Introduction
For this assessment, you are required to demonstrate your ability to:
- clarify budget plans with your manager and negotiate changes to the budget
- identify and analyse a risk to the budget
- prepare a contingency plan to prevent or minimise the risks
- access and communicate details of the budget to a team member
- support your team member to perform their role with respect to software resources and systems.
Case Study
Company overview
Babies on the Go is a pram manufacturer based in Perth, Western Australia. The company produces prams which it sells to retailers in the domestic Australian market.
The senior management structure of the company appears below.
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Person
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Position
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Jan Goodwin
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CEO
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Henry George
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Managing Director
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Anita Tran
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CFO
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Anna Peters
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Operations General Manager
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George Floro
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Senior Accountant
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Sam Georges
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Sales General Manager
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Brett Price
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Production Manager
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Taylor Jones
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HR Manager
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According to company's strategic plans, the company aims to achieve a net profit before tax of $1,000,000. The main risks to this goal are:
1. poor sales due to economic downturn
2. increase in expenses such as wage expenses.
In addition, Babies on the Go is considering manufacturing overseas to take advantage of reduced costs. The company is also considering diversifying its product range to reduce exposure to poor sales of one product.
Task
1. You are the manager of Sales Centre A, based in Perth. The centre has achieved great success over the last year and consistently outsells other sales centres. In fact, due to the large number of accounts managed by your sales team, your centre is expected to sell as much volume as the other two sales centres put together. Naturally, you expect cost allocations to reflect both the needs of Sales Centre A and its importance to the business.
The Sales General Manager, Sam Georges, has asked you to review the master budget and cost centre budgets prepared by the Senior Accountant. She would like you to meet with her to discuss whether the budget projections are achievable, accurate, understandable and fair.
She would like you to look at the budget for your cost centre closely, note any changes you think are necessary, develop an argument for the changes and negotiate those changes with her.
Information you are aware of includes:
- Sales in the first quarter (Q1), third quarter (Q3), and the fourth quarter (Q4) are generally 30% less than the second quarter (Q2).
- Sales in Q2 depend on completion of 90% of repair and maintenance.
- Sales for Q2 have been estimated to be $1,000,000.
- Commission negotiated withmembers of the sales team has now increased from 2% to 2.5%.
a. Access and review the budgets and financial plans for Babies on the Go Pty Ltd.
i. As background information, you may want to familiarise yourself with Appendix 1- Budgeting and finance policy.
ii. Review the Appendix 2 - Master budget and profit projections,identify and write down all the errors.
b. Record a one or two-minute audio/video of you conducting a meeting with your manager to clarify and negotiate the two identified issues in relation to the budget and financial plans. Ensure that documented outcomes are achievable, accurate and comprehensible.
2. It has come to the attention of the Managing Director, Henry George, that due to the current economic climate, sales volume may be 20% below target this financial year. Henry 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 expenses and invest. Reliable data to determine whether the risk has eventuated should be available by mid-Q2, when sales data for the company's product are in.
As a special project, the Managing Director has asked you to perform a risk assessment and develop a contingency plan to manage the risk of sales falling by 20%.Prepare the contingency plan in line with the organisational policy.
a. Consult with your manager to prepare a contingency plan, using the Appendix 3- Contingency plan template, in the event that the initial plans need to be varied.
3. Refer to the budget information in the appendices and the Contingency Plan you have developed in the previous question.Determine what information you will need to communicate to your team.
a. Write a draft email to your team to explain the overall financial objective of the business. Provide an overview of the budget and explain how the budget translates to expense allocations for the team.(Take a screen shot and submit it with your assessment.)
4. You have identified that one team member, Claire Francis, will be responsible for tracking expenses and petty cash throughout the financial year. To meet organisational needs, this duty will need to be performed in accordance with policies and procedures.
You have concluded that expenses will need to be tracked by quarter. Claire will need to develop a spreadsheet to keep track of actual expenditure by account. To help you control expenses, the spreadsheet will need to provide an ongoing tally of expenses by account.
Claire's skills include basic accounting and needs to be informed of Babies on the Go policies and procedures for petty cash. She is familiar with Microsoft Excel but does not know how to use formula and functions to sum columns or rows of figures.
a. Develop a strategy that will enable you to support Claire in performing her role and developing spreadsheets using the information in Appendix 4-Financial policies and procedures.
Attachment:- Appendix.rar