Manage Finance: Budgets, Sales & Profit Budget, Cash Budget, Debtor's Ageing Report

This document provides information about budgets, sales & profit budget, cash budget, and debtor's ageing report in finance management. It discusses the importance of taxation compliance, financial software, and internal controls. The document also includes variance analysis and cash flow analysis. Subject: Finance, Course Code: N/A, Course Name: N/A, College/University: N/A

MANAGE FINANCE

TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................2
TASK 2............................................................................................................................................1
BUDGETS.......................................................................................................................................1
Sales & Profit Budget..................................................................................................................1
Sales budget.................................................................................................................................2
Cash Budget.................................................................................................................................3
Debtor's Ageing Report...............................................................................................................3
PROMPT QUESTIONS..................................................................................................................3
Part A...........................................................................................................................................3
Part B...........................................................................................................................................6
REFERENCES..............................................................................................................................12

TASK 2
BUDGETS
Sales & Profit Budget
PROFIT
BUDGET 2017/18 Qtr 1 Qtr 2 Qtr 3 Qtr 4
Revenue - 20% 24% 26% 30%
Sales 16971236 3394247 4073097 4412521 5091371
– Cost of
Goods Sold
9673605 1934721 2321665 2515137 2902081
Gross Profit 7297631 1459526 1751432 1897384 2189289
Gross Profit % 43% 43% 43% 43% 43%
Expenses
– Accounting
Fees
10000 2500 2500 2500 2500
– Interest
Expense
84508 21127 21127 21127 21127
– Bank
Charges
1600 400 400 400 400
–
Depreciation
170000 42500 42500 42500 42500
– Insurance 13390 3347.5 3347.5 3347.5 3347.5
– Store
Supplies
3862 772 927 1004 1159
–
Advertising
350000 20000
0
50000 50000 50000
– Cleaning 16771 3354 4025 4360 5031
– Repairs &
Maintenanc
e
64272 16068 16068 16068 16068
– Rent 264050
8
66012
7
660127 660127 660127
– Telephone [phone] 3899.2 4499.0
4
– Electricity
Expense
26780 5356 6427.2 6962.8 8034
– Luxury Car
Tax
6582 6582 0 0 0
1

– Fringe
Benefits Tax
28000 7000 7000 7000 7000
–
Superannua
tion
187020 37404 44884.
8
48625.
2
56106
– Wages &
Salaries
207800
0
41560
0
498720 540280 623400
– Payroll Tax 98705 19741 23689.
2
25663.
3
29611.
5
– Workers’
Compensati
on
41560 8312 9974.4 10805.
6
12468
Total
Expenses
583655
4
14531
90
139531
6
144467
0
154337
8
Net Profit
(Before Tax)
146107
7
6336 356115 452714 645912
Income Tax 438323
.1
1900.8 106834
.6
135814
.2
193773
.5
Net Profit 146107
7
6336 356115 452714 645912
Sales budget
SALES 2017/18 Qtr 1 Qtr 2 Qtr 3 Qtr 4
BUDGET Total
Budget
20% 24% 26% 30%
Total
Sales
1,69,71,2
37
33942
47
40730
97
44125
22
50913
71
Bathroo
m
fittings
30% 5091371.
1
10182
74
12219
29
13237
56
15274
11
Bedroo
m
fittings
25% 4242809.
25
84856
2
10182
74
11031
30
12728
43
Mirrors 15% 2545685.
55
50913
7
61096
5
66187
8
76370
6
Decorati
ve items
10% 1697123.
7
33942
5
40731
0
44125
2
50913
7
Lighting
fixtures
20% 3394247.
4
67884
9
81461
9
88250
4
10182
74
2

Cash Budget
CASH
FLOW
ANALYSIS
– GST 2017/18 Qtr 1 Qtr 2 Qtr 3 Qtr 4
GST
Collected
1697123.6 339424.7
2
407309.66 441252.1
4
509137.1
Less GST
Paid
1281418.4 282924.5 306868.6 326340.6 365284.7
GST Payable 415705.2 56500.2 100441.1 114911.5 143852.4
Debtor's Ageing Report
AGED
DEBTORS
BUDGET
TOTAL Qtr 1 Qtr 2 Qtr 3 Qtr 4
Sales 1,69,71,237 33,94,247 40,73,097 44,12,522 50,91,371
% Debtors
Sales
20% 20% 20% 20%
Total
Debtors
20% 678849.48 814619.38 882504.3
2
1018274.22
Current 84% 570233.56 684280.28 741303.6
3
855350.34
30 Days 10% 67884.95 81461.94 88250.43 101827.42
60 Days 5% 33942.47 40730.97 44125.22 50913.71
90 Days 1% 6788.49 8146.19 8825.04 10182.74
PROMPT QUESTIONS
Part A
1.
Company is required to comply with all the taxation such as payroll reporting, quarterly
or monthly business activity statements, record keeping and financial year reporting. It has to
collect and pay GST to the Government. Company is required to report over the quarterly
business activities, to pay payroll tax for wages and salaries, fringe benefits tax for benefits given
to employees and corporation tax on financial year profits (Mackie and et.al., 2019). It would to
comply with luxury car tax requirements. The different taxation applicable are:
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GST Payable – 415705
Luxury Car Tax - 6582
Payroll tax – 98705
PAYG withhold - 44872
Fringe Benefit Tax – 28000
Corporation Tax – 438323
2.
As the company is having shares listed it is required to comply with all the statutory
requirements under the Corporations Act, 2001. It is required to prepare financial reports in
accordance with accounting standards to prepare financial statement for year. It is also required
to send the quarterly reports to ASIC for the shareholders (Hafit, Irianto and Purwanti, 2018).
The company is required to get its accounts audited by the professional auditors that they are free
from material misstatements. The company is also required to pay the corporation tax applicable
for the year at the rate of 30%. It has to disclose the capital expenditure of luxury car in financial
reports for year.
3
Houzit is currently having financial management software that is efficient but is not able
to handle the data over large scale. It starts showing errors after a certain limit of transactions.
The software is also having update issues that will make inefficient for the future business needs.
As per current business requirements it could adopt HubSpot or Oracle. These software are
specially designed to meet the current business requirements. They provide all the tools and
guides with the processes in financial accounting (McLaren, 2019.). It could be expanded with
increase in size of business and can be updated timely with new features.
4.
a. Matching principle: It could be applied by ensuring that the revenues and incomes of the
Houzit have equal expenses for the year. The expenses are properly recorded against the
incomes while preparing budget.
4

b. Account groups: The group accounts principle for the Houzit could be applied by
properly dividing the sales from every division. It could record sales from each division
separately in sales budget.
c. Time periods: The expense and revenues are accounted in the period to which they relate.
This could be applied by dividing the expenses in four quarters to which they relate. The
quarterly statements are reported to authorities
5.
 To maintain the public sector integrity
 To provide accountability
 Ensure budgets comply with the required processes
 All the offers are evaluated under same criteria
 Preserving supplier confidence in the Government processes.
 Minimising conflicts and litigation (Perl and Burke, 2018).
 Ensuring best outcomes are provided from the procurement activities
 Potential for the misconduct, corruption and frauds are avoided.
6.
 Completing debtor analysis for reducing cash tied in the outstanding debts.
 Increase in salaries and wages by the $172500
 Reducing principal loan by December by $100000
 Increasing advertising budget around $60000
7.
The Houzit could include extra items in the budget for the year like the warehouse
expenses, stationary and printing, cleaning and maintenance expenses. It could also include other
expenses such as courier, training or development expenses if incurred for the staff, software
maintenance expense and such other.
8.
 Ensuring integrity and reliability of the financial information
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 Safeguarding the assets of Houzit from accidental losses
 Ensuring compliance with all the statutory and other applicable laws to it
 Promoting effective and efficient operations by increasing the employees (Habu, 2017).
 Internal controls system for monitoring achievement of the goals and the objectives of the
business.
Part B
1.
Variance analysis
Houzit Pty Ltd
Variance to Budget
xxx Quarter ended mmm-yyyy
Actual Results
Budget-
Qx Actual-Qx
$ %
Variance F or UVariance
Sales 3394247 33,71,200 23,047 0.68% F
– Cost Of Goods
Sold
1934721
19,55,296
-20,575 -1.05% U
Gross Profit 1459526 14,15,904 43,622 3.08% F
Gross Profit % 43% 42% 1% 2.38% U
Expenses
– Accounting
Fees
2500
2,500
– Interest
Expense
21127
28,150
-7,023 -24.95% U
– Bank Charges 400 380 20 5.26% F
– Depreciation 42500 42,500
– Insurance 3348 3,348 -1 -0.01% U
– Store Supplies 772 790 -18 -2.24% U
– Advertising 200000 1,50,000 50,000 33.33% F
– Cleaning 3354 3,325 29 0.88% F
– Repairs &
Maintenance
16068
16,150
-82 -0.51% U
– Rent 660127 6,60,127
– Telephone 2999 3,100 -101 -3.25% U
– Electricity
Expense
5356
5,245
111 2.12% F
6

– Luxury Car
Tax
6582
12,000
-5,418 -45.15% U
– Fringe Benefits
Tax
7000
7,000
–
Superannuation
37404
37,404
– Wages &
Salaries
415600
4,10,500
5,100 1.24% F
– Payroll Tax 19741 19,741
– Workers’
Compensation
8312
8,312
Total Expenses 1453190 14,10,572 42,618 3.02% F
Net Profit
(Before Tax)
6336
5,333
1,003 18.81% F
Income Tax 1901 1,600 301 18.80% F
Net Profit 6336 3,733 2,603 69.73% F
2.
Cash Flow Analysis report
2015/16 2016/17 2017/18
Trade Debtors 850000 950000 1018274
Sales 14550100 15714108 1,69,71,237
Debtor Days 21 22 22
3.
a) Issues
Issues were identified in the case study regarding the various issues such as
Internal control measures in the company are very weak. The internal control would lead to
the non compliance of the accounting requirements and other legislations. Weak internal control
can lead the company to have increased costs.
The variances are high for interest expenses which show that the business has not proper
analysis of the financial systems.
Improper accounting estimates which may have occurred due to old and outdated financial
management software (Dapeng, Lulu and Wei, 2017). Ineffective accounting software affects
the reporting and other errors in transactions.
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The internal controls are required to be fixed by the management for ensuring that the
company grows well in future.
b. Variances
i)
Houzit Pty Ltd
Variance to Budget
xxx Quarter ended mmm-yyyy
Actual Results
Budget-
Qx Actual-Qx
$ %
Variance F or UVariance
Sales 3394247 33,71,200 23,047 0.68% F
– Cost Of Goods
Sold
1934721
19,55,296
-20,575 -1.05% U
Gross Profit 1459526 14,15,904 43,622 3.08% F
Gross Profit % 43% 42% 1% 2.38% U
Expenses
– Accounting
Fees
2500
2,500
– Interest
Expense
21127
28,150
-7,023 -24.95% U
– Bank Charges 400 380 20 5.26% F
– Depreciation 42500 42,500
– Insurance 3348 3,348 -1 -0.01% U
– Store Supplies 772 790 -18 -2.24% U
– Advertising 200000 1,50,000 50,000 33.33% F
– Cleaning 3354 3,325 29 0.88% F
– Repairs &
Maintenance
16068
16,150
-82 -0.51% U
– Rent 660127 6,60,127
– Telephone 2999 3,100 -101 -3.25% U
8

– Electricity
Expense
5356
5,245
111 2.12% F
– Luxury Car
Tax
6582
12,000
-5,418 -45.15% U
– Fringe Benefits
Tax
7000
7,000
–
Superannuation
37404
37,404
– Wages &
Salaries
415600
4,10,500
5,100 1.24% F
– Payroll Tax 19741 19,741
– Workers’
Compensation
8312
8,312
Total Expenses 1453190 14,10,572 42,618 3.02% F
Net Profit
(Before Tax)
6336
5,333
1,003 18.81% F
Income Tax 1901 1,600 301 18.80% F
Net Profit 6336 3,733 2,603 69.73% F
ii.
The variance report shows that there has been deviation from the budgeted figures.
 The major variances are seen for Interest expenses as the company might have taken
extra loans after repaying 100000.
 Advertising expenses were incurred less from budgeted due to lack of financial funds.
 Variance in luxury car tax is very significant as the tax incurred is double from the
budgeted which might have increased due to higher price of car.
 There has been a significant variance in profit figures from the budgeted figures due to
increase in expenses.
c. Performance
9

i. The financial performance of the organisation could be analysed that they are suffering from
critical stage currently. It could be assessed that there is significant variance in the budget and
actual performance which shows that management is required to increase the efficiency. It could
be assessed that company is competing below the industry benchmarks due to lower sales.
ii. The reports suggest that the profits of company has gone significantly down as compared with
the budget and also from the previous years. The business could not be managed effectively in
the current situations (Djalil, 2020). The business is financially viable up to managing the gross
profits of the business and budgets.
It would be difficult to manage the turnover and gross profit in this downturn as company had
already reduced the prices and the cost of goods sold has also increased. There is also decrease in
the revenues of company which will make it hard for the business to maintain the profits.
iii. It could be evaluated that trend of the average debtor days of the company has increased from
previous years. The average debtor days were 21 days in the 2015-16 and have increased to 22
days in the current year.
The cash flows analysis shows that the company is having reduced cash flows and is facing
issue in managing the expenses. The increase in debtor days has been made to increase sales. It
will help in having adequate cash cycle.
d. Recommendations
i. The business is not showing increasing trend and is therefore evaluated that there has been
critical stage for the business to survive. The business is not viable as the growth has declined of
the company and also the issues regarding the internal control and software are required to be
managed effectively.
ii.
 The revised budget will be prepared after the thorough research of the new trends and
demand of the products and services.
 The management is also required to ensure that the budget is prepared considering the
actual figures in financial reports (Bayer, 2018).
 The company is required to use better software as the forecast and estimates may not be
accurate and reliable for the business.
10

 The internal controls are to be ensured for the achievement of financial goals scheduled
inn the budget.
e. evaluation
i. The financial management process of the company had helped the company to maintain its
profits up to the last year. At current time the process is unable to manage the downturn of the
turnover and profits (Du and Xia, 2019). It could be evaluated that the company is required to
adopt new financial management process to increase the efficiency of process.
11

REFERENCES
Books and Journals
Mackie, R.S., and et.al., 2019. Trends in nicotine consumption between 2010 and 2017 in an
Australian city using the wastewater-based epidemiology approach. Environment
international. 125. pp.184-190.
McLaren, J., 2019. Laws to protect tax whistleblowing in Australia: what does this mean for
taxpayers and the taxation profession. Australian Tax Review. 48. pp.24-41.
Perl, A. and Burke, M.I., 2018. Does institutional entrenchment shape instrument adjustment?:
Assessing instrument constituency influences on American and Australian motor fuel
taxation. Policy and Society. 37(1). pp.90-107.
Habu, K., 2017. How aggressive are foreign multinational companies in reducing thier
corporation tax liability?.
Djalil, M.A., 2020. The Effect of Internal Control. Budget Participation and Budget Commitment
on Managerial Performance of Government Work Unit (SKPA) In Province of Aceh,
Indonesia. 2. pp.20-24.
Bayer, E., 2018. The Influence Of Budget Goal Clarity, Internal Control System, Reporting
System, With Organizational Commitment As Moderating Variable On The Performance
Accountability Of Government Agencies Of Local Government Serdang Bedagai
Regency. International Journal of Public Budgeting, Accounting and Finance. 1(2).
pp.10-10.
Du, G.L. and Xia, D., 2019, July. Research on University Budget Management from the
Perspective of Internal Control. In 5th Annual International Conference on Management,
Economics and Social Development (ICMESD 2019). Atlantis Press.
Dapeng, T., Lulu, W. and Wei, W., 2017. Conceptual Framework and Realization Path of
Government Internal Control from the Perspective of Budget Decentralization. Public
Finance Research. (6). p.7.
Hafit, M., Irianto, G. and Purwanti, L., 2018. Analysis of Government Internal Control System
on Budget Implementation in Accordance with Government Regulation No 60 of
2008. Journal of Accounting and Business Education. 2(2).
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