assignment Leadership & Management

Application

This unit describes the skills and knowledge required to undertake financial management within a work team in an organisation. It includes planning and implementing financial management approaches, supporting team members whose role involves aspects of financial operations, monitoring and controlling finances and reviewing and evaluating effectiveness of financial management processes.

It applies to managers in a wide range of organisations and sectors who have responsibility for ensuring that work team financial resources are used effectively and are managed in line with financial objectives of the team and organisation.

No licensing, legislative or certification requirements apply to this unit at the time of publication.

Unit Sector

Finance – Financial Management

This section describes language, literacy, numeracy and employment skills incorporated in the performance criteria that are required for competent performance.

Performance Evidence

Evidence of the ability to:

· Use financial skills to work with and interpret budgets, ageing 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.

Knowledge Evidence

To complete the unit requirements safely and effectively, the individual must:

· Describe basic accounting principles

· Identify and explain the relevant legislation and current requirements of the Australian Taxation Office, including the Goods and Services Tax (GST)

· Explain the key requirements for financial record keeping and auditing

· Describe the principles and techniques involved in managing:

· budgeting

· cash flows

· electronic spreadsheets

· GST

· ledgers and financial statements

· profit and loss statements.

Assessment Conditions

Assessment must be conducted in a safe environment where evidence gathered demonstrates consistent performance of typical activities experienced in the financial management field of work and include access to:

· Resources and documentation used in the workplace

· Workplace policies and procedures

· Workplace budgets and financial plans

· Business technology

· Case studies and, where available, real situations.

Assessors must satisfy NVR/AQTF assessor requirements.

Links

Companion volumes available from the IBSA website: http://www.ibsa.org.au/companion_volumes

Your trainer will inform you of the following:

· Where the toilets and fire exits are located, what the emergency procedures are and where the breakout and refreshment areas are.

· Any rules, for example asking that all mobile phones are set to silent and of any security issues they need to be aware of.

· What times the breaks will be held and what the smoking policy is.

· That this is an interactive course and you should ask questions.

· That to get the most out of this workshop, we must all work together, listen to each other, explore new ideas, and make mistakes. After all, that’s how we learn.

· Ground rules for participation:

· Smile

· Support and encourage other participants

· When someone is contributing everyone else is quiet

· Be patient with others who may not be grasping the ideas

· Be on time

· Focus discussion on the topic

· Speak to the trainer if you have any concerns

· Discover how to plan financial management approaches

· Know how to implement financial management approaches

· Learn how to monitor and control finances

· Understand how to review and evaluate financial management processes

Gain the skills and knowledge required for this unit.

1.1 Access budget/financial plans for the work team

1.2 Clarify budget/financial plans with relevant personnel within the organisation to ensure that documented outcomes are achievable, accurate and comprehensible

1.3 Negotiate any changes required to be made to budget/financial plans with relevant personnel within the organisation

1.4 Prepare contingency plans in the event that initial plans need to be varied

When dealing with accounts, it is essential to know the basic principles – known as 'generally accepted accounting principles'. They are as follows:

Revenue

Revenue is made when a sale is made. This is when legal ownership of the goods passes from the seller to the buyer. It is not simply when you collect cash for something.

Expense

This is when a business uses goods or services i.e. the opposite of revenue. Expenses become active as soon as you receive the goods or services, not when you actually pay for them.

Matching

This is when you match revenue to expenses – onlycounting expenses on the day that you get revenue for them, not when you initially buy them. So if, you buy stock in bulk, only count expenses when you sell individual items.

Cost

Costs of items will only be measured at their value for the time you initially bought them – you should not adjust them in the accounting system to reflect current market values.

Objectivity

All data in the accounting system should be objective, factual and verifiable.

Continuity assumption

Accounts should assume that the business will continue to operate in the future; otherwise, none of the assets have any definite value.

Unit-of-measure assumption

The domestic currency should be used by a business in its accounting system, regardless of inflation and deflation effects on that currency's purchasing power.

Separate entity assumption

The business is a separate thing from its owner; a partnership is also a separate entity to the partners who own the business. Therefore, the financial records of the business and those of the owners/partnership are entirely separate.

Budget/ financial plans are an essential part of any business – without them, it is impossible to plan and monitor income and expenditure.

They can include any of the following aspects:

Cash flow projections

Long-term budgets/plans

Operational plans

Short-term budgets/plans

Spreadsheet-based financial projections

Targets or key performance indicators for production, productivity, wastage, sales, income and expenditure

The types of people that budget/financial plans must be clarified with include the following personnel:

Financial managers, accountants or financial controllers

Supervisors, other frontline managers

Financial plans need to achieve the following:

Analyse the past

Compare customer demand to company spending

Identify the sources of cash flow

Compare the financial performance against the performance indicators set at the start of the financial year

Analyse audit results and accountant reports for ways to improve

Plan for the future

Identify future cash flow sources and their potential impact

Analyse organisational policies and their impact of organisational operations

Look at spending trends and their potential impact

Implement new strategies for the future

Analyse organisational policies and create new ones

Account for existing strategies when financial planning

Examine existing staff and their skill levels – determine whether goals can be achieved at their current level

Assess all available options

Get the opinions of stakeholders in decisions

Set annual budgets

Arrange plans to set a budget

Budgets should be centred around financial plans

Involve budget managers in setting budgets

Ensure work meets budgeting organisational standards

Plan for contingencies

Set budgets for certain departments of the organisation

Provide a structure to budgets

Monitor work to ensure it complies with budgets

Take long and short-term arrangements into account

Looking long-term is essential with financial planning and it should be integrated into the overall strategy of the organisation. While short-term planning is also required, doing only this will result in a lack of security and financial problems in the future.

The benefits of long-term financial plans are:

You can estimate the funding required

Budget allocations increase in accuracy

Trends in demand can be identified

Change is easier to implement

Financial consequence of major programs/changes can be planned

Change can be implemented more easily

You can forecast how the market is likely to change and account for this

You can plan for human resources changes

Staffing needs and resources can be calculated and planned

This is the go-between for short and long-term planning. For this stage, you need to:

Identify likely sources of cash flow

Create a cash flow forecast statement, identifying the major changes of income sources

Think what things may occur based on what you know will happen

Identify future spending levels

Consult with stakeholders for their opinions on what the major changes could be

Analyse the impact of proposed changes of future finances

This approach will do the following:

Helps management deal with cost cutting, budget cuts, resource allocation and resource levels

Allow changes to be more easily planned rather than being impulsive reactions

Helps managers plan for the future – if they know their budget and budget forecasts, they can assess whether change is viable

The idea of this is to make decisions based on the advantages and disadvantages of the options available. It is a useful tool for allocating limited resources; for example, if budget is limited, you can decide the most effective part of the organisation for it to be invested in.

When budgeting, there are various people who play a role in managing them.

Management

They are accountable for their own budgets. However, their accountability depends on their level in the organisation. Within budgets, the following should be made clear:

The difference between managers and financial support staff

Who is responsible for setting and analysing each budget

The delegation of roles (and their levels)

Budgets must be built upon current pricing levels, with price changes and inflation allowed and accounted for. This involves:

Anticipating the type and extent of possible price changes, allowing for if they become a reality

Contingency planning for price changes

Consultation with staff and experts to determine accountability and allowances

When changes in accountability are possible, you must make sure:

Everyone is aware of them and their impact

Decisions are only made by the top-level people in the budgeting process

Accountability is not with the original budget holders anymore

Budget holders

These people contribute to setting budgets and provide the information that is used to calculating exact figures.

They are responsible for:

Identifying trends and determining areas of change for budgets

Dealing with budget reports

Determining corrective actions for problems identified in budget reports (and implementing them)

Reporting any issues which cannot be resolved to senior managers

Analysing data with support staff

Providing expertise for support staff

Finance and support staff

Their role is to:

Set budgets in collaboration with budget holders

Implement monitoring of:

Budgets

Reporting processes

Timeframes of processing changes

Reporting procedures

Analyse financial data

Examine data that impacts budget holders

Provide advice to budget holders

Be accountable for the quality of financial data they create

Implement monitoring and reporting processes for financial decisions

Be accountable for the quality and relevance of financial data used for budget monitoring

The overall budget of an organisation, as previously discussed, should be divided into separate budget for different departments etc. However, these should be grouped together so that related budgets are under the responsibility of one person. It should also be clear who is responsible and accountable for each budget, to avoid confusion.

In the modern age, most systems in an organisation have become computerised – this includes budget management.

A budget tracking system allows monitoring/recording of:

Organisational spending

Budgets

Organisational income

Debtor and creditor records

Payment processing

Budget management

Contract management

Financial analysis

The system you use needs to do the following:

Work in collaboration with the other information systems you use

Allow comparison of accounts (automatically)

Maintain and update budget management information

Transfer information between budgets

Enable easy billing

Facilitate financial analysis

Record actual income and outgoings

Record expenditure commitments over time

Make creditor payments easy

Record costs individually

Allow for easy forecasting

Provide required reports

Export data to spreadsheets

Facilitate easy sharing of data

This involves having a set point where all data into accounts is frozen and recorded, so it can be analysed accurately over a set time period. It allows decisions and performance measurement to be made from a set point.

Having this closure allows decisions to be made on:

Whether under/over-spends can be carried forward

How budget managers can examine results

If any under-spend can be given back

If over-spend needs to be given back (at a later date)

Whether performance variances between actual and desired performance can be assigned to future projects

When dealing with variances:

Have your approach set out in writing at the beginning of each cycle, to ensure everyone is clear about expectations

Ensure that the approach aligns with the overall financial strategies and approaches

Keep the approach in line with responsibility levels

People feel in control of dealings with variances

Ensure that everyone is aware of the levels of variance that will instigate an investigation

Make sure that investigations are done by those external to the department they concern

These are also known as pooled budgets. Make sure that:

Contribution levels of managers is clear

The acceptable level of variance is set

The methods of dealing with variances are clear to all staff

People involved in a joint budget know the management strategy for it

Reporting responsibilities are allocated

Accountabilities are assigned

Management responsibilities are outlined

Contingency plans need to be present in budgets and budget forecasts, in the event that things do not go to plan and the initial plan needs to be altered. There can be any number of unexpected variances, such as your main supplier going bankrupt, power cuts, data corruption etc.

Examples of contingency plans include:

Contracting out or outsourcing human resources and other functions or tasks

Diversification of outcomes

Finding cheaper or lower quality raw materials and consumables

Increasing sales or production

Recycling and re-using

Rental, hire purchase or alternative means of procurement of required materials, equipment and stock

Restructuring of organisation to reduce labour costs

Risk identification, assessment and management processes

Seeking further funding

Strategies for reducing costs, wastage, stock or consumables

Succession planning

Every organisation will have contingency plans in place for various situations. If a workplace event doesn’t go according to plan – or if another solution is required – than a contingency plan will be required. There should be risk management plans and contingency plans in place for almost anything that can go wrong.

A contingency plan does not mean that you expect things to go wrong but rather are planning ahead for all eventualities, which is incredibly sensible in the business world. Contingency plans can help to save time, money and a great deal of stress. A contingency plan may be put in place from day one or it may be something that needs to be implemented following a situation that did not go according to plan first time round.

A contingency plan doesn’t necessarily have to focus on risk management or health and safety issues (although both are very important); it can include finding alternative resources or gaining further funding, for example. A contingency plan does not necessarily mean your current plan has not worked; it just might need certain alterations.

Contingency plans should be part of the organisational policies and procedures and be seen as flexible and adaptable as every situation will be different.

Contingency plans may need to cover situations such as:

Broken/malfunctioning equipment

Staff quitting or needing time off due to illness, holidays etc

Health and safety issues

Natural disasters (i.e. floods, earthquake etc)

Theft, fraud or other security issues

Contingency plans should be flexible enough that last minute changes can be implemented. They should provide an opportunity for action to take place so that an immediate solution can be found and utilised.

Contingency plans may need to include the following information:

The situation needing action

Personnel to be involved

Contact numbers for personnel, resources etc.

Legislative, organisational and ethical requirements to consider

How it will impact on the organisation

Costs that may occur – including how to resolve the issue

Solutions – these can be as many as necessary for different outcomes

How the solution will be implemented and by who

A deadline

2.1 Disseminate relevant details of the agreed budget/financial plans to team members

2.2 Provide support to ensure that team members can competently perform required roles associated with the management of finances

2.3 Determine and access resources and systems to manage financial management processes within the work team

It is important that all relevant personnel receive relevant details about the agreed budget/financial plans.

It is vital that price changes and pricing policies are communicated to staff members to ensure they are all on the same page and can work cohesively.

Most of this communication will be verbal; however written communication can be useful for the purposes of:

Ensuring everyone gets the same message

Ensuring there is a record of communication

People can refer to the contents of the communication later (if need be)

Pricing policies and changes are likely to be communicated in stores on a vertical level – the manager should hold a staff meeting to inform employees of this information.

When informing staff, you need to bear the following in mind:

Be clear and concise – don't leave room for interpretation

Check they understand – make sure your instructions have been understood and provide clarification

Consider cultural differences – use suitable languages and avoid slang

After the budget/financial plans have been agreed, you will now need to divulge the relevant details to team members.

People who may be informed include:

Senior management – they will need to see the full details of the budget/financial plans (as they are responsible for it).

The accounts department – so that they can enter the figures into appropriate software and create the necessary budget lines, etc.

Budget committee – where the (usually large) establishment has a budget committee, they will be responsible for ongoing monitoring of income and revenue against projections.Their role may also extend beyond this overseeing role, into proposals for increasing revenue streams and limiting/reducing expenditures, as appropriate.

Managers – middle level management (people such as heads of department) commonly have daily control over the revenue raising areas of the property and power over relevant areas of expenditure. It is predominantly these individuals who are responsible for generating the bulk of the income, and whose decisions have immense impact on the profitability and viability of the premises; while they operate under direction from senior management, they make numerous day-to-day and on-the-spot decisions that have the potential to greatly impact on budget figures.

Establishment staff –the head of department usually explains the latest budget allocations to departmental staff. This news is traditionally passed on verbally in a formal departmental meeting – as well as written information being distributed. The head of department commonly sets the scene by explaining the general budgetary context and the trading situation the establishment finds itself in – general statements are normally used to describe the current situation as it compares to the last period.

Next, further general statements are made about what management expects from the department (and by association, the staff); it is not common to pass on exact dollar figures to the staff as this is seen as material that is 'commercial in confidence'.

Staff may be told that there is an expectation that, for example, they are expected to increase revenue in the upcoming 12-month period by an average of 10% over the previous year:this indicates management requirements without disclosing the actual figures involved.

Staff may be informed, for example, that there is an expectation for expenses to bereduced by five per cent.

It is always important to convey this sort of news within a positive context,wherever possible, to reduce the possibility of staff disillusionment and the likelihood that staff may misinterpret 'economic imperatives' as signalsthat their job is in jeopardy. When staff pick up this sort of message they commonly start looking for employment elsewhere because they can 'see the writing on the wall'.

Departmental meetings where information is delivered verbally and face-to-face (as described above)

All staff meetings where a series of overhead projections (or a PowerPoint presentation) is used

Internal memos or emails sent to staff

Paper-based documentation that outlines, without being too specific, the requirements that have been decided on. Certainly, where staff are informed and involved (wherever that is possible), it creates a situation that will lead to greater work satisfaction, higher levels of productivity and enhanced staff commitment to organisational goals.

Also, ensure that team membersare made aware of relevant legislation, including:

This is a tax of ten per cent on most goods, services and other items sold or consumed in Australia. In terms of pricing, this is usually factored into the price of sales to customers; this business then claims credits for GST included in the price of business purchases. All businesses that reach the registration threshold for GST will only register for this once.

Businesses must fill in an activity statement to report and pay the GST the business has brought in and claim GST credits. Reporting and payments can be made either monthly, quarterly or annually – most businesses choose to pay GST quarterly.

GSP can be calculated in one of two ways:

Derived from accounts methods – using the GST amounts from business records. This method is easier if you have recorded the GST amounts for sales and purchases separately.

Calculated sheet method – using a step-by-step worksheet

For both methods, you need to keep valid tax invoices of transactions to support your claims.

If something happens that requires adjustment of a previous activity statement (e.g. returned goods/cancellation of sale), you will need to lodge a revised activity statement with the Australian Taxation Office

Full details and a calculation worksheet for GST can be found at www.ato.gov.au.

Team members will need support in the workplace, to adequately perform their roles and to facilitate improvement.

The types of support that can be offered include:

Access to specialist advice – an advice service or someone on hand to answer any specialist questions that team members will save time and ensure that roles are performed in a uniform manner.

Documentation of procedures – keeping records of procedures is a useful tool in retrospectively identifying problems or issues. The documentation process also makes you more aware of what you are doing, so you are less likely to become casual in your role/make errors.

Help desk or identified experts within the organisation – having specific personnel to use as a first port of call for any queries will save time and make the problem solving process more efficient.

Information briefings or sessions – having meetings where finance management is explicitly discussed is a great way to clarify the roles of team members and provides an opportunity for staff to raise any issues they might have.

Intranet-based information – having an online resource for all employees to access at anytime is extremely useful. It is a more efficient way of explaining processes and can provide comprehensive guides to certain roles and situations.

Training including mentoring, coaching and shadowing – having tailored demonstration, monitoring and feedback on roles will ensure that each employee is performing their role to the best of their abilities and in line with organisational policies.

The required roles which team members may need support with include:

Arranging for use of corporate credit cards

Banking

Debt collection

Ensuring security, accuracy and currency of financial operations

Invoicing clients, customers and consumers

Maintaining journals, ledgers and other record keeping systems

Maintaining petty cash system

Purchasing and procurement

Wages and salaries payments and record keeping

The resources and systems needed to manage financial management processes within the work team may include:

Hardware and software

Human, physical or financial resources

Record keeping systems (electronic and paper-based)

Specialist advice or support

The majority of businesses in the developed world now use some form of computerisation – with financial management, this offers many advantages.

You will need to determine the type of hardware – such as computers and necessary accessories – that will fulfil the minimum requirements of financial management software.

The types of software you will need for financial management will include:

A universal ledger – coveringyour general ledger, accounts payable, accounts receivable, fixed assets, project accountingand other financial reporting requirements

End to end spend management program – to allow the control of purchasing activity and to organise it in one document

Budgeting, planning and forecasting program

Reporting program – to analyse the efficiency of the business processes

Process and control automation program – to allow all operations to be managed and organised into an auditable format

Human resources

This includes all of the skill-sets that the business already has within its personnel. They need to be sufficient to meet the needs of business in achieving its strategy – if they aren't, can staff be trained efficiently, or do new personnel need to be acquired?

Existing resources may include:

Amount of staff in each role (take into account location, grade, experience, qualifications, pay)

Rate of staff loss

Training standards for key roles

Intangibles e.g. morale, business culture, work relationships

Changes to resources may be needed when strategies change. Consider:

What the change of strategy is e.g. change of location, extra locations, new products/product lines

The human resources required for these changes

Sources of fulfilling the human resource requirements

Physical resources

These include the following facilities:

Production facilities – location, maintenance requirements, production processes, efficiency of facilities for meeting business requirements

Marketing facilities – distribution channels and marketing management process

Information technology (IT) – what programs and equipment is used? How is it integrated with customers and suppliers?

Financial resources

This refers to the ability of a business to fund its chosen strategies – it includes the existing funds, and the ability to source new funds.

Existing funds include:

Cash balances

Loans

Bank overdraft

Shareholders' capital

Capital invested in the business e.g. stocks, debtors

Creditors e.g. suppliers, government

New funds may depend on:

The reputation and strength of the business and its management team

Relationships with existing investors/lenders

The attractiveness of the market your business deals with (is it appealing to investors)

Listing on a quoted Stock Exchange

Businesses will need accurate and efficient record keeping systems to allow them to collect revenue, pay employees and suppliers, and pay taxes in a timely manner and using the correct processes.

Paper-based record keeping

Also known as manual record keeping, this involves keeping a paper-based journal of transactions for each financial year.

It is divided into the following types of sections:

Receipts

Payments

Wages and superannuation

Bank reconciliation

Inventory

This system requires a cash accounting approach, where you record revenue and expenses when transactions actually occur – so, for example, when you receive the money as opposed to when you send the invoice.

Electronic record keeping

These are an efficient way of maintaining financial records, providing a comprehensive way of managing all accounts under one program and giving the option of using accrual accounting (recording revenue and expenses when they are incurred) – this means a sale is recording when an invoice is created and sent as opposed to when you receive the payment from the client.

Computer-based accounting programs can create the following:

Orders

Invoices

Aged debtor reports

Financial statements

Employee pay records

Inventory reports

Some programs have the ability to send (via direct email):

Invoices to clients

Orders to suppliers

BAS returns to the Australian Taxation Office

Others can also produce financial forecasts and allow you to monitor business performance.

Whichever system you use, you need to make sure it is compatible with the systems of your book-keeper and accountant. Also, consider the costs of keeping the software up-to-date and any training costs for staff to use it.

This advice/support can be internal or external to the company – examples include:

Accountants

Book-keepers

Finance seminars

Mentors

The areas they advise on are those which require specialist and technical knowledge. Trying to manage finances of a business without the proper information is a huge risk and can lead to many problems down the line. While it may seem like a high initial cost for advice, in the long-term it should save you far more than it costs you.

3.1 Implement processes to monitor actual expenditure and to control costs across the work team

3.2 Monitor expenditure and costs on an agreed cyclical basis to identify cost variations and expenditure overruns

3.3 Implement, monitor and modify contingency plans as required to maintain financial objectives

3.4 Report on budget and expenditure in accordance with organisational protocols

The processes to monitoractual expenditure and to control costs across the work team include the reporting of:

Assets

Consumables

Equipment

Expenditure

Income

Stock

Wastage

A general ledger is the main accounting record of a company – it contains a complete record of financial transactions over the entire life of a company. It is used to prepare financial statements and includes the following accounts:

Assets

Liabilities

Owners' equity

Revenues

Expenses

Generally, businesses employ a double-entry book-keeping method – each financial transaction is posted twice (as a credit and a debit). Therefore, the total of all debits is equal to the total of all credits.

Balance sheet ledger accounts

These record each asset, liability and equity component of the financial position statement.

For example a receivable ledger account may look something like this:

Income statement ledger accounts

These record incomes and expenditures of businesses; for example, the ledger may look something like this:

The Australian government will review your financial affairs each year in a tax or superannuation review to check you:

Have declared all the assessable income you receive

Are entitled to the deductions and tax offsets you have claimed on your tax return

Have met all your regulatory obligations

With regards to employees the following are required by all businesses:

Registering for pay as you go (PAYG) withholding when they take on staff for the first time

Registering for GST when their turnover exceeds the threshold

Making superannuation payments for their employees

The types of audits that may be undertaken include:

Reviewing compliance with registration, lodgement and payment obligations

Specific-issue audits or reviews

Comprehensive audits or reviews

Transfer pricing reviews and audits for businesses with international operations

Pre-lodgement compliance reviews for larger businesses

You need to be aware of and comply with the record-keeping requirements of the Australian Taxation Office.

When keeping a self-managed super fund (SMSF), you need to keep accurate tax and super funds – not only is this a legal requirement, it will also help you manage your money efficiently.

You should keep records of all investment decisions, including:

Why a particular investment was chosen

Whether all trustees agreed with the decision

This allows for security of individuals, should other trustees take action against you if an investment fails – if they have signed the minutes of the meeting when the decision was made, this is proof that they agreed with you.

For the purposes of the SMSF auditor, the following records need to be kept for at least five years:

Accurate and accessible accounting records that explain the transactions and financial position of your SMSF

An annual operating statement and an annual statement of your SMSF’s financial position

Copies of all SMSF annual returns lodged

Copies of any other statements you are required to lodge with us or provide to other super funds

Also, the following records need to be kept for a minimum of ten years:

Minutes of trustee meetings and decisions

Records of all changes of trustees

Trustee declarations recognising the obligations and responsibilities for any trustee, or director of a corporate trustee, appointed after 30 June 2007

Members’ written consent to be appointed as trustees

Copies of all reports given to members

Documented decisions about storage of collectables and personal-use assets

Recording every sale

The date it occurred

The amount that was exchanged

Retain a detailed record for at least a month

Keep a month's worth (minimum) of records of individual transactions – this helps verify the summary records are accurate.

Retain a summary record

Cash registers or point of sales systems:

maintaining detailed daily records or tapes(these can be discarded after one month)

reconciliations to account for cash drawings and expenses paid in cash

retaining reconciliation records for a statutory period of five years

retaining rolls of tape for five years if reconciliations are not undertaken

Receipt or invoice books (for business not using electronic record-keeping systems):

conduct a reconciliation between your bank statement and receipt book at least on a monthly basis

businesses that conduct a daily reconciliation of sales may discard individual sales records (receipts) after one month

If you do not perform a daily sales reconciliation, you must keep individual sales records for five years

Bank records and receipt books must be retained for five years

If it is not practicable to record every sale

Sometimes, cash registers cannot be used and it is impossible to record individual transactions – this can be for businesses that deal with high volume/low value transactions and do not operate from a permanent residence e.g. market stall holders.

In this case:

Summary records must be made at regularly defined intervals – for example, at the end of each day or shift

Reconciliations must take into consideration any cash earned that a business uses for other purposes and should show total cash at day end plus drawings and expenses less the opening float amount

As outlined in 1.4, examples of contingency plans include:

Contracting out or outsourcing human resources and other functions or tasks

Diversification of outcomes

Finding cheaper or lower quality raw materials and consumables

Increasing sales or production

Recycling and re-using

Rental, hire purchase or alternative means of procurement of required materials, equipment and stock

Restructuring of organisation to reduce labour costs

Risk identification, assessment and management processes

Seeking further funding

Strategies for reducing costs, wastage, stock or consumables

Succession planning

Once you have developed the contingency plan, it needs to be implemented, monitored and modified (where necessary). As a business changes, the plans will need to be reviewed and updated to make sure that any new potential problems are accounted for.

To maintain a contingency plan, you must do the following:

Communicate the details of it to everyone in the organisation

Tell people their roles and responsibilities in the contingency plan

Provide training (if necessary) for people to perform their roles

Perform training drills periodically (to test the contingency plan)

Use training drills to identify and implement any necessary changes

Review the plan any time there are personnel, operational and technological changes

Distribute amended plans throughout the company (discard the old plan)

Make and store copies off-site that can be easily accessed if need be

Perform audits on the plan from time to time. They should:

Reassess business risks

Compare actual performance levels to desired performance levels in the contingency plan

Identify changes and implement them, if necessary

In line with the requirements of the Australian Taxation Office, you must report on budget and expenditure.

Reporting may include data from:

Bank statements

Credit card statements

Financial reports

Invoices and receipts

Ledgers and journals

Logs

Petty cash records

Spreadsheet-based records

Operational reports can be seen as providing:

A communication link between management and staff – in an organisation where, say, the business operates every hour of every day, no-one can be there all the time; so, these reports provide one way of making sure everyone gets vital information

A historical database which builds into a useful management tool that can help future predictions

Data to managers which can inform and assess operational performance against budgets

A typical report probably does not exist as their format and content varies widely, but reports will contain certain basic elements:

A statement of purpose – identifying the type of report and its intention so that readers are quite clear about what this specific report is all about

Subject topic – a note explaining the exact focus of the document

The nature of the contributory evidence – explanation or verification of sources, information and the period used as the basis for the report

A conclusion – a plan of action formulated from the evidence provided in the report

Identification as to who generated the report, together with its intended target audience (by individual names or positions/titles)

Authorisation – an indication as to who has authorised the report

Date of the report – reports can be regular in nature (every month) or they can be ad hocto respond to a particular issue

The precise types of reports will vary from venue to venue (as will the names of the reports); also, how venues calculate their version of them may differ (some may include certain aspects/figures that others don't).

Photocopies of original source documents may accompany the report to validate the figures.Accompanying explanatory notes may also be attached.

Sample reports include:

Sales summaries – these can provide total figures (units and/or dollars) for a given period as well as trends by day/hour, together with brand/product/item trends.Some reports may also provide a 'sales by staff member' breakdown which reflects the selling records of each team member

Daily, weekly or monthly transactions – outlining and providing an overview of the statistics, progress and acceptability of the operation of the nominated department or revenue centre; while profitability will be very important, turnover may also be a major concern

Department expenditures – this report will focus exclusively on expenditure and is likely to highlight 'cost of goods sold' figures, 'wages' and 'overheads'

Commission earnings – in some properties, especially those in high tourist areas or those who belong to a chain, the income from earnings may be a critical key performance indicator (KPI). This may not be so much as a revenue earner, but more as an indicator of how well you are promoting other allied agencies/properties. This report will highlight not only the revenue earned but also the commissions paid out, and a breakdown of both commission income and expenditure (such as travel agents, airlines, cars, other venue, etc.)

Marketing activities – this report will detail promotions and publicity campaigns, identifying the response in terms of dollars to these activities

Accident reports – detailing accidents for the period under consideration and updating the report recipients regarding post-accident events (possible legal action, out of court settlements, action taken to address the cause, training proposed)

Typical sources of information used to develop financial reports are:

Internal sales analysis figures from each department and/or revenue source – this will include dockets, cash register audit tapes, daily takings sheets, debtor accounts

Actual staff rosters for each revenue centre – these must be costed and, where a role extends across a more than one revenue centre, there must be a breakdown of wage allocation for each area/centre

Internal stock movement sheets on a revenue centre basis – this will require costed requisitions, purchases records, goods received books, interdepartmental transfer sheets

General and specific financial statistics and data – this embraces budgets in 'for the period', and 'year-to-date' formats together with comparisons with performance, say, last month, and 'same month last year'.

These reports should provide:

A snapshot of the current position – a financial and operational picture of the business showing where you are and how you're doing

A prompt for action –they should provide the basis on which to make some planning/action decisions

A reliable foundation for upcoming planning – by supplying data that shows trends

The reports should also be prepared to be:

Easy to read and interpret – the information and statistics contained shouldn’t clutter the main objectives

Well-timed – they must be distributed as soon as possible after the data they contain is captured

Truthful and precise – they must be double checked to ensure that the information they contain is accurate in all respects

Sufficient data relevant to the issue(s) under consideration – the points made in organisational statements should be covered by the reports so that there is a link from planning through to actual operation. For example, if a statement was made that you aimed to achieve 'X' per cent increase in sales in the 'Y' department by the end of the year, then this– and other similar figures and percentages – must be covered in the report

Similar in layout and style to all other reports – so that where people are promoted or transferred, they remain familiar with the format of the report.

Reports and recommendations may need to be forwarded to:

Senior management

Owners

Personnel manager

Sales manager

Finance manager

Heads of departments

Supervisors

General staff

4.1 Collect and collate for analysis, data and information on the effectiveness of financial management processes within the work team

4.2 Analyse data and information on the effectiveness of financial management processes within the work team and identify, document and recommend any improvements to existing processes

4.3 Implement and monitor agreed improvements in line with financial objectives of the work team and the organisation

Before you can analyse the effectiveness of financial management processes, you will first need to collect data and information related to financial management processes.

Data and information on the effectiveness of financial management processes may include records (paper-based and electronic) related to:

Bank account records

Cash flow data

Contracts

Credit card receipts

Employee timesheets

Files of paid purchase and service invoices

Income and expenditure

Insurance reports

Invoices

Job costings

Petty cash receipts

Quotations

Taxation records

Wages/salaries books

The information should be collected and filed on an ongoing basis to make it easily accessible for when the time comes that you need to use it.

It should be ordered chronologically and by department – this will make searching for specific data much easier.

Much of the figures for the above information can be found in the general ledger, but original copies of all the documents should still be filed as evidence and for clarification purposes.

Cash flow describes the movement of money in or out of a business – it is measured over a specified time period. It is calculated by adding non-cash charges (e.g. depreciation) to net income after taxes. The cash flow of a company can indicate its financial strength and is essential for it to remain solvent e.g. having enough available money to finance its operations.

If a company's statement of cash flow shows that the company is performing well, the available remaining cash can be reinvested into the business to generate more profit.

These financial statements summarise the revenues, costs and expenses of a company over a specific time – this is usually a fiscal quarter or year.

They will provide information to show a company's ability to make profit via increasing revenue and reducing costs. It does this by subtracting the costs of running the business from the revenue to show net income (profit).

The cost of running a business includes:

Stock expenses

Operational expenses

Tax expenses

Interest expenses

Along with the balance sheet and income statement, it is the most important financial statement produced by a business; together, they can be analysed to give a complete overview of a company's finances.

This is a small amount of money which is kept on hand and used to pay for small amounts owed, as opposed to writing cheques. It is usually assigned to a petty cash custodian – employees must than refer to this person if they need to use petty cash or be reimbursed for a company expense they have paid for out of their own pocket. When the petty cash fund gets low, the custodian can request the cashing of a cheque to top it up.

The reason for petty cash is that is simpler than the writing, signing and cashing cheques for minor transactions. For example, think about paying a delivery man costs due on delivery (these can be under a dollar) – it is not worth recording this individual transaction individually – therefore, recording small transactions collectively as petty cash makes the accounting process simpler.

The custodian must still keep a record of individual petty cash expenditure by issuing petty cash vouchers for each transaction, complete with an invoice and receipt. These vouchers and the amount of cash to hand must always equal the original fund. They should also keep a petty cash daybook to keep a record of petty cash transactions over time. Because of the easiness with which petty cash can be abused, it needs to be kept under close monitoring.

Now the information has been gathered and collated, it now needs to be analysed to determine the effectiveness of your financial management processes.

This information can be used to create the following:

Cost/benefit analysis (of individual processes)

Profit statements

Electronic spreadsheets

Budgeting forecasts

Ledgers and financial statements

Profit and loss statements

Ageing summaries

From this, these documents must be analysed to see if productivity/profitability is going up or down.

The things that you want to see include:

Earnings growth – over the previous year, quarter or month. You also want to strive for growth to be above the market average.

Earnings stability – you want steady, predictable growth as opposed to spikes of revenue and periods of inactivity. This makes it easier to predict the financial position of the company in the future.

Return on equity – you want to turn a profit on the money invested

The findings of your analysis should be documented and reported to the appropriate personnel in your organisation. The specific nature and methods of this, as well who you report your findings to, will depend on your organisational policies and procedures.

The people you discuss the findings with may include:

Colleagues

Supervisors

Managers

Financial advisors

Accountants

Industry experts

Departmental specialists

The purpose of analysis is not only to see how the business is performing in relation to its targets, but to identify areas for improvement.

These improvements will need to be made and monitored in line with the financial objectives and organisational requirements of the work team and organisation.

Find out who is responsible in your organisation for implementing any agreed improvements. The people you may need to talk to include:

Management

Budget holders

Finance and support staff

Budgets must be monitored and reported on, to ensure that they are meeting expectation and to identify any problems that need rectifying.

Monitoring and reporting processes should cover the following:

Set timetables and deadlines for monitoring and setting up of budgets

Having a system to ensure data is up-to-date and accurate

Reports should be made available for to management

Reports should be done at least monthly

Data should be inputted into your records regularly, to allow for better budgetary planning

Reports should be produced as soon as possible to ensure they are relevant

Reporting should happen from the bottom up – it should include:

Actual expenditure

Forecasted expenditure

Expected changes

Monitoring should happen from management downwards

Monitoring processes should be reviewed regularly (to check they are working)

This is usually the responsibility of budget holders as they provide the information that is required for forecasts themselves.

Forecasts should:

Account for all expenses

Assign expenses to the correct budget

Ensure expenses are accounted for over the correct time period

Detail the correct length of time for financial commitments

Account for delays

Account for the level of activity required

Remember that budgets must be inherently flexible, as it's impossible to predict exactly what will happen. Therefore, there needs to be in place a system for adjustment, should any changes occur.

Nearly there...

At the end of your Learner Workbook, you will find an activity titled ‘Major Activity’. This is an opportunity to revise the entire unit and allows your trainer to check your knowledge and understanding of what you have covered. It should take between and 1-2 hours to complete and your trainer will let you know whether they wish for you to complete it in your own time or during session. Once this is completed, you will have finished this unit and be ready to move onto the next, well done!

Congratulations!

You have now finished the unit ‘Manage budgets and financial plans'

MSA Training and Professional Development Phone: 03 9905 3180

Room 159, 21 Chancellors Walk Website: monashshortcourses.com

Monash University Clayton, Vic 3800

BSBFIM501 V3 24.01.19