Financial Analysis and Budgeting for Paramount Pty Ltd

This document provides a financial analysis and budgeting for Paramount Pty Ltd, a company engaged in the retail business of home products and fittings. It includes information on sales budget, GST analysis, luxury car tax, aged debtors budget, statutory requirements, financial records, director expectations, and principles of accounting.

Company is engaged in retail business
of home products and fittings. This
document includes financial analysis,
budgeting, compliance and regulatory
requirements, software recommendation
and variance analysis of the company.
Paramount Pty Ltd

Contents
Introduction................................................................................................................................2
Assessment Task 1.....................................................................................................................3
Sales Budget...........................................................................................................................3
Sales and Profit Budget for 2016-2017..................................................................................3
Sales Budget by Department..................................................................................................4
GST Analysis.........................................................................................................................4
Luxury Car Tax......................................................................................................................4
Aged Debtors Budget.............................................................................................................5
Budget Notes..........................................................................................................................6
Assignment Task 2.....................................................................................................................8
Statutory Requirements..........................................................................................................8
Annual Returns.......................................................................................................................8
Financial Records...................................................................................................................8
Director Expectations...........................................................................................................10
Australian Securities & Investments Commission (ASIC)..................................................11
Principles of Accounting......................................................................................................11
Probity..................................................................................................................................12
Resources.............................................................................................................................13
Budget Inclusions.................................................................................................................14
Recommendations for Software...........................................................................................15
Assessment Task 3...................................................................................................................18
Variance Analysis................................................................................................................18
Primary Cause of Variances.................................................................................................18
Financial Viability................................................................................................................18
Conclusion................................................................................................................................19
References................................................................................................................................20

Introduction
Paramount Pty Limited is in the business of manufacturing homeware, and electrical and
home fittings. They are planning for the best after sales service, which could be a key driver
in driving more and more sales in the coming future. Also, they are planning to pay certain
instalments, so the near future liability of interest will come down. (Syed Mustapha Nazri,
Zolkaflil & Omar, 2019)
Paramount sales have shown a significant quarter on quarter movement from 20% to 30%,
which is quite a good figure for a growing business. Gross profit has shown a constant
growth. There has been a significant decrease increase in the interest expense as company
may have incurred new debt, so it could affect its debt equity ratio in near future. There are
some irregularities in the controls as seen in the internal auditor report which the company
has to take care. Also, job roles and responsibilities are also not clear to the employees which
can lead more work and disturbance between the employees. Bank positions may have been
inflated as there are no proper reconciliation. (Jadevicius and Huston, 2014)
Paramount anticipates that it will maintain the same growth rate of sales as it was maintaining
in previous year. There plan is to increase all the expenses by 4%. they are also planning to
buy a new car for the chairman for business purposes.

Assessment Task 1
Sales Budget
Sales and Profit Budget for 2016-2017
Please refer to the excel work Book.

Sales Budget by Department
Please refer to the excel work Book.
GST Analysis
Please refer to the excel work Book.
Luxury Car Tax
a. Luxury tax amounts to $32,164.
b. After seeing today’s fast-moving world, luxury car has become the most important thing,
at least from business prospective. Your vendors and customers are going to judge you
from the car you have and will negotiate for rates accordingly. Also, the employee cost
also depends on the car you have, employees tend to shout for hikes if they see the
business owner is getting richer and richer. But from the corporate social responsibility
perspective luxury cars is a good option, because of this car will have a huge impact on
the client, so certainly it will lead to huge business resulting in impact on profit.
Company’s has to do corporate social responsibility on the basis of profit earned in the
previous three financial years.
c.

Aged Debtors Budget
A. Aged debtors are an issue for paramount because as observed from the internal audit
report the sales made to customers are recorded on net of discount basis, so the actual
sales amount and discount allowed to customers have been disappeared from the
accounts. Also, the cash register doesn’t reconcile with the cash which is present in
the drawer, there are chances that the debtor’s amount is manipulated, or the cash
received from the debtors have been applied somewhere else. Also, debtor’s
reconciliations is not done on monthly basis, this can be the indication that the debtors
amount reflecting in the financials is not true. (Srivastava, Das & Pattanayak, 2019)
B. Paramount has to Ensure that proper reconciliation is been done on monthly basis and
the supporting for the reconciliation is a valid recon point. Also, cash received from
debtors must be accounted on a regular basis, and not be put in the suspense account
for longer period. Debtors whose overdues are above 90 days, must be check for
credibility assessment, and no further sales should be made to them and a legal notice
must be sent to them to all the debtors for the payment pending. Reminder must be
sent on regular basis for payment to be made. Check if any debtors got bankrupt in
Advantages Disadvantages
1. Luxury cars are safer as compared to
normal cars, so in case of accidents
luxury car can protect the key business
persons.
1.It has a huge maintenance cost. If the
car got accidented than company has
bear a hell lot of expenses in repairing
and sometime have to replace it.
2. It comes with a greater speed, which
can help the executive to travel more
and it will help in saving time, so the
executive will have time for important
things more rather than just travelling.
2.High fuel cost and servicing cost. Car
will be having a very low average so
certainly it will increase the fuel cost.
Also, the cost of services is almost 3
times than that of the average car.
3.It always has great impression on
client, because luxury cars are sign of
prestige, it will eventually bring more
confidence in client.
3.Car theft is a problem for luxury and
high insurance cost. Company has to
bear a very high insurance cost.

near period, if yes, then try to create a bad debt as early as possible. (Sikka, Filling &
Liew, 2009)
C. Please refer to the excel work Book.
Budget Notes
A. Profit and Loss
Gross profit has been declined by 1%, in order to maintain sales in the market, as there
was an economic recession despite of growth in sales there is decrease in the net profit.
Also, the Interest expense also got doubled in 3 years’ time, resulting to a lower net
profit.
Advertising budget went to 7 times of what it was in 2012-13, but still it was not able to
generate required sales which was needed. (Porter, 2009)
After sales service has shown a significant improvement on sales figure.
B. Financial Management Approaches
Budget must be circulated on timely basis to designated persons and the budget must
be very clear and precise about the outcomes it wants from the concerned personnel,
because as we see the budget was not properly spent by the advertising department
resulting in a very low sales growth despite of having high marketing budget.
There is a very minimum amount of communication between the shop floor to the
head office, resulting in lack of communication problems faced at the ground floor
employees, like the problems faced by them, their suggestions and modification to the
existing business process. Proper assessment was not made of the revenue, thereby
resulting in lower net profit, despite of high spending on advertisement. This
miscalculation had led to lower net profit. Also, there was no proper time sheet
management which lead to inaccurate time booking, so employees have taken full
benefit of it leading to high salary and wages, this is due to the computer software

which is not efficient enough to provide with the timely reports resulting in a financial
crunch.
C. Importance of having contingencies plan – Contingency plan will help paramount in
any impossible or unpredictable business situations. It can protect the company from
harmful and serious risk it is facing at present. It helps the organisation in preparing
for any challenges in the future.
D.
Issue Strategy
1. Discounts which is given to the customers are been
recorded on net basis.
Company should stop practising such
policy and record all such transaction
on gross basis and show the discount
allowed separately in profit and loss.
2. Cash registers were not reconciling with the cash in This reconciliation must be done at
Issue Contingency
1. There must be right to cancel the
contracts without refund in case of
serious weather conditions or in the
event of a disaster
Communication must be made in a
timely manner. Resulting in profits in
disaster period also.
2.Must includes all types of penalties in
a contract with vendor and if there is a
facility problem than there must be an
insurance coverage for it.
Event must be rescheduled at a finest
facility available. If the dates are needed
to be modified than take the choice of
refund.
3. Internet connection must be taken
from two different types of vendors.
If there are problems with one network
provider than the other internet vendor
can solve the problem, hence the
temporary shortage of internet will be
reduced.

hand. day end in order to avoid differences
between the cash count.
3. Timesheets are not approved by the manager. Overtime must be approved by the
concerned manager on timely basis in
order to avoid high unnecessary
payroll cost.
Assignment Task 2
Statutory Requirements
• Paramount must pay Superannuation 9.5% of wages and salaries.
• Employees Payroll tax is 5.5% of wages and salaries.
• Workers compensation is set 2% of wages and salaries for each.
• Company tax is 30% of net profit before tax.
• Statutory requirements for GST are 10% of the recorded amounts in sales.
• 10% of cost of goods sold.
• The rolling forecast that need to be prepared quarterly.
Annual Returns

As per law, the above documents must be submitted to Australian Securities & Investments
Commission (ASIC).
Financial Records
Financial records
It can contain documents such as:
receipts and invoices for goods and services entity is buying and selling
contracts with suppliers and other contractors
bank statements
a register of all your business assets
schedule of depreciation
tax documents together with activity statements and annual tax returns
documents that show how the business is financed e.g. any type of business loans and shares
in the business entity.
Legal records
Legal records are the documents that relate to the process of your business. These documents
can include:
 Documents required for business registration
 leases
 contracts that are you having with suppliers and other clients
 insurance documentation
Employee records
Employee records also include any information that you have about the employees of your
business establishment including their:

 staff rosters, their attendance and the pay records
 financial records, such as bank details, tax files and superannuation files
 contact details, including addresses, mobile numbers and emergency contacts
 work performance and history, including any performance issues or workplace
injuries.
Policy and procedures
Policy and procedure records outline how you will manage the day-to-day operation of your
business. They include:
 work place health and safety plans
 dress standards
 sexual harassment policies
 operation manuals.
It’s a good idea to provide your staff with a copy of your policies and procedures when they
start work with you. You can include it as a part of their employment contract.
How long should you keep records for
You need to keep your records and documents for different amounts of times depending on
the government department or organisation that needs the information.
Australian Securities and Investment Commission (ASIC) requires companies to keep records
for seven years.
The Fair Work Ombudsman (FWO) requires you to keep employee records for seven years.
The Australian Taxation Office:
It Requires you to keep records for five years after the records are created. If your business
owns assets, Capital gains tax may apply. In this case you may need to keep records for
longer.

Director Expectations
Director should recognize and agree to uphold the following standard of behavior:
1. Take personal accountability
for contributing impartially to the decisions of the team, with no thought given to personal
gain.
2. Enthusiastically
Seek adequate knowledge about the business of the organization.
3. Provide positive and strong support:
for contribution into the growth of relevant organizational policy and long-term strategies.
Australian Securities & Investments Commission
(ASIC)
The ASIC Act requires The Empire Homeware Pty Ltd to:
 Maintain, facilitate and improve the performance of the financial system and entities
in it
 Promote confident and informed participation by investors and consumers in the
financial system
Principles of Accounting
a) Matching principle: the application of this principle in developing the budget for
Paramount is of vital importance because the company can foresee whether or not will be a
profit or a loss at the end of the period for which the budget is set for and make decisions
accordingly. Since the matching principle dictates that expenses are to be matched against the
revenue they are generated and that matching is to be made within the same period, a budget

following this principle is to be accurate is relation to results providing a clear picture of
future financial position of the business.
b) Account groups: the account group principle indicates the five group accounts are used to
group the different transactions the business incurs into. These groups are Assets, Liabilities,
Equity, Revenue, and Expenses. For Paramount the use the group account is necessary
because it will allow the business the classification of all components of the business such as
what assets they own, how much liabilities they owed, their equity composition, and what are
the expenses and revenue generated. This classification allows Paramount a visual
organisation of the business functioning.
C. Time periods: the generation of financial information is provided to users in a timely
manner. Generally speaking, the time periods for generating financial information for
stakeholders is monthly, quarterly, and annually. Nonetheless, for administration purposes,
some report is generated weekly or fortnightly. In the case of Paramount and budget
development, the information foreseen should be done in monthly projected figures. It will
allow for anticipated estimation of results highlighting which months will have the best or the
worse outcomes.
Probity
a) For a business, the preparation of budgets that reflect the future performance of the
company is of vital importance at the time of making financial decisions and investments. In
this sense when preparing a budget, the person in charge of making this financial information
must use honesty and transparency to not deceive the user of the information by providing
false figures and promising excellent results when in reality they know that the situation is
not that good. Budgets are an important tool for immediate decision making. Therefore,
preparing it observing all ethical and professional standard is a must to ensure that the
information it contains is real and users can rely on it to make sound financial decisions and
planning.

b) Conducting the business within ethical and principled standards should be mandatory for
Paramount in all departments. Regardless the type of employee, displaying high standards of
ethics, principles, and moral, will enhance the image of the company and rise its reputation as
a good company. All areas of the business are to display ethic while in operation. It not only
will bring benefits to the business in terms of people’s preference for its quality service and
ethical standards, but also it will create a competitive edge for the company that will be
difficult to match by its competitors.

Resources
The importance of allocating resources to help internal stakeholders to reach their full potential lays
of the fact that the more valued they feel, the better will their response to that sign of appreciation the
company shows for them. For example, in the case of allocating resources to improve the physical
work environment will have an impact in the motivation of employees leading them to a better
performance. Likewise, when resources are allocated to train and upskill staff, the company is
making them more productive in their roles directing leading them and the company to a much better
performance and outcomes.

Budget Inclusions
Human
(What experts/qualifications/experience will
Paramount require to ensure the business
remains financially profitable)
1. Hire an interior design professional to arrange
the display of merchandise in all stores so
that they are more appealing to clients.
2. Provide training to sell staff in customer
service mainly in relation to culturally
diverse customers.
Physical 1. Create in each store a rest area in which
staff can go there to have a break and enjoy
a time on their own.
2. Upgrade to an online sales platform so
that the business can start taking advantage
of the e-commerce market.
Financial 1. Hire an AR receivable officer to take care of
debtor’s collection and carry on reconciliations
so that money is not lost due to negligence
in collecting them.
2. Evaluate the amount of discount given to
clients and create and standard procedure
to be distributed to sales staff so that
Discounts are managed appropriately.

1. Fixed cost: these outlays are constant and are part of the ongoing running of the business.
They include rent, insurance, salaries, financing costs, etc.
2. Variable costs: these outlays change from one period to another and depend on volume of
unit produced. They include raw material, overtime, and overheads such as electricity and
others.
3. One-off capital cost: these outlays refer to the purchase of fixed assets. They include
purchases of computer, equipment, or premises.
Recommendations for Software
a. Commercial Software
Software Titles
Title 1 Title 2
NetSuite ERP Xero
Specifications Specifications
NetSuite ERP is a finished, versatile
cloud ERP arrangement focused at
high-developing, moderate sized
organizations and vast undertakings.
It mechanizes front-and back-office
forms including: budgetary
administration, income the board,
fixed resources, request the board,
Xero is a bookkeeping programming to a
great extent known for having changed
bookkeeping. Created to give the most ideal
client experience, the arrangement is
anything but difficult to utilize, making
intense bookkeeping undertakings like
twofold accounting basic notwithstanding for
first-time clients. For the individuals who

charging, and stock administration. require an accountant, the merchant offers
confirmed guides who are more than willing
to help them.
Features Features
Accounting
 Order-to-Cash
 Audit Trail Visibility
 Procure-to-Pay
 Tax Management
Billing Management and Invoicing
 Flexible Billing Scheduling
 Integrated Process Workflow
 Shipping & Fulfillment
 Revenue Recognition
Management
 Financial Planning
 Human Capital Management
 Core HRIS
 Payroll Services
 Incentive Compensation
Management
 NetSuite TribeHR
 Recurring Revenue
Management
Inventory Control and Warehouse
Management
 Cost Management
 Order Fulfillment
 Inventory Control
 Bank reconciliation
 Contacts – Keep track of
suppliers and customers
 Dashboard
 Expense claims
 Files – Attach documents to your
financial data
 Financial reporting
 Free, unlimited email support
 Inventory
 Invoicing – Create and send
invoices automatically
 Log in from anywhere
 Online accounting – Access Xero
anytime, anywhere
 Payroll
 Purchase orders
 Quick and easy 1099s
 Receive bills electronically
 Smart lists – Segment contacts
based on purchase history
 Fixed assets
 GST return

b. Recommendation
In my opinion paramount should go for NetSuite ERP. This software is quite complete and
provide excellent tools for the line of business the company is in. The fact that this
software provides inventory control and warehouse management tools is valuable for the
business because in that way larger control can be exercised. The accounting features are
just spot on and the five staff having access to it will have all they need to perform well
their duties. Also, NetSuite ERP accompanies worked in business knowledge highlights,
and partners those to the budgetary and creation the executive’s information for greatest
precision. Clients can utilize it to transform numerical information into high calibre visual
examination, and screen the wellbeing of your business anytime of time. They can pull off
an assortment of reports and significant bits of knowledge, and make custom information
synopses.

Assessment Task 3
Variance Analysis
Refer to the Excel Workbook.
Primary Cause of Variances
Item Budget Q1 Actu
al Q1
$ %
Varianc
e
Favourable
Unfavourable
F/U
Strategy
Interest
Expense $21,127 $28,
150 $7,023 33% U
Interest expenses has
increased due to
recessions.

Store
Supplies $750 $790 $40 5% U
Store supplies has
increased due to increase
in sales.
Advertising $2,00,000
$1,5
0,00
0
-
$50,000 -25% U
Company has spent a lot
on advertising in order to
maintain sustainable sales
in the market.
Financial Viability
The company will have to face high financial crunch in the coming future, despite of huge
investment in marketing its sales are not rising to that proportion. Investor should note that
properly, add calculate the solvency ratios accordingly. Actual expends and budgeted spender
must be compared frequently in order to check the financial ability to accommodate
expenses.
Conclusion
Paramount internal controls are really weak. It really needs to focus on the internal audit
report findings. It should properly spend its marketing expenses. IT should focus more on the
debtors ageing part and should involve itself in increasing the customer bas in the highly
competitive environment. Also, the high spend on wages and salaries should be cut down
because unapproved time is been allowed in the systems.
I see a substantial growth in the industry so paramount should go in line with the other
business entity. It should try more on to improve the policies procedures and methods of
doing business.
Further, the points that are highlighted by the internal auditor report should be taken care of.
There must be proper reconciliation of all accounts whether it be accounts payable or
accounts receivable, cash or bank.

Paramount also has to take care of overtime hours booked by staff. There must be proper and
adequate control for it
References
Jadevicius, A. and Huston, S. (2014). A “family of cycles” – major and auxiliary business
cycles. Journal of Property Investment & Finance, 32(3), pp.306-323.
Syed Mustapha Nazri, S., Zolkaflil, S., & Omar, N. (2019). Mitigating financial leakages
through effective money laundering investigation. Managerial Auditing Journal, 34(2), 189-
207. doi: 10.1108/maj-03-2018-1830
Srivastava, V., Das, N., & Pattanayak, J. (2019). Impact of corporate governance attributes on
cost of equity. Managerial Auditing Journal, 34(2), 142-161. doi: 10.1108/maj-01-2018-1770
Sikka, P., Filling, S., & Liew, P. (2009). The audit crunch: reforming auditing. Managerial
Auditing Journal, 24(2), 135-155. doi: 10.1108/02686900910924554

Porter, B. (2009). The audit trinity: the key to securing corporate accountability. Managerial
Auditing Journal, 24(2), 156-182. doi: 10.1108/02686900910924563