Manage budget and financial plans

Task 4:

Task A

Complete the following.

1. Review the Statement of Financial Performance in Appendix 2 to

calculate:

a. The average debtor days _46 days (362500/ 2900000) * 365

b. The average creditor days 29 days_(80000/1000000) * 365

c. The average stock turnover _1.9 times per year_380000/

(100000+300000/2)

2. Consider the existing BRB ageing debtors budget in Appendix 2. On

your response document, make two written recommendations for
improvement to existing financial management processes to improve
cash flow. To support your recommendations, refer to data sources,
organizational needs, and analytical techniques, for example:

a. Statement of Financial Performance

b. ledger accounts
c. scenario information
d. ageing debtors budget
e. ratios.

3 possible answers to look at:

- Debtors’ issues: currently ageing debtors’ ratio and ageing debtors’

budget show that debtors aren’t following their terms and conditions.
To avoid cash flow issues, Big red Bicycle should consider stricter
terms
Team members also need to be informed of policy and trained if
needed

- Creditors issues: Big Red bicycle is paying creditors less than 30 days.
There is a gap of 15 days between payment to creditors and receipt of
cash from debtors
Renegotiation of terms should be considered to avoid cash flow issues

- Stock issues: Big red bicycle has problems with stock spoilage and
wastage, therefore in order to avoid cash flow issues different
 strategies may need to be used .

Overall, big Red bicycle must reduce its debt levels for better cash flow
options.

3. On your response document, list three sources of information of use to

complete this activity.

Check different sources as listed above

Task B

1. On your response document, work out:

a. how many units at current variable cost would need to be produced to achieve profit
target (show calculations)
(1280000+1000000)/250= 9120 units

b. what the variable costs per unit would need to be to achieve profit target at current
manufacturing capacity (show calculations)
$215
(FC + Profit) / 8000=285
500-285= $215
.
3. On your response document, make one written recommendation based on your
analysis. To support your recommendation ensure you refer to the organizational needs
or situation, and any analytical techniques used. You may also suggest possible actions
for BRB to take depending on possible future scenarios.

2 examples please choose one only:

- Current variable cost (CVP) indicates that if price is maintained at $500 then the variable
cost per bike should be no more than $215. A negotiation of -35$ per unit should be
requested

- If price is maintained at $500, variable cost per bicycle should be no more than $215 at a
maximum production of 8000 units
Big red bicycle should consider switching production to India if renegotiation costs with
suppliers is unsuccessful.

3. On your response document, list three sources of information of possible use to complete this
activity.
Choose 3 from list:

● wages/salaries books (including PAYG, superannuation etc.)

● sales information and budgets

● purchasing records and materials used

● inventory, materials, finished goods records

● consumables records

● ledger accounts.

Task C

1. State how many years you will need to keep GST records in order to satisfy ATO
requirements:

5 years

2. Complete the GST budget on the following page to anticipate GST liability.

July August September

Budgeted cash receipts incurring GST:
Cash sales 20,000 10,000 10,000
Cash revenue 0 0 0
(besides sales)
Cash receipts from 0 0 0
sale of assets (not
stock)
Total receipts for 20,000 10,000 10,000
GST
Budgeted non-cash receipts incurring GST:
Debtors sales 180,000 230,000 150,000
Total non-cash 180,000 230,000 150,000
receipts
Total budgeted 200,000 240,000 160,000
receipts incurring
GST
Budgeted cash payments incurring GST:
Cash purchases of 0 0 0
stock
Cash expenses 4,300 5,200 5,250
Total cash receipts 4,300 5,200 5,250
incurring GST
Budgeted credit payments incurring GST:
Credit purchases of 25,000 30,000 25,000
stock incurring GST
Credit purchases of 4,300 5,200 5,250
assets (besides
stock)
Total cash 29,300 35,200 30,250
payments
incurring GST
Total budgeted 33,600 40,400 35,500
cash payments
incurring GST
GST cash budget calculations

a) Cash receipts

b) Cash payments

c) GST liability

Task D

Choose one of the recommendations from Task A or B and develop an action plan to implement and
monitor the recommendation. Ensure you include appropriate activities, monitoring, timelines and
accountabilities.

Please complete a contingency plan table as provided in previous assessments provide 2 activities:

Table must have activity, monitoring activity and date and persons

Topics to look at:

-Training needs

- Performance target adapted to include debt control

- Regularly schedule budget monitoring as part of quarterly reporting cycle

Use some of your own

Task E

To write a reflection report covering the below requests:

Few websites to assist you are:

www.business.vic.gov.au
essays.mightystudents.com/essay/fundamental.priciples.essay.17494

Understanding basic principles of accounting for dummies

Reflecting on the tasks you have undertaken and on your knowledge of financial management
and planning principles:
1. describe basic accounting principles
2. describe cash flows
3. describe ledgers and financial statements
4. describe profit and loss statements.

You may revisit the five fundamental principles of accounting. For example, the list is said to be
crucial to effective management decision-making:

1. Control – managers need to control and monitor the business.

2. Relevance – decision-makers need information that is timely, useful etc.
3. Compatibility – the accounting systems should match the aims of a company.
4. Flexibility – the accounting systems need to adapt to the company’s needs.
5. Cost-benefit – the benefits of the accounting information system need to outweigh the cost.

What do you think?