Assessment Task4

Assessment Task 4 BSBFIM501 Manage budgets and financial plans
Review and evaluate/examine financial

management processes
Submission details
Student’s name Student no.
Assessor’s name
Assessment site
Assessment date/s
The assessment task is due on the date your assessor has told you. Any changes to this
arrangement must be approved in writing by your assessor.
Submit this document with any required evidence attached. See specifications below
for details.
Performance objective
The student will show the skill and knowledge to review/relook and evaluate/examine
financial management processes.
Assessment description
Using the scenario/environment information supplied, you will respond/reply to a number of
scenario tasks. You will collect and analyse/study financial data and make
recommendations/changes to improve existing processes/systems. You will also create a plan
to implement/put together and monitor/check solutions/results.
Procedure
1. Consider the scenario, tasks and financial information contained in the appendices/at
the end of this assessment task.
2. On a separate electronic document (computer file), provide written responses to the
following five tasks (i.e. tasks A to E).
3. Submit a document containing your responses to your assessor as per the
specifications/standards outlined below. Ensure you keep a copy of all work submitted
for your records.
© 2015 Innovation and Business Industry Skills Council Ltd/Modified 14Sep15 1st edition version: 2
Page 1 of 15
Specifications
You must:
● provide responses to the five tasks provided in this assessment task
● submit answers on an electronic document such as Microsoft Word.
Your assessor will be looking for:

● numeracy skills (mathematical- knowledge of figures, sums) to read and understand a
budget and negotiate budget re-allocations (changes)
● knowledge of basic accounting principles and to identify/point out and use account
balances (plus and minus - credits and debits)
● knowing what the company wants in relation to finances – and also what is written in
company policies & procedures.
● knowledge of principles/rules and techniques/ways involved in budgeting (managing
money).
● knowledge of current requirements of the Australian Taxation Office with respect to
GST (goods & services tax)
● knowledge of principles and techniques involved in:
○ budgeting (financial planning)

○ cash flow (money coming in and money going out)
○ electronic spreadsheets (computer files)
○ GST (Goods & Services Tax)
○ Ledgers/books and financial statements (record keeping and financial
information)
○ profit and loss statements (records on how well the company is doing financially)
Appendix 1 – Scenario
Big Red Bicycle Pty Ltd is a bicycle manufacturer based in Bendigo, Victoria. The company
produces bicycles which it sells to retailers in the domestic Australian market.
The senior management structure of the company appears below:
Person Position
Michelle Yeo Chief Executive Officer (CEO)
Tom Copeland Managing Director
John Black Chief Financial Officer (CFO)
Stuart LaRoux Operations General Manager
Page 2 of 15
Pat Roberts Senior Accountant
Sam Gellar Sales General Manager
Charles Pierce Production Manager
Holly Burke HR Manager
According to company strategic/management goals plans, the company had aimed to

achieve/target a net profit before tax of $1,000,000. Actual figures showed the company fell
short (was less) approximately $175,000 of this goal.
After successful labour cost cutting measures (reducing staff) and improved sales team
performance (increasing sales), the company aims to generate/get a net profit before tax of
$1,200,000 from Australian operations/businesses alone.
This year, in addition to Australian operations, the company is considering manufacturing
overseas as it is cheaper to manufacture. The company is also thinking of expanding into
different products and not to have risk of poor sales of one product.
The board of directors of Big Red Bicycle feels that more cash will be needed to make
investments 1 to get company management goals/aims. One significant/important risk to plan
is bad debt 2 and poor cash flow (money coming in and going out) due to large and
unsustainable/unmanageable trade debtor balances (supplier bills) quarter by quarter.
Note: Strategic plans/ goals dictate/say that Big Red Bicycle must reduce its debt levels
(money owed) and so additional financing to increase cash flow is not an option (i.e
borrowing money from a bank etc is not a good idea).
Role
You are the Senior Accountant. As part of your role, you will need to complete the following
tasks.
Task A
As you are aware, one risk to the strategic plans of Big Red Bicycle (BRB) is bad debt and
poor cash flow due to large trade debtor (money owed to suppliers) balances. Consider the
following:
● According to its policies, BRB offers 30 day terms to debtors (30days to pay back by
people owing you or the company).
● BRB does not currently train sales staff on credit terms (on how to manage money
owed).
Investments - is time, energy, or matter spent in the hope of future benefits.
Bad debt - A bad debt is an amount owed by a debtor (who owes you money) that is unlikely to be
paid
Page 3 of 15
● There is currently no enforcement of credit terms. (no one is chasing up the money
owed)
● Warehousing of stock is expensive at current leased premises. (storage of goods is
expensive)
● Many bicycles need to be thrown out if parts rust; this problem exacerbates/grows the
problem of waste expense (i.e money wasted due to having to throw away products).
You have the following information from the Statement of Financial Position and current
ledger accounts in the electronic accounting system (MYOB AccountRight). (i.e financial
information from computer systems)
Account $
Trade debtors 362,500
Trade creditors 80,000
Opening stock 100,000
Closing stock 300,000
Purchases 1,000,000
Page 4 of 15
Complete the following.
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 days
c. The average stock turnover 1.9 times
d. Show calculations and results on your response document for this assessment
task.
Page 5 of 15
2. Consider the existing BRB ageing debtors budget in Appendix 2. On your response
document, make two written recommendations/ideas for improvement to existing
financial management processes to improve cash flow. To support your
recommendations, refer/point to data sources, organisational needs, and analytical
techniques (studied methods), for example:
a. Statement of Financial Performance
b. ledger accounts (accounts in the ledgers/books)

- the Statement of Financial Position and current ledger accounts in the
electronic accounting system (MYOB AccountRight). (i.e financial
information from computer systems)
c. scenario information (information based on your environment)

- Consideration of the ageing debtors ratio and ageing debtors budget
indicates that debtors are not adhering to terms. To avoid cash flow issues,
Big Red Bicycle should consider stricter terms for debtors and/or enforce
trading terms.
- Currently, team members do not have the capacity to enforce trading
terms.
d. ageing debtors budget (the report that shows how much money s owed to the
company and how late it is in being paid back)
- Consideration of the ageing creditors ratio indicates the Bid Red Bicycle is
paying creditors in less than 30 days on average. There is a large gap of 15
days between average payment to creditors and receipt of cash from
debtors.
- To avoid cash flow issues, Big Red Bicycle should consider negotiating
more favorable terms with creditors.
e. ratios. (what are the percentages compared to each other)
- Consideration of the stock turnover ratio reveals that the stock of bicycle is
sold out approximately twice per year. Big Red Bicycle has problems with
stock spoilage and wastage. Therefore, in order to avoid cash flow issues
and wastage problems, Big Red Bicycle should consider options such as
JIT (Just In-Time) manufacturing and distribution.
- The company may also be able to save money though leasing a smaller
warehouse. The company may consider discounting products to sell excess
stock as a last resort.
3. On your response document, list three sources of information of use to complete this
activity.
Task B
Page 6 of 15
In addition to its Australian business, Big Red Bicycle is considering manufacturing a new
range of cheaper bicycles in Indonesia. The following information is available:
● The Indonesian plant has capacity to manufacture 8,000 units.
● Big Red Bicycle’s strategic goal is to generate a pretax profit of $1,000,000 for the next
financial year for Indonesian operations.
● Clients will pay a maximum of $500 per bicycle
● Possibility exists for move to Indian plant with capacity for 10,000 units.
● Market for bicycles is growing rapidly and BRB will be able to sell all units produced.
● Limited ability to renegotiate/arrange a new agreement costs with suppliers.
● Pricing and cost information is as follows.
Bicycle price per unit $500 (excl. GST)
Current variable costs per unit $250
Fixed costs $1,280,000
Page 7 of 15
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)
Answer: Sales units to achieve profit = X = (FC + Profit) / (P – V)
Unit contribution margine (CM) =P – V
Therefore :
Sales unit to achieve profit at current CM = X = (FC + Profit) / CM
(1,280,000 + 1,000,000) / 250
=9,210 units
b. what the variable costs per unit would need to be to achieve profit target at
current manufacturing capacity (show calculations).
Answer: CM at maximum production to achieve target – (FC + Profit) / 8000
= 285
V = P – CM
= 500 – 285 = $215
2. On your response document, make one written recommendation based on your
analysis. To support your recommendation ensure you refer to the organisational
needs or situation, and any analytical techniques used. You may also suggest possible
actions for BRB to take depending on possible future scenarios.
Answer:
Consideration of price and variable coat data and CVP analysis indicates that, if price
is maintained at $500, the 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 renegotiating costs with suppliers is unsuccessful.
3. On your response document, list three sources of information of possible use to
complete this activity.
Answer:
- Wages/salaries book (including PAYG, superannuation etc.)
- Inventory, materials, finished goods record
- Purchasing records and materials used
Page 8 of 15
Task C
Soon you will need to prepare a Business Activity Statement (BAS) for the first quarter on
2012/13.
1. State how many years you will need to keep GST records in order to satisfy ATO
requirements.
Answer: The ATO requires GST record to be kept for at least five years.
2. Complete the GST budget on the following page to anticipate GST liability.
Answer:
July August September
Budgeted cash receipts incurring GST:
Cash sales 20,000 10,000 10,000
Cash revenue (besides sales) 0 0 0
Cash receipts from sale of assets (not stock) 0 0 0
Total receipts for GST 20,000 10,000 10,000
Budgeted non-cash receipts incurring GST:
Debtors sales 180,000 230,000 150,000
Total non-cash receipts 180,000 230,000 150,000
Total budgeted receipts incurring GST 200,000 240,000 160,000
Budgeted cash payments incurring GST:
Cash purchases of stock 0 0 0
Cash expenses 4,300 5,200 5,250
Total cash receipts incurring GST 4,300 5,200 5,250
Budgeted credit payments incurring GST:
Credit purchases of stock incurring GST 25,000 30,000 25,000
Credit purchases of assets (besides stock) 4,300 5,200 5,250
Total cash payments incurring GST 29,300 35,200 30,250
Total budgeted cash payments incurring 33,600 40,400 35,500

GST
GST cash budget calculations
a) Cash receipts 20,000 24,000 16,000
Page 9 of 15
b) Cash payments 3,360 4,040 3,025
c) GST liability 16,640 19,960 12,975
Task D
Choose one of the recommendations from Task A or B and develop an action plan to put
together a plan and to check the ideas put in place. Ensure you include the right activities,
monitoring/checking, timelines (due by when) and accountabilities/responsibilities.
Answer:
Recommendation:
Consideration of the ageing debtors ratio and ageing debtors budget indicates that debtors are
not adhering to terms. To avoid cash flow issues, Big Red Bicycle should consider stricter
terms for debtors and/or enforce trading terms. Currently, team members do not have the
capacity to enforce debt terms effectively. Team members should be informed of policies and
trained if necessary.
Activity Monitoring activity Person/s

and date
Communication of requirement to enforce terms Completion of HB/SL

to sales team (preferably though a personalized communication
forum or meeting as opposed to by email) forum: quarter 1,
explaining need to gain control of debtors, week 1.
benefits to organization, benefits to team
Completion and
members such as professional development (if
analysis of feedback:
training option is pursued, for example).
quarter 1, week 1.
Senior management team should be represented

at communication forum to underscore
importance to organization and motivate
employees.
Include request for feedback.
Training needs analysis performed to ensure Training need Sales Team

targeted and control/collection target. analysis conducted Managers
Consultation with team members conducted. and submitted to
reports containing
new performance
Page 10 of 15
scorecards,
professional
development plans
for team members,
etc. prepared for
senior management.
Training (or other intervention such as Assessment of HB

coaching, mentoring etc.) conducted training/intervention
effectiveness
conducted.
Management report
completed containing
generated
recommendations
submitted to senior
management team
and sales team
managers: quarter 1,
week 2.
Regularly scheduled budget monitoring as part Analysis of ageing PR

of quarterly reporting cycle. debtors and
recommendations
made to senior
management
quarterly.
Task E
Reflecting/considering on the tasks you have undertaken/taken to do and on your knowledge
of financial management and planning principles/basics:
1. describe basic accounting principles (how accounting works – the basics)
Matching Principle, Consistency Principle, Going Concern Principle, Accrual
Principles, Conservatism Principle and Full Disclosure Principle.
2. describe cash flows (money in and out)
Operating Activities: The principal revenue-generating activities of an
organization and other activities that are not investing or financing; any cash
flows from current assets and current liabilities.
Investing Activities: Any cash flows from the acquisition and disposal of long-
term assets and other investments not included in cash equivalents
Financing Activities: Any cash flows that result in changes in the size and
composition of the contributed equity capital or borrowings of the entity
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3. describe ledgers and financial statements (what are these recording keeping
documents, i.e books and reports)
The general ledger is a group of accounts that support the main items (assets,
liabilities, and equity) that are shown in the major financial statements such as
the balance sheet and income statement. These value items are created by
posting transactions recorded in the sales book, purchases book, cash book,
and general journals book.
4. describe profit and loss statements. (describe the company’s money profits – i.e how
well it is doing or not doing)
A profit and loss statement, otherwise known as a P&L or income statement,
is a document that measures and reports a company’s expenses and revenue
during a specific period of time. This shows a company’s financial status and
progress during the time surveyed.
Give a brief report, written statement and submit this to your assessor.
You may revisit the five fundamental principles of accounting. For example, the list is said to
be crucial/important 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/more than the cost.
Answer:
Source: <https://www.icaew.com/for-current-aca-students/applying-for-membership/code-of-
ethics#:~:text=Code%20of%20ethics%20-%20the%20five%20fundamental%20principles,and%20due
%20care.%204%20Confidentiality.%205%20Professional%20behaviour. >
Integrity
A professional accountant should be straightforward and honest in all professional
and business relationships.
Objectivity
A professional accountant should not allow bias, conflict of interest or undue
influence of others to override professional or business judgments.
Professional competence and due care

A professional accountant has a continuing duty to maintain professional knowledge
and skill at the level required to ensure that a client or employer receives competent
professional services based on current developments in practice, legislation, and
techniques. A professional accountant should act diligently and in accordance with
applicable technical and professional standards.
Page 12 of 15
Confidentiality
A professional accountant should respect the confidentiality of information acquired
as a result of professional and business relationships and should not disclose any
such information to third parties without proper and specific authority unless there is a
legal or professional right or duty to disclose. Confidential information acquired as a
result of professional and business relationships should not be used for the personal
advantage of the professional accountant or third parties.
Professional behavior
A professional accountant should comply with relevant laws and regulations and
should avoid any action that discredits the profession.
Source: ‘Understanding the Basic Principles of Accounting’, For Dummies, viewed March
2015, http://dummies.com/how-to/content/understanding-the-basic-principles-of-
accounting.html.
Another alternative is that the candidate may describe the differences between cash and
accrual accounting methods covered in the unit.
Page 13 of 15
Appendix 2 – Financial information
Statement of Financial Performance

Big Red Bicycle Pty Ltd
Statement of Financial Performance
For the year ended 30 June 2012
REVENUE
Sales 2,900,000
Less direct wages and commissions 272,500
Opening stock 100,000
Purchases 300,000
Closing stock 20,000
Less cost of goods sold 380,000
Gross Profit 2,247,500
EXPENSES
General & Administrative Expenses
Travel 22,000
Legal fees 4,500
Bank charges 700
Office supplies 4,000
Postage & printing 500
Dues & subscriptions 600
Telephone 11,200
Repairs & maintenance 45,000
Payroll tax 25,000
Marketing Expenses
Advertising 208,000
Employment Expenses
Superannuation 45,000
Wages & salaries 500,000
Staff amenities 23,000
Occupancy Costs
Electricity 38,000
Insurance 100000
Rates 100,000
Rent 200,000
Water 35,000
Waste removal 60,000
TOTAL EXPENSES 1,422,500
NET PROFIT (BEFORE INTEREST & TAX) 825,000
Income Tax Expense 206,250
Page 14 of 15
NET PROFIT AFTER TAX 618,750
Ageing debtors budget

Big Red Bicycle Pty Ltd
AGED DEBTORS TOTAL Qtr 1 Qtr 2 Qtr 3 Qtr 4

BUDGET 2011/12
Sales 2,900,000 600,000 900,000 800,000 600,000
% Debtors Sales 50% 50% 50% 50%
Total Debtors 100% 300,000 450,000 400,000 300,000
Current 65% 195,000 292,500 260,000 195,000
30 Days 20% 60,000 90,000 80,000 60,000
60 Days 12% 36,000 54,000 48,000 36,000
90 Days 3% 9,000 13,500 12,000 9,000
Page 15 of 15

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Assessment Task 4 BSBFIM501 Manage budgets and financial plans

Review and evaluate/examine financial

Student’s name Student no.

● submit answers on an electronic document such as Microsoft Word.

Your assessor will be looking for:

○ budgeting (financial planning)

Michelle Yeo Chief Executive Officer (CEO)

Tom Copeland Managing Director

John Black Chief Financial Officer (CFO)

Stuart LaRoux Operations General Manager

Pat Roberts Senior Accountant

Sam Gellar Sales General Manager

Charles Pierce Production Manager

Holly Burke HR Manager

According to company strategic/management goals plans, the company had aimed to

Investments - is time, energy, or matter spent in the hope of future benefits.

Trade debtors 362,500

Trade creditors 80,000

Opening stock 100,000

Closing stock 300,000

Complete the following.

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

b. ledger accounts (accounts in the ledgers/books)

c. scenario information (information based on your environment)

● Limited ability to renegotiate/arrange a new agreement costs with suppliers.

● Pricing and cost information is as follows.

Bicycle price per unit $500 (excl. GST)

Current variable costs per unit $250

Fixed costs $1,280,000

Complete the following.

1. On your response document, work out:

- Wages/salaries book (including PAYG, superannuation etc.)

- Inventory, materials, finished goods record

- Purchasing records and materials used

Complete the following.

Budgeted cash receipts incurring GST:

Cash sales 20,000 10,000 10,000

Cash revenue (besides sales) 0 0 0

Cash receipts from sale of assets (not stock) 0 0 0

Total receipts for GST 20,000 10,000 10,000

Budgeted non-cash receipts incurring GST:

Debtors sales 180,000 230,000 150,000

Total non-cash receipts 180,000 230,000 150,000

Total budgeted receipts incurring GST 200,000 240,000 160,000

Budgeted cash payments incurring GST:

Cash purchases of stock 0 0 0

Cash expenses 4,300 5,200 5,250

Total cash receipts incurring GST 4,300 5,200 5,250

Budgeted credit payments incurring GST:

Credit purchases of stock incurring GST 25,000 30,000 25,000

Credit purchases of assets (besides stock) 4,300 5,200 5,250

Total cash payments incurring GST 29,300 35,200 30,250

Total budgeted cash payments incurring 33,600 40,400 35,500

GST cash budget calculations

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

b) Cash payments 3,360 4,040 3,025

c) GST liability 16,640 19,960 12,975

Activity Monitoring activity Person/s

Communication of requirement to enforce terms Completion of HB/SL

Senior management team should be represented

Include request for feedback.

Training needs analysis performed to ensure Training need Sales Team

Training (or other intervention such as Assessment of HB

Regularly scheduled budget monitoring as part Analysis of ageing PR