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BSBfim501 Manage budgets and financial plans


new doc 04-05-2020 15.06.28
Answered Same DayApr 05, 2021BSBFIM501Training.Gov.Au

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Kuldeep answered on Apr 13 2021
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Big Red Bicycle Pty
Assessment 1
Introduction about the Big Red Bicycle Pty. Ltd
Big Red Bicycle Pty Ltd is a bicycle company based in Victoria, Bendigo. The business manufactures bicycles and sells them to retailer in the Australian domestic market.
The senior management structure of the business appears below.
    Person
    Position
    Michelle Yeo
    CEO
    Tom Copeland
    administration Director
    John Black
    CFO
    Stuart LaRoux
    Operations General executive
    Pat Roberts
    Senior Accountant
    Sam Gellar
    Sales General executive
    Charles Pierce
    Production executive
    Holly Burke
    HR executive
According to the business strategic plan, the business’s goal is to attain a pre-tax net income of $ 1,000,000. The main threats to achieving this objective are poor sales and increased expenditures such as wages due to the economic downturn.
In addition to doing business in Australia, the business is also considering industrialized overseas to reduce costs. The business is considering diversifying its goods variety to decrease the threat of bad sales of a product.
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
A:
After reviewing the master budget as well as cost center budget prepared by the senior accountant. The budget has a few unrealizable, inaccurate or unclear problems:
• Salein's (Q1), (Q4) and (Q3) are usually 30% lower than the (Q2).
• Sales in the second quarter based on completing 90% of maintenance and repairs
• Sales in the second quarter are predicted to be $ 1,
000,000
• Commissions negotiated with sales team members are now 2.5%
Describe problem in the budget
According to total budget, some things are unclear and wrong. All the figures are similar. The average sales in Q2 are higher than in other quarters and at least 40% lower than in the Q2. We can simply recognize some changes moreover we can achieve the objective of the $ 1.000.000. From option 1 to option 3, we can simply recognize that reducing the expense of the sales, expenses furthermore increasing sales are the best ways to attain the objective. We don’t require decreasing labor and increasing sales prices, which would put our business at risk.
Prepare to negotiate necessary changes to the budget
Adjust the budget: It is recommended that the executive’s budget is superior to the budget; however the actual number is lower than the budget, so the cost must be lesser it’s crucial to produce revise budget for contrast.
Option 1: In Q1, Q3 and Q4 sales decreased by 40% compared with the Q2. This means that the trading volume in the second quarter will increase by 40% compare to other trading volumes, and the commission will rise by 30%.
Option 2: Due to the current economic situation, the cost of selling goods and expenses has been reduced by 20%.
In this manner we can generate more profits by producing sales; moreover we can contract with the suppliers to get very cheaper specials than previous to. if they disagree, we can use other resources to replace it. 20% reduction in employment costs = reduction in the number of employees, net profit will reach $ 1,051,500
Option 3: Decrease Commissions and Expense
The commission negotiate with the sales team members is now 2.5%, so the business will pay for commission, moreover the gross profit has changed every quarter. These things reduced the net profit before tax. It fell from $ 948,500 to $ 932,500.
Set up a time with your manager to meet. Email
In the next three months, take the necessary corrective measures to ensure budget control.
Dear Sir,
I discovered the budget problem and proposed three solutions. I hope we can spend some time meeting to discuss the details.
Regards
Date: 07/04/2020
Meet with your manager (assessor) to clarify budget and negotiate changes:
Identify at least two issues for clarification.
The primary problem I found in the sales budget was because it was evenly distributed. Therefore, the sales budget figures will be incorrect. It will directly make the wrong decision and make the organization fail and lose. The second problem is that the commission with the members is unfair and is less than 0.5%. This may lead to conflicts between employees and employers. This increases the likelihood that the company will suffer losses and risks. Another problem is the budget allocation of Center A, which is equal to Centers B and C. Center A needs more budgets.
Negotiate at least two changes and attached new budget after changes.
Risk reduction: The risk change is reduced because fraud and failure are detected early in the process and the risk impact is reduced, or the risk event is reduced due to the mitigation / elimination of risk exposure.
Cost reduction: All direct and indirect cost savings due to continuous monitoring. Consider the reduction in hours of full-time employee resources due to automatic monitoring.
    Purpose
    Identify areas in the current budget that is unachievable, wrong and unclear, moreover make some changes to get the executive’s authorization
    Time
    10-2pm
    Location
    UIT
    
    Manager of Sales name
    Sam Gellar
    
    Name of Manager
    Katherine
    
    Date
    16/10/17
    Identify areas in the budget that are unachievable, inaccurate or unclear
    Identified Issues
    Proposed budget changes
    Rationality of proposed changes
    Consequences of not making relevant changes
    
    Strategies to achieve new goals
    certified by
    Financial target
    Sales volume due to current economic climate
    Modified target reduced by 10%
    Keep your goals achievable
    Pressure on the sales team, wrong expectations of stakeholders; project failure due to wrong budget
    Motivate sales teams; promotional activities; increase social media marketing
    John Black-Chief Financial Officer
    
Waste removal
    
Waste removal costs are 20% higher than budget
    
Looking for other solutions to reduce waste and reduce material waste
    To reduce the cost of waste removal and keep it within budget
    
Wasting money with something that other solutions can manage
    To find the cause of waste, track the production process, find a better solution, and formulate waste policies and procedures.
    
Charles Pierce-Production Manager
    Advertising
    Economic downturn
    Reduce the budget of expensive media and explore cheap media
    Keep the budget within the recommended range and save money for other areas
    Use budget for invalid results and make it exceed plan
    Alternative advertisement
    Stuart LaRoux – Operations General Manager
Explain basic accounting principles add 4 more
Accrual principle: This is a concept, and accounting transactions must be recorded during the accounting period that actually occurs, instead of when they are related to cash flows.
Accounting standards: GAAP (Generally Accepted Accounting Standards) establishes standardized standards for accounting practices. Here are some principles:
Cost principle: It is related to historical costs, in other words, the costs associated with items that ignore inflation. Historical costs are reported in the economic statements.
Importance: It determines that accounting should not be related to value or irrelevant facts. Therefore, accounting data should be appropriate, fair, and relevant, and must be consider cost-effective for the data to be generated, thereby avoiding waste of resources or time arrangements.
Time period theory: Interval at which business activities can be reported can be weeks, months, quarters, and fiscal years. The financial statements must show the date of the fixed period.
Refer to relevant legislation and ATO requirements
Importance: Accounting data should be appropriate, fair, and relevant, and the generated information must be considered as cost-effective, thereby avoiding wasting resources and time.
BAS (Business activity statement)
The initial letter "GST" of the 1999 GST Act refers to services and goods tax, which is a 10% tax on goods, goods and services in Australian territory. The GST Law of 1999 is a piece of legislation which stipulates rules on goods and services tax (when applicable, the exemption law applies, etc.).
Corporations Act 2001
The 2001 Corporation Act (Cth) (Company Act, or casually referred to the "Company Act") is the law of Commonwealth of the Australia, which regulate the connection between Australian and commercial units at interstate and federal levels Related laws (Biswas-Diener, 2010). It is primarily aimed at industries, while it covers some laws associated to further entities, for example partnerships and custody investment plans.
(Corporations Act 2001, Wikipedia, 2016)
The purpose of the Act of the Investment Commission and Australian Securities Act 2001 is: (a) to stipulate that the Investment Commission and Australian Securities will be responsible for the laws of Commonwealth, Territory or State, giving these laws its functions and powers. ; (B) Provide functions, powers and operations of ASIC; (c) Establish a company and market advisory board to provide ministers with information on company laws, laws on companies and financial goods as well as economic markets, informed and operational operations and management Expert recommendations; (d) Establish an acquisition team, a company auditors or liquidators disciplinary committee, a economic reporting committee, an AAS committee, an audit moreover assurance standard committee, a economic reporting group and a company and financial services Parliamentary joint committee.
(Our Role, Australian Securities & Investments Commission, 2016)
ATO requirements:
Record keeping: Usually, for income tax purposes, you should keep record in accessible form (electronic or printed) for five years. A few fundamental records to stay are:
Regulatory documents (for instance, articles of association, rules, belief deeds) • economic reports (such as, financial statements, yearly budgets, audit reports, reconciliations, and accounts payable) • Taxation Invoices or income tax record, for example debtor and creditor lists, inventory records, moreover motor vehicle costs • Employee-related records withholding, retirement benefits, and fringe advantages) Suppliers of Enterprise Number • Bank records • Grant documents (eg, when funds are received, when acquittal is required, and the application deadline Date) • Agreements and Contracts (such as, cleaning, insurance and maintenance contracts, Leasing or financing • A copy of the tax reduction and exemption review • Helps to prepare records for tax statements and returns.
(Record keeping, Australian Taxation Office, 2015)
Refer to principles and techniques of managing budget items
Budgeting: The principles of budgeting involve plan management. Planning is essential. Planning is the first step in a long-term or short-term budget (Campbell, 2010). Determining the organization’s goals and objectives should ensure that the budget can control finances. Budget is the key to successful business change.
Cash flow: Cash flow represents business feasibility and corporate value. Understand cash flow to help formulate overall strategies and risks. Let everyone in the enterprise break down the forecast into understandable and predictable activities.
Spreadsheets: Spreadsheets can definitely help you manage your business. Calculate accurate and fast financial information or other important data.
Consumption tax: Companies with an annual income of less than $ 75,000 are exempt from consumption tax. Enterprises can list GST as operating expenses in their tax returns.
Ledger and financial statements: These reports are generated by organizing and analyzing the numbers in the income statement and balance sheet.
Profit and Loss Statement: This table can fully display your income and expenses over a time period. It shows how good or failed the business is.
There are the five principles of capital budgeting. They play a vital function in procedure of capital allocation and capital budgeting. The five values are:
(1) Decision-making is depending on cash flow, not accounting profits;
(2) Cash flow is depending on opportunity price;
(3) Cash flow time is significant;
(4) The financing cost is reflected in the required rate of project return.
The relevant cash flow is depends on the increment of cash flow. If project is carried out, this represents a change in cash flow. These are inevitable costs. Sunk costs are inevitable costs even if project is carried out.
Cash flow is depends on cost of opportunity. In the other words, its cash flow lost because of project financing.
The financing cost is reflected in the required rate of project return. The return rate is an aspect of potential risk in financing. Projects whose expected return rate is higher than their price of capital will raise the importance of the company.
(Principles of Capital Budgeting, Valuation Academy, 2016)
Budgeting Techniques
The budget is basically an action plan for upcoming trade period, and the budget plan must involve the whole association (de Haan, 2008). Effective budgeting capacity is critical to both performance and profitability, because if you don’t understand the cost, it is easy to fall into a loss for a period of time.
There are the three major budgeting methods:
Incremental budget: The incremental budget method combines the cost determined in the past accounting phase with the percentage increase. These increased percentages are used to cover up two main areas, including the increase in costs due to inflation and high purchase costs, or the predictions related to the increase in costs and revenue due to business volume forecasts. Then it may also cause companies to have to increase their sales prices to levels that are no longer competitive (Deci and M. Ryan, 2020).
Zero-based budgeting (ZBB): This heading is located in the heading because the ZBB system needs that the budget starts on a basis that each cost is zero. Next, processes each item related to the expenditure and decides whether the acquisition is totally necessary. Then, explore the different purchase options related with a particular project to ensure that the project is obtaining as cost-effectively as probable. However, it can be added that using this method will provide a very useful database that contains precious, time-saving data for the next few years.
Flexible budget-Like a zero-based budget, the flexible budget system does not display a name in the name because it involves a "flexible" common budget. The advantage of flexible budgeting is that it may become more correct as budget adjusts to several external changes. Under this approach, executives can provide critical data to achieve achievable budgets, pessimistic budgets, or optimistic budgets (Jeno et al., 2018). Throughout a flexible budgeting process, managers can better make important decisions related to risks and expenditures, and have a broader understanding of the worst and best outcomes.
(Budgeting Techniques, Fleming & Co. Certified Public Accountants, 2015)
Take and keep notes of agreed changes.
Supervisors and executives should understand how to collect, organize, communicate and present relevant, correct, reliable and up-to-date data, and then analyze these data to provide data for workers and organizations.
Supervisors and executives should have a clear knowledge of planning functions in the organization and how analysis and monitoring work or maintaining performance records contribute to processes and the organization’s capability to take advantage of innovative opportunities as well as preemptive changes (Linley, 2009). They must know how the financial plan, financial KPL and appropriate record keeping system meet tax and other legal needs.
Contingency plan template
    Contingency Plan
Company name: Big Red Bicycle Pty Ltd
Person developing the plan:
Name:    Position:
    Risk identified: The cost of sales per unit of goods has increased, while sales have fallen, and customers are planning to compete with competitors.
    Strategies/activities to minimize the risk
    By when
    By whom
    Turn purchasers into suppliers. If your finished product is an integral...
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