program.
Monitoring of variance report
results: Q3.
PR
Mandatory training conducted.
Monitoring of variance report
results: Q3.
PR
Assessment Task 3 BSBFIM501 Manage budgets and financial plans
Choice Business College
RTO 41297 | CRICOS 03444C Page 6 of 7
Dec 2017 version: 2.0
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 Chief Financial Officer.
● 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 – MS Windows.
● Accounting information system – MYOB AccountRight.
● Data analysis – Microsoft Excel 2007.
Actual results will be produced monthly by the MYOB accounting system. Actual variances
to budget will be produced using 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.
Assessment Task 3 BSBFIM501 Manage budgets and financial plans
Choice Business College
RTO 41297 | CRICOS 03444C Page 7 of 7
Dec 2017 version: 2.0
● 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.