BSBFIM501 Manage Budgets and Financial Plans

Role

You are the Senior Accountant at Big Red Bicycle. A major component of your role is setting budgets and monitoring budgetary performance for the organisation.

Part A 

The Managing Director, Tom Copeland has asked you to implement a process to monitor expenditure and income. He has asked you to prepare a spreadsheet to capture and compare actual income and expenditure to budgeted figures. Your spreadsheet must contain columns for each of the four quarters of the financial year. You are required to gather data from the relevant managers (your assessor) to complete a budget variation report. 

The report should conform to organisational requirements in policies and procedures
and contain:

• columns to show actual account values
• absolute variation
• percentage variation.

Part B

It has come to the attention of the managing director, Tom Copeland, that due to the current economic climate, sales volume may be 20% below target this financial year. Tom is worried that this may severely impact profit projections. The company can accept as much as a 10% variance in profit projections; however, more than this could severely affect the company’s ability to pay obligations and invest. Reliable data to determine whether the risk has eventuated should be available by midway through the second quarter (Q2), when sales data for the company’s product are in. 

Consider the contingency plan and the implementation plan for the contingency below. You have already implemented a portion of the contingency plan, namely the monitoring of budget performance in the variation report you have prepared. You should now analyse the report to determine the effectiveness of the contingency plan and its implementation.

You have received the following feedback from team members:

• full-time workers and sales people resentful of time wasting and distracting contract employees
• overtime not used but employees resentful of suggestion it might not be approved if needed
• training suited the needs of many sales team members but was not relevant to about half
• sales team members were happy with the incentives program and tried hard to make sales in the third quarter (Q3); however they were also resentful at the threatening tone of emails and soon lost enthusiasm
• effect of one-day training wearing off
• 50 percent of direct wages costs are attributable to short-term contract employees whose contracts have expired and who are no longer needed
• employees concerned about lack of attention paid to wastage: water; electricity: paper; raw materials
• employees feel left out of budgetary decision-making in general.

The managing director would like you to submit a revised contingency plan and contingency plan implementation to bring income and expenses under more effective control.