BSBFIM501 Manage budgets and financial plans

Assessment 4

Review and Evaluate Financial Management Processes

Task A

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

a. The average debtor days = 46 days

b. The average creditor days = 29 to 30 days

c. The average stock turnover = 4 times

d. Show calculations and results on your response document for this

assessment task

 The average debtor days = Trade debtors / Account sales x 365

362,500 / 2,900,000 *365 = 46 days

 The average creditor days = Trade creditors / Purchases x 365

80,000 / 1,000,000 x 365 = 30 days

 The average stock turnover

(Opening stock + Purchase – Closing stock) / (Opening stock + closing stock / 2)

= (10,000+1,000,000-300,000) / ((100,000+300,000)/2)

= 800,000 / 200,000

= 4 times

2. On your response document, make two written recommendations for

improvement to existing financial management processes to improve cash

flow.

Firstly, we should improve the average debtor days by trying to collect from our

debtor within 30 days. From our record, it is shown that there is 15% of our

debtors pay their debts later than 60 days.

 BSBFIM501 Manage budgets and financial plans

Secondly, we should try to negotiate with our creditors to let us have 45-60 days

period of credit days. Therefore, we have more time to manage our cash flow.

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

activity.

 Statement of Financial Performance

 Ageing debtors budget

 Ledger Accounts

Task B: Complete the following

Bicycle price per unit $500 (excl. GST)

Current variable costs per unit $250

Fixed cost $1,280,000

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)

CM (Contribution margin) = P (Selling Price) – VC (Variable cost)

= 500 – 250

= 250

(FC + Profit) / CM = (1,280,000 + 1,000,000) / 250

= 9,120 units

9,120 units at current variable cost would need to be produced to achieve

profit target
 BSBFIM501 Manage budgets and financial plans

b. What the variable costs per unit would need to be to achieve profit

targets at current manufacturing capacity (show calculations)

(FC+ Profit) / Current manufacturing capacity = New CM

(1,280,000 + 1,000,000) / 8,000 = 285

Then

P – CM = 500 – 285

= 215

The variable costs per unit would need to be to achieve profit targets at

current manufacturing capacity is $215

2. 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.

My recommendation would be negotiate with Indian plant to manufacture for us

at the cheaper rate than Indonesian can as the Indian plant can produce more

volume therefore the cost can be reduced to $215 per unit.

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

use to complete this activity.

 Pricing Information

 Cost Information (From suppliers)

 Budget Plan
 BSBFIM501 Manage budgets and financial plans

Task C

1. State how many years you will need to keep GST records in orders to

satisfy ATO requirements.

We will need to keep GST records in orders to satisfy ATO requirements for 5

years.

2. Complete the GST budgets on the following page to anticipate GST

liability.

GST cash budget

July August September
calculations

200,000 x 10% = 240,000 x 10% = 160,000 x 10% =

a) Cash receipts
20,000 24,000 16,000

333,600 x 10% = 40,400 x 10% = 35,500 x 10% =

b) Cash payments
3,360 4,040 3,550

20,000 – 3,360 = 24,000 – 4,040 = 16,000 – 3,550 =

c) GST liability
16,640 19,960 12,450
 BSBFIM501 Manage budgets and financial plans

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.

Activities Timelines Accountabilities

Sales team needs to negotiate with our customers to

pay all sales within 30 days or else we will have to
Monthly Sales Dept.
charge the interest on over due payment and eventually
stop supplying our products to them accordingly.

Debtor collection department need to keep on track and

ensure to collect debt within the time frame. For
example, send a reminder to our debtors when debt Weekly Accounting Dept.
reach 7 days to due date, on the due date and late
reminder as well.

Review overdue debts and take a further action on how

to deal with such as consider cut down the volume of Quarterly General Manager
supplying products.
 BSBFIM501 Manage budgets and financial plans

Task E
Reflecting on the tasks you have undertaken and knowledge of financial

management and planning principles:

1. Describe basic accounting principles

Accounting is the analysis & interpretation of book keeping records. It includes

not only the maintenance of accounting records but also the preparation of

financial & economic information, which involves the measurement of

transactions & other events relating to entry. According to this statement to apply

basic account statement need to meet the stage of

I. Controls – manager and account department plan controls activity and task,

monitor activity and how business grow. In case of bicycle business by

controls activity, staff performances will lead better step.

II. Relevance – identify relevant practice and documentation for information

and awareness.

III. Flexibility – account systems to generate sales, cost cycle

2. Describe cash flows

Cash flow is the difference in amount of cash available at the beginning of a

period (opening balance) and the amount at the end of that period (closing

balance).

I. Controls: state from cash flow from account standards to set cash flow for

transaction of business.

II. Relevance: cash flow relevant to operating cash flow, free cash flow and net

cash flow to run the business.

 BSBFIM501 Manage budgets and financial plans

3. Describe ledgers and financial statements

The ledger holds account information that is needed to prepare financial

statements and includes accounts for assets, liabilities, owners’ equity, revenue

and expenses. Financial statements are a picture of a company’s financial health

for a given period of time at a given point of time. The statements provide a

collection of data about a company’s financial performance, its current conditions

and its cash flow.

I. Controls ledgers and financial statement - will state details of transaction in

time with account recording.

II. Compatibility – match aim of company and lead the activity to achieve the

goals

4. Describe profit and loss statements.

The profit and loss statement, or P&L, is a name that is often used for what today

is the income statement, statement of income, statement of operations, or

statement of earnings. In other words, the profit and loss statement reports a

company's revenues, expenses, and most of the gains and losses which

occurred during the period of time specified in its heading.