Subject: Preparing for the new budgeting cycle
The new budgeting cycle is about ready to begin. It is a hectic time of the year because we need to have all of the organisation’s budgets in place by the beginning of the last quarter in the financial year.
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As the Finance Manager for BizOps Enterprises, much of this workload will be allocated to you.
I have provided a list of tasks that you will need to perform throughout the budgetary cycle in the ‘Instructions’ section that follows.
Managing Director: Financial Operations
You will need to access the following BizOps Enterprises plans, policies, procedures and financial documents.
- Budgeting and financial planning procedures
- Company business plan
- Risk management policy
- Risk management procedures
- Risk management plan template
- Financial reports
- Cashflow worksheet assumptions
- Profit loss worksheet assumptions
- Balance sheet worksheet assumptions
See the ‘Required resources’ section for how to access these documents.
This Project has been split into seven separate tasks. Please complete each task in the order they appear.
Access and read the budgeting and financial planning procedures to familiarise yourself with the responsibilities and procedures of the budgetary process.
Using this document as a guide, prepare a plan and time line with critical dates for preparation of the organisation’s budgets for the financial year 2017/18. Assume that it is now early March 2018.
Access and review the company business plan and the financial data available in Annex I-IV. Note the business goals that are listed to maintain financial stability.
Prepare a financial report that includes requirements to undertake budgeting, financial forecasting and reporting financial management and promotes the direction that future budgets will need to take:
- Put the cashflow trends and financial information into a spreadsheet and prepare a histogram that clearly shows the financial plan for the next five years. Use the histogram and the supporting dot-points from the business plan to prepare the financial planning report.
- Review statutory requirementsfor compliance and tax liabilities. This includes ATO tax requirements on GST, company tax and PAYG tax.
- Review the existing softwareand its suitability for financial management, such as investigating new technologies and applications that can be used to manipulate data.
Access and read the financial reports (Annex I- IV), which have been collated from the organisation’s financial system. Using these reports, prepare a report on the organisation’s current financial position to guide the planning for budget preparation. This report needs to:
- demonstrate analysis of the:
- net profit margin
- net profit ratio
- cashflow return on assets
- return on owner’s equity ratio
- demonstrate horizontal analyses of the areas of the business that have the greatest impact on the business’s profit or loss
- identify major variances in the profit and loss budget and explain the likely impact on the business’s annual performance
- show the organisation’s current position in relation to the previous years by summarising the cashflow trends
- contain a list of recommendations for ongoing maintenance of financial viability.
Prepare preliminary 2017/18 budgets for the whole organisation that align with the business plan objectives and will set a framework for the budget committee to use through the budgetary development process. The base information, worksheets and underlying assumptions for each preliminary budget have been provided.
Consider the following while preparing the budget:
- Allocate funds in accordance with statutory and organisational requirements, including business strategies and operational objectives.
- Make informed estimates of new items for inclusion in the budget, such as financial bids and estimates.
- Use previous financial data to determine resource allocations, such as by reviewing past financial statements and Business Performance
It is preferable to develop the budgets using spreadsheet software. The budgets that you need to prepare include:
a forecasted profit and loss budget for the 2017/18 financial year
b forecasted balance sheet as at 30 June 2018.
Produce a report on the budget implementation, including a plan for managing risks and dealing with contingencies, in achieving its objectives in the 2017/18 financial year:
- Identify and assess key financial risks to the organisation.
- Ensure suitable triggers are identified to determine when contingency responses to be implemented.
- Ensure there are no opportunities for misappropriation of funds.
- Ensure systems are in place to properly record all financial transactions.
- Review profit and loss statements, cashflows and ageing debtor summaries.
- Maintain audit trails to ensure accurate tracking.
- Identify discrepancies between agreed and actual allocations.
- Comply with due diligence processes.
Produce a report that makes recommendations on financial management that reviews the effectiveness of BizOps’s budgeting and financial planning procedures and helps to ensure compliance with organisational and statutory requirements:
- Structure and format financial reports to ensure they are clear, and that they conform to organisational and statutory requirements.
- Identify and prioritise significant issues in statements, including comparative financial performances for review and decision-making processes, such as risk identification or compliance and regulatory issues.
- Outline recommendations to ensure financial viability of the organisation.
- Evaluate the effectiveness of financial management processes, such as the financial management software, an audit trail, etc.
Develop and provide an audit checklist to guide staff in collecting and assessing information to review financial management software, managing risks of misappropriation of funds, ensuring systems are in place to record all transactions, maintaining an audit trail and complying with due diligence.
The final documents you submit for assessment will be assessed using the project criteria provided.
All project criteria outlined must be covered satisfactorily for Part B to be completed satisfactorily.
You must complete the project unassisted by the assessor or other personnel, but may refer to reference material as needed.