Copyright © 2016, APEX Institute of Education BSBFIM501 MANAGE BUDGETS AND FINANCIAL PLANS Page 1 BSBFIM501 Manage budgets and financial plans BSB51915 Diploma of Leadership and Management Name:...

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Copyright © 2016, APEX Institute of Education BSBFIM501 MANAGE BUDGETS AND FINANCIAL PLANS Page 1 BSBFIM501 Manage budgets and financial plans BSB51915 Diploma of Leadership and Management Name: _____________________________________ Student ID: _____________________________________ Copyright © 2016, APEX Institute of Education BSBFIM501 MANAGE BUDGETS AND FINANCIAL PLANS Page 2 This workbook has been designed to be used in conjunction with information and materials to be provided at sessions. This workbook does not contain all subject information and students should attend all scheduled sessions and read and understand all materials provided at sessions. Publisher: Apex Institute of Education Pty Ltd (A.C.N. 38 130 193 207) trading as Apex Institute of Education Parramatta Campus: 2 Sorrell Street, Parramatta NSW 2150 Sydney CBD Campus: L2&3 22-26 Goulburn Street Sydney NSW 2000 Telephone: 02 8007 6261 (Sydney) 02 8007 6262 (Parramatta) www.apexaustralia.edu.au RTO Provider No: 91606 CRICOS Provider: 03156M ABN: 38 130 193 207 Edition: 1st Edition Release date: 16 May 2016 The publisher owns the copyright in this publication. All rights reserved. No part of this publication may be reproduced by any process without the prior written permission of Apex Institute of Education Pty Ltd. Copyright © 2016 Apex Institute of Education The publisher owns the copyright in this publication. All rights reserved. No part of this publication may be reproduced by any process without the prior written permission of Apex Institute of Education Pty Ltd. Copyright © 2016, APEX Institute of Education BSBFIM501 MANAGE BUDGETS AND FINANCIAL PLANS Page 3 CONTENTS Subject Overview Page- 4 Element 1 Plan financial management approaches Page- 5 to 13 Knowledge test Page- 14 to 15 Element 2 Implement financial management approaches Page- 16 to 20 Knowledge test Page- 21 to 22 Element 3 Monitor and control finances Page- 23 to 31 Knowledge test Page- 32 to 32 Element 4 Review and evaluate financial management processes Page- 33 to 35 Knowledge test Page- 36 REFERENCES Page- 37 Copyright © 2016, APEX Institute of Education BSBFIM501 MANAGE BUDGETS AND FINANCIAL PLANS Page 4 SUBJECT OVERVIEW ELEMENT PERFORMANCE CRITERIA Elements describe the essential outcomes. Performance criteria describe the performance needed to demonstrate achievement of the element. 1 Plan financial management approaches 1.1 Access budget/financial plans for the work team 1.2 Clarify budget/financial plans with relevant personnel within the organisation to ensure that documented outcomes are achievable, accurate and comprehensible 1.3 Negotiate any changes required to be made to budget/financial plans with relevant personnel within the organisation 1.4 Prepare contingency plans in the event that initial plans need to be varied 2 Implement financial management approaches 2.1 Disseminate relevant details of the agreed budget/financial plans to team members 2.2 Provide support to ensure that team members can competently perform required roles associated with the management of finances 2.3 Determine and access resources and systems to manage financial management processes within the work team 3 Monitor and control finances 3.1 Implement processes to monitor actual expenditure and to control costs across the work team 3.2 Monitor expenditure and costs on an agreed cyclical basis to identify cost variations and expenditure overruns 3.3 Implement, monitor and modify contingency plans as required to maintain financial objectives 3.4 Report on budget and expenditure in accordance with organisational protocols 4 Review and evaluate financial management processes 4.1 Collect and collate for analysis, data and information on the effectiveness of financial management processes within the work team 4.2 Analyse data and information on the effectiveness of financial management processes within the work team and identify, document and recommend any improvements to existing processes 4.3 Implement and monitor agreed improvements in line with financial objectives of the work team and the organization Copyright © 2016, APEX Institute of Education BSBFIM501 MANAGE BUDGETS AND FINANCIAL PLANS Page 5 Element 1 Plan financial management approaches ___________________________________  Access budget/financial plans for the work team  Clarify budget/financial plans with relevant personnel within the organisation to ensure that documented outcomes are achievable, accurate and comprehensible  Negotiate any changes required to be made to budget/financial plans with relevant personnel within the organization  Prepare contingency plans in the event that initial plans need to be varied ______________________________________________________________________ An overview of budgeting A budget forecasts the financial results and financial position of a company for one or more future periods. A budget is used for planning and performance measurement purposes, which can involve spending for fixed assets, rolling out new products, training employees, setting up bonus plans, controlling operations, and so forth. Planning and monitoring your budget will help you identify wasteful expenditures, adapt quickly as your financial situation changes, and achieve your financial goals. Essential consideration while allocating funds to budget • your organisational objectives and priorities • other operational and organisational considerations such as income targets and the agreed expenditure cap • Availability of finance • any existing expenditure commitments ie recurrent staff costs Copyright © 2016, APEX Institute of Education BSBFIM501 MANAGE BUDGETS AND FINANCIAL PLANS Page 6 • the prioritisation of activities in the department Types of budgets are: 1. Sales budget- or revenue budget, it a first budget every organisation prepares, it includes all the sales generates from sales, service fees, income from investments, grants and donations 2. Operational budget- generally consists of the cost of goods and services sold budget. In the manufacturing industry, this covers an opening and ending inventory of goods for sale 3. Production cost budget: It includes the cost related to production, especially applicable to manufacturing industry. The 4 main component of production budget are: • Production requirement/target: This includes material purchase budget and includes anticipated sales as well as the stock currently held and the desired level of stock on hand. It also includes installed capacity, actual capacity utilisation, manufacturing losses • Direct costs: includes cost of raw materials, utilities- power, water, labour cost, subcontracting costs, salaries, rent, maintainence, taxes • Indirect costs: includes administration depts costs, depreciation, advertising and stock holding costs • Other components like ATP( Available to promise), ROL ( Reorder level of stock), max stock holding, min stock holding, lead times and annual advance orders 4. Financial statement budgets: comprises of the budgeted income statement and the budgeted balance sheet. 5. Cash flow budget/ forecast: are cash budgets which tells you whether you have enough cash to pay your bills. • The purpose of Cash flow forecast is to show how cash flows in and out of the business. It may be used in planning the short term credit needs. Copyright © 2016, APEX Institute of Education BSBFIM501 MANAGE BUDGETS AND FINANCIAL PLANS Page 7 • It determines the future ability to pay debts as well as expenses. • It is important for financial institutions to prepare cash budgets before making capital expenditures( working capital) for new assets as well as for expenditures associated with any planned expansion • Working capital(WC) is also known as net current assets • Its WC= Current assets - Current liabilities • There is negative cash flow when your payments exceeds to your earnings and positive cash flow is in case of vice versa Methods of budgeting A budget is basically a plan of action for the forthcoming business period and budget planning should involve the whole organisation. The ability to budget effectively is crucial both in terms of performance and profitability as without having an awareness of costs it is all too easy to spiral down into losses over a period of time. Following are some of the techniques of budgeting: Incremental Budgeting The incremental approach to budgeting combines the costs identified from the previous accounting period with percentage additions. These percentage additions are utilised to cover two key areas which include cost increases as a result of inflation or higher purchases costs and predictions associated with increases in costs and income as a result of business volume predictions. A key limitation of the incremental budgeting system is the manner in which percentages are added in a blanket fashion resulting in the likelihood of higher overall costs in the long-term. This may then also result in a business having to increase its sale prices to a level that is no longer competitive. Zero based budgeting: • In this method, every time budget is prepared, every activity is evaluated on its own merits and each item of expenditure is critically reviewed for its effect on the whole budget Copyright © 2016, APEX Institute of Education BSBFIM501 MANAGE BUDGETS AND FINANCIAL PLANS
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