Unit Summary
This unit describes the skills and knowledge required to undertake financial management in an organisation or work area. It includes planning and implementing financial management approaches
and supporting and evaluating the effectiveness of financial management processes.
The unit applies to managers in a wide range of organisations and sectors who have responsibility for
the effective use of financial resources within work teams. They are responsible for ensuring that
financial resources are managed in line with the financial objectives of the team and organisation.
No licensing, legislative, or certification requirements apply to this unit at the time of publication.
Questions
1 Create definitions for the following financial terminology:
Accrual Accounting
Ageing
Ageing Summaries
ATO
Assets
Auditing
Balance Sheet
Budget
Cash Accounting
Cash Flow
Costs
Cost Variations
Contingency Plans
Expenses
Expenditure
Expenditure Overruns
Financial Management
Financial Statements
Financial Plans
Financial Objectives
Financial Reports
GAAP
GST
General Ledger
Ledger
Liabilities
Matching
Owner’s equity
Petty Cash
Profit & Loss Statements
Resources
Revenue
2 When discussing budgets and financial plans, it is important to ensure that the documented outcomes are achievable, accurate and comprehensible. List the relevant personnel, within an organisation, that would need to be consulted.
3 List and explain at least FIVE (5) of the basic accounting principles.
4 Provide TWO (2) examples of business operational risk scenarios that could affect your budgets and financial plans.
5 If your initial financial plans need to be varied, what contingency planning strategies would you need to put in place?
6 Match each of the following financial management roles with their respective job descriptions.
Financial Management Roles:
1. Maintaining journals, ledgers and other record keeping systems
2. Ensuring security, accuracy and currency of financial operations
3. Debt collection
4. Banking
5. Invoicing clients, customers and consumers
6. Arranging for use of corporate credit cards
7. Maintaining petty cash systems
8. Wages, salary payments and record keeping
9. Purchasing and procurement
Job Descriptions:
A. Person who organises contract entitlements, approval from management, daily limits, timing
and methods for reconciliation, producing receipts for card use and procedures for lost cards.
B. Person responsible for petty cash, the petty cash limit, the process for replacing petty cash,
record keeping, access to petty cash and security of petty cash and storage.
C. Person who is responsible for etiquette for recovering accounts and training in dealing with conflict and company procedures.
D. Person who is responsible for the banking and safety and reconciliation procedures for banking
and security.
E. Person responsible for software, MYOB or invoicing programs, managing accounts, professional communication and relationship management, data entry accuracy, program and computer use and the appropriate authority to invoice.
F. Person responsible for using recognised accounting standards, follows company procedures for bookkeeping, reporting responsibilities, access to data, dissemination processes, reporting hierarchy, ATO and Legal responsibilities and they have the appropriate training.
G. Person responsible for ensuring standards, audit procedures, audit requirements by law, communication between departments, researching the latest financial techniques and ongoing staff training.
H. Person responsible for pre-existing service agreements with suppliers, delivery procedures, software to track purchases, training required, ordering aligned with company supply needs, budgets for ordering and following established procedures
I. Person responsible for using timesheets, electronic recording of information, HR and payroll requirements in regard to format, timing, entitlements and paper work standards, using external sources for payroll management, using spreadsheets and tables for record keeping, communicating channels and establishing awards, contracts and pay rates.
7 Outline at least FIVE (5) ways support could be provided to a finance team to ensure that they competently perform their roles?
8 List and describe at least THREE (3) of the main resources and/or systems that finance personnel may need to successfully manage financial management processes.
9 As the finance manager, what processes would you implement to monitor actual expenditure and to control costs?
10 For each of the following types of source documents, categorise them according to whether you would access them to report on actual expenditure and to control costs or for information to include in your budgets and financial plans.
• Bank statements • Financial reports
• Cash flow projections • Operational plans
• Spreadsheet-based financial
projections
• Logs
• Invoices and receipts • Long-term budgets/plans
• Petty cash records • Credit card statements
• Short-term budgets/plans • Ledgers and journals
• Targets or key performance indicators for production, productivity, wastage, sales, income and expenditure
• Spreadsheet-based records
Report on actual expenditure and control costs Report on budgets and financial plans 11 As a finance manager, you would be expected to regularly collect and collate data and information on the effectiveness of financial management processes within the work team. List at least EIGHT (8) documents where you could source such data and information.
12 Outline the concept of GST and explain how the system operates in Australia.
13 Which Australian businesses have to register for GST?
14 List the business records that must be kept for Payments made to employees.
15 List the business records you must keep for Income Tax and GST purposes.
16 List all the business records you must keep for PAYG withholding for your business payments.
17 List all the business records you must keep for PAYG withholding for Fuel tax credits.
18 Outline at least THREE (3) of the ATO’s legal requirements or conditions for keeping business records.
19 Using the link below, research the ATO requirements for keeping tax records electronically then describe and explain THREE (3) of these requirements.
https://www.ato.gov.au/business/manage-your-invoices,-payments-and-records/gettingstarted/choosing-a-record-keeping-system/electronic-record-keeping/
20 Outline which relevant personnel in the organisation would be consulted when implementing changes to the budget/financial plans?
21 Outline the communication tools you would use to disseminate relevant details of agreed budget/financial plans to team members?
22 Describe the factors that can be used to analyse data and information in order to measure the effectiveness of financial management.
23 How can improvements with financial objectives be implemented and monitored?
24 What can you report on to monitor actual expenditure and to control costs across the work team?
25 The effectiveness of financial management processes relies on data collected from what sources?
26 What is a general ledger? List the five accounts that are included in the general ledger.
27 What items appear on a Balance Sheet?
28 List the people that budget plans must be clarified with?
29 Which personnel need to be informed after budget/ financial plans have been agreed upon?
30 Explain the importance of a debt collection procedure for aged debts?
ASSESSMENT 2 – PROJECT – STUDENT INFORMATION
This information is to be handed to each student to outline the assessment requirements.
You will be required to undertake three Assessment tasks in order to successfully complete this
Assessment. This Project Assessment will require you to demonstrate evidence of your ability to:
• Use financial skills to work with and interpret budgets, aging summaries, cash flow, petty cash, Goods and Services Tax (GST), and profit and loss statements
• Communicate with relevant people to clarify budget/financial plans, negotiate changes and disseminate information
• Prepare, implement and modify financial contingency plans
• Monitor expenditure and control costs
• Support and monitor team members
• Report on budget and expenditure
• Review and make recommendations for improvements to financial processes
• Meet record keeping requirements for the Australian Taxation Office (ATO) and for auditing
purposes
For this project, you will be required to undertake financial management within a work team in an
organisation or simulated organisation. It includes planning and implementing financial management
approaches, and supporting team members.
• You must complete the full project and provide enough information to demonstrate sufficient
understanding of what has been asked to achieve competency
• Ask your trainer/assessor if you do not understand the project, he/she may be able to reword the requirements for you or provide further assistance based on the Institute’s “Reasonable Adjustment Policy”
• Answers should be your own work, in your own words and not plagiarised, nor copied.
• However, if an answer is cut & pasted (such as a definition), then the source should be referenced
ASSESSMENT PART A:
Consider the following financial plan for Maree’s Tax Return Business. It shows Maree’s projections for
her new business over the first 18 months. She has worked out how many days in each month she can
work and estimate the number of new clients she can attract in each month of the first year. In the
second year, there will be repeat clients as well as new clients.
1. In what month will Maree first make a profit?
2. In what month will Maree reach “break-even”?
3. What happened to Maree’s pricing at the end of the first full year?
4. Maree has projected her revenue inclusive of GST. In the blank column above calculate the amount of GST payable to the government for each month and the total for the year.
Remember the Revenue figure includes GST, so the correct answer will not be 10% of the
revenue figure. (Refer to the table above)
5. What relevant legislation and ATO requirements do Maree need to be aware of? State how many years Maree will need to keep GST records in order to satisfy ATO requirements?
(Please use the ATO website to check your answer https://www.ato.gov.au/)
6. What 3 goals or KPIs would you set for Maree in relation to sales, costs, and expenses to maximise income for her business?
7. Maree’s business is in the professional services/ administration sector. Please research and outline the operational, market, and financial risks that may impact Maree’s business and prevent her from achieving her desired Financial Key Performance Indicators (KPIs).
1. Using the answers above, develop a Contingency Plan for Maree’s business which includes the probability of these risks occurring and action to implement in such an event? Students can use the Contingency Plan template Provided on the next page.
Contingency Plan
Risks Identified Risk
Acceptable
Yes/ No
If No, additional strategies to be implemented to plan for unforeseen circumstances (Contingencies)
Contingency Plan template
Contingency Plan
Risks Identified Risk
Acceptable
Yes/ No
If No, additional strategies to be implemented to plan for unforeseen circumstances (Contingencies)
2. What are the implications for the continuation of Maree’s business if any of these risks occurring?
3. What approach should Maree take in developing the budget with her team? How often should
they monitor budgets?
4. How will you communicate, support, monitor, and motivate staff towards achieving your countermeasure actions or achieving a revised KPI.
ASSESSMENT PART B
Review the following Profit and Loss Statement. It contains actual figures for Year 1 and Budget figures for Years 2 & 3. Please answer the questions that follow.
Giuseppe’s pizza shop Profit and loss statement
Year 1 Year 2 Year 3 Year4
INCOME ACTUAL BUDGET VARIANCE BUDGET BUDGET BUDGET
Shop Sales 145,000 150000 -5,000 155,000 160,000
Phone Sales 165,000 150000 15,000 175,000 190,000
TOTAL INCOME 310,000 300,000 10,000 330,000 350,000
LABOUR COSTS
Wages – Full time 40000 38000 2,000 39,140 39,520
Wages Part-time 25,000 25,000 0 25,000 25,000
Wages – Casuals 70,000 60,000 10,000 65,000 70,000
Superannuation
9.5% 12,825 11,685 1,140 12,260 12,780
TOTAL LABOUR 135,025 124,685 10,340 141,400 147,300
STOCK COSTS
Food 51000 52000 -1,000 54000 56000
Drink 60000 52000 8,000 54000 56000
TOTAL STOCK
COSTS 111,000 104,000 7,000 108,000 112,000
EXPENSES
RENT 25000 25000 0 25625 26265
BANK LOAN 26000 26000 0 26650 27315
UTILITIES 1500 1200 300 1250 1300
MOTOR VEHICLES 5300 5200 100 1250 1300
OTHER EXPENSES 2500 2400 100 2500 2600
PETTY CASH 500 500
TOTAL EXPENSES 60,300 59,800 500 57,775 59,280
TOTAL
INCOME 310,000 300,000 0 330,000 350,000
COSTS Labour 135,025 124,685 10,340 141,400 147,300
Stock 111,000 104,000 7,000 108,000 112,000
Expenses 60,300 59,800 500 57,775 59,280
PROFIT/LOSS 3,675 11,515 22,525 31,420
TAX AT 28% 1,029 3,224 6,307 8,798
NET PROFIT 2,646 8,291 16,218 22,622
1. What observations can you make about sales performance against budget in Year 1?
2. What are the main reasons why the business failed to meet its budgeted Nett Profit in Year 1?
3. What is the accumulated (total) budgeted net profit over the first 3 years of the business?
4. At the end of Year 1 Giuseppe decides he wants to open a new shop at the end of Year 3 and will require $45,000 for this new business. Taking into account the actual net profit in Year 1 and the budgeted net profit in Years 2 and 3 should Giuseppe consider opening a new shop at the end of Year 3? Give reasons for your answer
5. What effect would a change in the tax rate to 25% have on the net profit in the Year 3 budget?
6. Design and develop a spreadsheet to capture budgeted figures for Year 4. Use previous financial data from the Year 3 budget to determine allocation for resources.
a. Shop sales decrease by 5%
b. Phone sales increase by 18%
c. Labour costs increase by 3%
d. Food stock increases by 2% and drinks by 12%
e. Rent, Utilities and Other expenses all increase by 4%
f. After Year 1, Giuseppe realized that it is easier to pay cash for some small purchases and expenses such as car washes for his delivery van and small rewards for his staff. He included $500 as a petty cash expense in Years 2 and 3 in the Budget above. In Year 4 he believes this needs to be $600
g. What is the budgeted net profit for Year 4?
h. Format for budgets and reports to include the following details:
➢ name of the person who prepared it
➢ name of the budget/report, i.e. sales, expenses, cash flow, budget variation report
➢ period of the budget
7. Outline your recommendations to the organisation’s stakeholders for ongoing financial viability for the organisation, based on your assessment of the labour costs, stock costs, and expenses impacting organisational performance you have identified.
ASSESSMENT PART C
Giuseppe has a number of corporate customers that wish to order pizza every Friday for their staff.
They have asked to pay by invoice at the end of the month.
This was thought to be good for business as these customers placed large orders for lunchtime when
the shop generally was not very busy.
However, not all of these customers pay their accounts on time. Below is a summary of the money that is owed to Giuseppe.
Giuseppe’s Ageing Debtors Report
Debtor’s Name Current
Month
Over 30 days Over 60 Days Over 90
Days
Mike’s Mechanical Services $120.00 $90.00
Jenny’s Junk Yard $85.00
Harry’s Timber Yard $65.00 $50.00 $240.00
Mandy’s Caryard $180.00
1. Identify and describe the significant issues that are evidenced in the Ageing Debtors report above.
2. What is the total amount outstanding to Giuseppe?
3. a. Develop a Debt Collection Procedure for debt recovery used by the company, for aged debts. Please address the following:
➢ Current Month;
➢ Over 30 days;
➢ Over 60 days;
➢ Over 90 days.
b. Using the Debt Collection Procedure, what should Giuseppe do about the debt owed by Harry’s Timber Yard?
4. Explain with reasons whether you would or would not continue to give credit to customers for purchases.
5. Determine a trend of the average debtor days and the impact to the cash flow for Giuseppe.
6. Who are the major internal and external stakeholders Giuseppe would need to communicate with when preparing the budget?
7. What interest do they have in the development of the budgets for the company?
8. What processes and resources could you put in place to monitor and control costs across the work team?