Annual revenue will also increase

Student ID and Name
BSBFIM501 Financial Management Report
Financial Management Report
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Financial Management Report Template V1.0519

Student ID and Name
BSBFIM501 Financial Management Report
Contents
1. INTRODUCTION.........................................................................................................................3
1.1 Background:.......................................................................................................................3
2. Details........................................................................................................................................3
2.1 Sales and COGS 2015.........................................................................................................3
2.2 Budget for 2016.................................................................................................................3
2.3 Projections for 2016...........................................................................................................3
3. FINANCIAL ANALYSIS 1ST Q 2016................................................................................................4
3.1 Statement of Income.........................................................................................................4
3.2 Statement on Costs............................................................................................................4
3.3 Projections for Year End 2016............................................................................................4
3.4 Variance Analysis...............................................................................................................5
3.5 Risks and Contingency Planning.........................................................................................5
4. RECOMMENDATIONS................................................................................................................5
4.1 Meals.................................................................................................................................6
4.2 Drinks.................................................................................................................................6
4.3 Expenses............................................................................................................................6
4.4 Adjustments to Budget......................................................................................................6
4.5 Contingency Strategies......................................................................................................6
5. CONCLUSION.............................................................................................................................6
6. Bibliography...............................................................................................................................8
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Financial Management Report Template V1.0519

Student ID and Name
BSBFIM501 Financial Management Report
1. INTRODUCTION
1.1 Background:
The report has been prepared based on various activities upon monitoring and
reviewing budgets and Profit & Loss statement. In the first activity, the Sales and Cost of Goods
Sold for the year 2015 has been prepared related to meals and drinks for the full year which has
been showcased monthly basis. In the second activity, budgeting forecast has been prepared for
the year 2016 and revenue and expense has been showcased on monthly basis. In the last
activity, i.e. Activity 3 for the first quarter 1 of the year 2016, the variance has been identified
between budgeted results and actual results1. Furthermore, there has been explanation of the
different contingencies planning strategies and also adjustments that will help in showcasing the
budget. All the areas which includes meals, drinks, COGS, rent, utilities, wages and
miscellaneous are all mentioned in this report.
2. Details
As per the assumptions that has been mentioned in the 1st quarter of 2016, the total
revenue that has been estimated quarterly are $ 225,907.50 and for the total year it amounts to
$ 780,780. Then total expenses that has been estimated for that quarter is $ 120,316.75 and for
the total year it amounts to $ 481,267. The cost of goods sold for that quarter is $ 73,816.75 and
for total year $ 295,267.
2.1 Sales and COGS 2015
From the solution that has been evaluated, it can be seen that for the year 2015,
revenue each month for meals is $ 47,775 and for drinks it is $ 4,166.67. The Cost of Goods Sold
for meals in every month is $ 20,930 and for drinks is $ 1,333.33. For the entire year revenue
from meals is $ 573,300 and from drinks is $ 50,000 and the Cost of Goods Sold for meals is $
251,160 and for drinks is $ 16,000.
2.2 Budget for 2016
Some of the key aspects that have to keep in mind at the time of formulate the budget is
that how much revenue they can earn through the amount that they are spending. In estimating
the budget, it can be seen that the revenue for the year remains the same for each month and
the cost that is required for production is much less so there is an opportunity in earning more
revenue. The revenue for the entire year for meals is $ 780,780, for drinks is $ 122,850.
2.3 Projections for 2016
 Revenue generated for 2016 amounted to $ 780,780 for meals and $122,850 for drinks
which increased from 2015 is 10% increase in meals and 50% increase in drinks which reflect
1 John, Kilimuhana Clement. "Effectiveness of public sector financial planning and budgeting: MTEF
budgeting process in the Tanzania LGAs." PhD diss., University of Dar es Salaam, 2018.
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Student ID and Name
BSBFIM501 Financial Management Report
a healthy revenue statement and increases the popularity of the product and services for
the business forecast for the year 2016.
 COGS for the year 2015 shows $ 267,160 for the drinks and the meal which increased to $
295,267 on the year 2016, this reduces the net income or profits of the business but the
effect on paying the tax on the income or profit which will be less due to reduced profit.
 Expenses also increase due to the increased amount of COGS in the year 2016 which
impacted the net profit of the profit statement.
3. FINANCIAL ANALYSIS 1ST Q 2016
3.1 Statement of Income
Meals
2016, Actual Q1 amount for Meal amounted to $ 234,234 and Q1 budget is $ 195,195
resulted in a favourable percent variance because compared to actual revenue production
expected revenue generation is less.
Drinks
For Drinks, the actual Q1 for 2016 amount is $ 36,855 whereas budgeted Q1 for 2016 is
$ 30,712.50 implies a favourable percent variance because compared to actual revenue
expected revenue generation is less.
3.2 Statement on Costs
 The cost of Meal and Drinks or food costs increased in the actual budget was 30% higher
than the budgeted forecast and thus reflected an unfavourable variance in the cost
statement.
 For the cost of expenses, the COGS impacted hugely in terms of the actual budget which
increased from the budgeted amount for Q1 2016 by 30% shows an adverse effect on the
profit generation and increased cost2.
3.3 Projections for Year End 2016
 For the Quarter 1, 2016 data of actual quarterly budget shows the revenue amount of $
271,089 whereas the Q1 budgeted amount shows $ 225,907.50 shows positive forecast
effect3. Annual revenue will also increase in terms of actual forecast shows better result.
2 Rubin, Irene S. The politics of public budgeting: Getting and spending, borrowing and balancing. CQ
Press, 2019.
3 Benade, Gerdus, Swaprava Nath, Ariel D. Procaccia, and Nisarg Shah. "Preference elicitation for
participatory budgeting." In Thirty-First AAAI Conference on Artificial Intelligence. 2017.
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Student ID and Name
BSBFIM501 Financial Management Report
 In the case of Expenses for Q1 actual data 2016 gives an amount of $ 140,461.78 and the Q1
forecasted budget shows $ 120,316.75 implies the negative affect on the statement because
from the Q1 actual, Q1 budgeted 2016 is less. However, the increase in the expense
quarterly as well as annually affect the net profit of the business and resulted in less tax
deduction on the income presented.
3.4 Variance Analysis
Variance analysis is an investigating tool which reflects the difference between the
actual or current budget and forecasted budget planning. It maintained to control the business
uncertainties4. Variances classified under Material variances, Labour variance, variable overhead
variance, fixed variance, sales variance.
One of the variances are the sales variance, it is used to calculate the differences of
budgeted value for actual sales and the budgeted sales value. This occurs when the present
price of the sell value is different from the expected price5. This effects the change in sales
volume and the price on profit to be assessed correctly.
 Revenue in the Q1 budget for actual reflects the higher amount than the expected Q1 2016
which depict the favourable position of the business and its growth and development
 Expenses projected an adverse effect due to its huge amount of Cost of Goods sold and
other expenses, which reduce the profit of the business planning.
3.5 Risks and Contingency Planning
Risk and contingency planning is planning to protect the growth of the business from the
risking situation in business planning6. Though it cannot be avoided in business planning,
however it can be adjusted by reducing the risk impact in times.
The risk for this business for Q1 2016 analysis is the occurrence by increasing in
expenses especially for the Cost of Goods sold and other variable and fixed expenses which are
incurred in a business can be reduced to increase the income of the business.
The Business contingency can be expired products or leaked items (packaging defects)
supplied and wastage of products in transit or after getting supplied and can be the
manufacturing defects. Simpsons Pty Ltd does not show any contingency in its planning7.
However, the business has to take precautions in its selling and manufacturing quality and
quantity to increase the sales.
4. RECOMMENDATIONS
4 Wildavsky, Aaron. Budgeting and governing. Routledge, 2017.
5 Gallani, Susanna, Ranjani Krishnan, Eric J. Marinich, and Michael D. Shields. "Budgeting,
psychological contracts, and budgetary misreporting." Management Science 65, no. 6 (2019): 2924-
2945
6 Malenko, Andrey. "Optimal dynamic capital budgeting." The Review of Economic Studies 86, no. 4
(2019): 1747-1778.
7 Miller, Gerald. Performance based budgeting. Routledge, 2018.
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BSBFIM501 Financial Management Report
4.1 Meals
Simpsons Pty Ltd business planning and growth is meeting its expectations; Meal is one
of its revenue-generating product which is consistently growing every year even it increases its
demand from 2015 to 2016 which given a positive result. Simpsons Pty Ltd is thinking to expand
its sale quantity monthly and reduce the cost to increase more customer. Thus resulted in a
good profit of the business.
4.2 Drinks
Simpsons Pty Ltd has increased the selling quantity and reduced the per-unit sell to meet
the selling demand and thus increased the production and selling of the business in 2016 by 50%
and this increase helps to gain income of the business and increase the revenue8. The Consistent
growth and meeting the demand of customers will help to attain profit.
4.3 Expenses
Upon the analysis in the budgeted forecast, the expenses include COGS, rent, utilities,
wages and utilities. Rent remains same, other than that there has been increase in wages and
COGS as the production increases.
4.4 Adjustments to Budget
The adjustments that has been done are based on the activities that are being
performed at the time of production processes. The revenue that has been estimated in the
budget, it can be seen that as per the variance analysis and the expenses that has been done
COGS and utilities has been marked unfavourable9. Thus it needs to be changed so that it will be
beneficial for the organization to earn more revenue in the future.
4.5 Contingency Strategies
There is a need of the contingency strategy, so that the organization can deal with
various unexpected financial problems which has been arise unexpectedly. It will help in
financial planning and it will help in facing any challenges10. One of the important concept that
has to be implemented is related to the risk, that means there should be implementation of risk
management.
5. CONCLUSION
From the above analysis of financial health of the organization, it can be seen that
Simpsons Pty Ltd has meet their expectations as per planning and growth of the organization.
8 Hirshman, Samuel, Devin Pope, and Jihong Song. "Mental budgeting vs. relative thinking."
In American Economic Association Papers and Proceedings. 2018.
9 Bogsnes, Bjarte. Implementing beyond budgeting: unlocking the performance potential. John Wiley
& Sons, 2016.
10 Roncalli, Thierry. Introduction to risk parity and budgeting. Chapman and Hall/CRC, 2016.
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BSBFIM501 Financial Management Report
There are certain situations that has been unfavourable that has to be changed with the
implication as per strategies. The organization should make certain changes in the costing so
that it will help in making more revenue in the future.
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BSBFIM501 Financial Management Report
6. Bibliography
Benade, Gerdus, Swaprava Nath, Ariel D. Procaccia, and Nisarg Shah. "Preference elicitation for
participatory budgeting." In Thirty-First AAAI Conference on Artificial Intelligence. 2017.
Bogsnes, Bjarte. Implementing beyond budgeting: unlocking the performance potential. John
Wiley & Sons, 2016.
Gallani, Susanna, Ranjani Krishnan, Eric J. Marinich, and Michael D. Shields. "Budgeting,
psychological contracts, and budgetary misreporting." Management Science 65, no. 6 (2019):
2924-2945.
Hirshman, Samuel, Devin Pope, and Jihong Song. "Mental budgeting vs. relative thinking."
In American Economic Association Papers and Proceedings. 2018.
John, Kilimuhana Clement. "Effectiveness of public sector financial planning and budgeting:
MTEF budgeting process in the Tanzania LGAs." PhD diss., University of Dar es Salaam, 2018.
Malenko, Andrey. "Optimal dynamic capital budgeting." The Review of Economic Studies 86, no.
4 (2019): 1747-1778.
Miller, Gerald. Performance based budgeting. Routledge, 2018.
Roncalli, Thierry. Introduction to risk parity and budgeting. Chapman and Hall/CRC, 2016.
Rubin, Irene S. The politics of public budgeting: Getting and spending, borrowing and balancing.
CQ Press, 2019.
Wildavsky, Aaron. Budgeting and governing. Routledge, 2017.
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Financial Management Report Template V1.0519