BSBFIM501 - Manage budget and financial plans

Activity 1.

1. Why should organizations collect, file and maintain accurate financial records?

Because managers and supervisors should have a clear understanding of the planning
functions in their organization and of the ways in which monitoring and analyzing work
performance and keeping performance records contributes to operations and to the
ability of the organization to exploit new opportunities and pre-empt change in a
competitive marketplace.

2. What are the expectations of managers and supervisors in relation to budget or

financial plans?

To maintain the budget and implement the Financial plans into the business. This also
includes educating staff about the responsibilities of maintaining costs.

3. What are the report that can be used for financial planning in an organization?
• Profit and Loss
• Balance sheet
• Revenue and Expenditure report
• Cash flow statement
• Debtors and Creditors reports

4. What is the process for preparing budgets or other financial plans?

• Identify data that needs to be collected.
• Identify the appropriate sources of data.
• Ensure currency, reliability and validity of data.
• Classify and code the data according to accounting and organisational principles.
BSBFIM501 - Manage budget and financial plans

• Calculate costs, profit and loss and/or breakeven analysis etc where necessary.
• Access the results of data analysis and provide formal or informal reports on the
outcomes.
• Keep accurate and secure records of financial transactions.

5. What two forms of budgeting might be used?

• Fixed budgeting
• Flexible budgeting

6. Which form of budget allows change to be made?

Flexible budgeting.

7. Explain how contingency plans work.

Contingency plans are put in place to address any unexpected changes that may occur.
They are developed using a 'What if' scenario and created ahead of time to avoid any
disruptions to the running of the business.

8. Why should team or work group members be actively involved in designing and
developing contingency plans?

Because they can add valuable ideas to the creation of the plans and they will also be
aware of the processes should a plan need to be put into place.

Activity 2.

1. How can employees be engaged in the preparation of financial report, allowing

detail to be easily disseminated among team members?
BSBFIM501 - Manage budget and financial plans

It should be communicated down through management and given them the opportunity
to contribute. Performance measures should also be incorporated into their job
descriptions to drive processes through the business.

2. Why should employees be involved in setting and monitoring the budget?

Because they can gain a better understanding of what the financial expectations are,
how they are implemented, and how they are maintained.

3. What is responsibility accounting and what is its importance to an organization?

Responsibility accounting is method of attributing costs to specific departments/

sections/ teams or project areas within an organization. Responsibility accounting is
important to organization because responsibility accounting can provide a sound basis
for team decision making.

4. What are cost centers?

A cost center is part of an organization that does not produce direct profit and adds to
the cost of running a company. Employees and cost center management are responsible
for its costs but not for the revenues or investment decisions.

For Example:

• Administration
• Manufacturing
• Marketing
• Sales
• Production
BSBFIM501 - Manage budget and financial plans

Activity 3.

1. What is the importance of a cash flow budget or report?

The importance of the cash flow budget or report is that it prevents impulse buying. The
cash flow budget or report helps to the generation of various ways of cash flow in an
organization.

2. What data do you need to collect, and from whom, in order to construct a cash
flow budget?
• Sales reports - last periods figures
• Outgoings such as purchases, marketing, loan repayments, etc
• Staff costs
• Capital such as stock on hand and cash

3. How the budget is used to monitor work, performance, variation, and team/
division outputs.

The budget reports are designed to give a clear overview of how the business is running.
Every expense can be calculated as a percentage of the total expense/margin to see if
it is cost effective. If it is being overspent then something needs to be done. This could
be a number of things such as reducing spending, reducing or increasing staff levels,
cross-training staff, incorporate techniques to increase sales, reduce stock levels,
outsourcing, and renegotiating supplier costs.

Activity 4

1. What is the meaning of the following terms:

BSBFIM501 - Manage budget and financial plans

A. Assents

Usually referred to as property or products that are of value and also cash. Can also be
referred loosely to employees of the company.

B. Liabilities

A liability is an obligation and it is reported on a company's balance sheet. A common

example of a liability is accounts payable. Accounts payable arise when a company
purchases goods or services on credit from a supplier. When the company pays the
supplier, the company's accounts payable is reduced.

C. Expenses

Money spent or cost incurred in an organization's efforts to generate revenue,

representing the cost of doing.

D. Equity

Equity is used in accounting in several ways. Often the word equity is used when referring
to an ownership interest in a business. Examples include stockholders' equity or owner's
equity.

2. Describe what the following budgets/ reports are and how they might be used to
inform a teams operations.

A. Variance analysis
BSBFIM501 - Manage budget and financial plans

Variance analysis is the quantitative investigation of the difference between actual and
planned behavior.

B. The general ledger

A general ledger account is an account or record used to sort and store balance sheet
and income statement transactions.

C. A sales analysis report/ budget report

A sales analysis report shows the trends that occur in a company's sales volume over
time. In its most basic form, a sales analysis report shows whether sales are increasing
or declining. At any time during the fiscal year, sales managers may analyze the trends
in the report to determine the best course of action.

D. Variance analysis reports

A variance analysis should be performed on an annual basis by all centers. The purpose
of the analysis is to compare the estimated costs of a rate proposal to the actual costs
for the same time period. This will aid centers in determining their variance between cost
estimates and actuals from year to year.

E. The revenue and expenditure report/ budget

a business is using the matching principle to link the expense incurred to revenues
generated in the same accounting period. This yields the most accurate income
statement results.

3. Explain why reports must be made to:

BSBFIM501 - Manage budget and financial plans

A. Management

As communication is the most important issue with any company, It's important to
communicate to all levels of a company. This is part of the control factor for any entity.
Management have to report to those above them or the investors, and they want to know
what is happening further down the company.

B. Investors

investors in a company for a return and you can determine what type of growth the
company may have by looking at its' financials.

C. Creditors

creditors may want to loan a business money so they must be able to determine if the
company can pay them back.

D. The government

reporting in government can be seen as a summary of the government's

performance, or capacity, in raising, handling, and using public money. Another way of
expressing the role of financial reporting is to say it goes hand in hand with accountability.
Accountability is often considered one of the cornerstones of good democratic
governments. Officials are given authority and responsibility and it is the task of the
officials to clearly convey actions taken and whether these actions fall within the
prescription of law and community wishes.

4. What details might be provided in a financial report?

BSBFIM501 - Manage budget and financial plans

• A clear statement of purpose

• Methods of data collection, sources, etc
• Details on how the information included in the report was collected
• Data related directly to the area being reported on, for instance

• costing trends ( wages, materials, overheads, etc)

• identification of shifts in supplies and market
• a statement of how such shifts may impact product costs and sales
revenue
• contingency plans suggestions or measures, with possible options for
sourcing other supplies, markets etc
• financial data and information, presented in a suitable form for use in the
draft cash flow forecast and for budget reports

• Relevant information relating to:

• sales information
• bills to be paid
• profit made
• items selling well
• items selling poorly
• condition of equipment
• maintenance required
• opportunities
• Analysis of problems, opportunities, threats and strengths that have or are likely
to impact on operations
• Problem solutions and improvement recommendations
• A recommended distribution list for the report, such as senior administration,
sales, production departments.
BSBFIM501 - Manage budget and financial plans

Summative assessment 1.

Question 1. What is GST and how is it implemented? Who is required to register for GST?
What piece of legislation primarily
governs GST?

GST is Goods and services tax. GST is a broad-based tax of 10% on most goods,
services and other items sold or consumed. GST is levied on most transactions in the
production process, but is refunded to all parties in the chain of production other than
the final consumer.

Required to register for GST:

• your business has a GST turnover of $75,000 or more

• your non-profit organisation has a turnover of $150,000 per year or more
• you provide taxi travel for passengers in exchange for a fare as part of your
business, regardless of your GST turnover. This rule applies to both taxi owner
drivers and people who just rent a taxi.

Piece of legislation primarily GST included:

• Division 9 of the A New Tax System (Goods and Services Tax) Act 1999
• (GST Act) stipulates that GST is applicable to a supply of goods, services and
transactions related to real property, obligations or rights.
BSBFIM501 - Manage budget and financial plans

Question 2. What are audits and why are they carried out?

An audit is an accounting procedure where financial records of a company are inspected

to verify that they are accurate. The audit keeps a company honest and reassures
employees and investors as to the financial status of the organization.

Question 3. What are:

• Budgets

An estimate of costs, revenues, and resources over a specified period, reflecting a

reading of future financial conditions and goals.

• Cash flow

Cash flow is the net amount of cash and cash-equivalents moving into and out of a
business. Positive cash flow indicates that a company's liquid assets are increasing,
enabling it to settle debts, reinvest in its business, return money to shareholders, pay
expenses and provide a buffer against future financial challenges.

• General ledgers

A general ledger is a company's set of numbered accounts for its accounting records.
The ledger provides a complete record of financial transactions over the life of the
company. The ledger holds account information that is needed to prepare financial
statements and includes accounts for assets, liabilities, owners' equity, revenues and
expenses.

• Profit and loss statements

BSBFIM501 - Manage budget and financial plans

A profit and loss statement is a financial statement that summarizes the revenues, costs
and expenses incurred during a specific period of time, usually a fiscal quarter or year.
These records provide information about a company's ability – or lack thereof – to
generate profit by increasing revenue, reducing costs, or both. The P&L statement is also
referred to as "statement of profit and loss", "income statement," "statement of
operations," "statement of financial results," and "income and expense statement.

Question 4.

There are several ways organisations maintain financial records. They include manual
systems and computer-based systems. How do computer and manual systems operate?

Manual accounting requires that all journal entries, invoices and other financial
documents be created by hand. Computerized accounting allows users to input
information into accounting software programs. Speed Accuracy Computerized
accounting produces information much faster than manual accounting.Accounting
software packages, such as QuickBooks and Peachtree, come with built-in databases
that allow users to input data. Financial Statements Manual accounting systems are
prone to mathematical errors and misplaced numbers. With based on numbers you input.
Cost In a manual accounting system, you have to prepare your company's income
statement, balance sheet and statement of owner's equity by hand. Information from
your journal entries helps formulate your company's financial statements. Computerized
accounting systems allow financial statements to be created from information stored in
the database.

Question 5.
BSBFIM501 - Manage budget and financial plans

Why do organisations need accurate and timely financial information? What information
is required to manage the organization financial? Who is usually responsible for an
organization financial management?

Organisations need accurate and timely financial information as this information is

analysed to produce information that can be used by management and employees in the
organisation. The financial data is then used to inform organisational, strategic and
operational plans. Information relating to costs, operations, assets, credit analysis, GST
transactions, inventory management, invoices and accounts is required to manage the
organisation’s finances. All employees and departments of an organisation are
responsible for the financial management of the company. If they meet the company’s
goals and ambitions, then they will gain more job satisfaction. Each member of the
committee (or board) of an incorporated association is jointly responsible for managing
the finances of the organisation. This means all committee members need to understand
the organisation’s financial obligations and participate in making decisions about your
organisation’s finances.