Financial Management for Australian Clothing Retail

This assignment analyzes the financial management strategies of a hypothetical clothing retail company operating in Australia. It identifies areas for improvement, such as increasing cash collection at point of sale and optimizing payment terms with suppliers. The analysis also recommends developing a branding strategy to compete effectively in the Australian market and leveraging online platforms for global reach and accessibility.

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Management accounting

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Table of Contents
Overview of expected results...........................................................................................................3
Production analysis..........................................................................................................................3
Cash Position...................................................................................................................................4
Analysis of market condition...........................................................................................................4
Summary of Recommendations.......................................................................................................6
References:......................................................................................................................................8

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Overview of expected results
Sun Worship Leisure Wear which is dealing in swimwear and accessories will be having
estimated to increase in sales in the first quarter in the sales of all 4 categories of the products it
is dealing. The expected sales for the first quarter will be 9260 units consisting of all the products
that are to be sold in the months January, February and March it will be amounting to around
$762400. The amount of sales of all the products for the month of January will be $279000, for
the month of February $245900 and March will be $237500. The sales will tend to be decrease in
the next two quarters which will be around $386300 for the months of April to June (Drury,
2013). Likewise there is slight increase in the sales but not like the first quarter which will be
around $373000 for the period of July to September. There will be increase in the sales in the last
quarter it will be results to a total sale of $720800 which will be having contribution of October
month sales $225900, November $225900 and December $269000. So company must focus on
more sales during the period of October to march it will help the organization to earn good
amount of profit (Matz, et al., 2011).
Production analysis
While analyzing the production budget it is observed that finished goods inventory with the
organization is available is around 624 units at the beginning of the year at the same time it is
also required to maintain 50% sales of the next period to be maintained as planned inventory for
the present year so it will be 50% of 2980 units which will be 1490 and total inventory that are
needed to be produced in the month of January will be 4267 units. This process will be continued
in next months (Zimmerman, and Yahya-Zadeh, 2011). The inventory production needs are

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highest in the month of January which will gradually fall in the later months from February to
July and thereafter there is need to increase the production gradually till the end of the year.
Contribution margin by Product
Particulars Bikini
Board
Shorts Towels
Beach
Bags
Sales (in units) 12000 11220 1560 2560
Selling Price per unit $100 $75 $55 $45
Sales (in $)
$1,200,00
0 $841,500 $85,800 $115,200
Variable costs per unit 32.25 34.25 31.5 26.5
Total Variable Cost $387000 $384285 $49140 $67840
Contribution Margin $813,000 $457,215 $36,660 $47,360
Cash Position
As per the analysis of the cash budget it is observed that company is having enough cash in hand
throughout the year. There is need to invest this cash in some more productive investments so
that higher returns can be generated by the company. Companies always need to have good
amounted of cash so that to manage daily operations. It is also recommended that the
maintaining the cash budget and cash position will leads to know about the possible expenses
and income of the organization so that the managers are able to manage operations in case of any
kind of contingencies (Weygandt, et al., 2015). Company is having cash position of $167936.2 at
the beginning of the year at the same time this cash balance has reached to 1 million in the month
of $1024865.4 and it also rose to 1.7 million till the end of December.

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Analysis of market condition
The clothing sector is wide spread industry which is having large variety of products. It is
serving various kinds of demographic and competition between local and international brands.
There are various changes that are faced by the retailing industry in past few years. These
challenges rose due to intense competition in the market due to presence of large number of
retailers in the market. The second challenge faced by this sector is the cautious consumer
spending, customers are comparing products and they are also aware of price difference so it has
resulted to change in preference and purchasing behaviors of the customers. Higher rents
affected the revenues and profits of the retailers but industry revenues are going to be growing at
2.0% rate annually over the period next five years (IBISWorld, 2017). Availability of clothing
products on the online channels has resulted to awareness and consumers are now cautious about
spending, but now the economic conditions and preferences are shifted towards purchasing the
products online as well as offline.
Figure 1: Retail Trade, Australia
The monthly comparison of the clothing trend has an increase of 0.2% in November 2017. At the
same time the overall rise in the industry trend for sales of the clothing, footwear and other
personal accessories were increased up to 1.6% when compared on the seasonally basis

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(Australian bureau of statistics, 2017). There is also possibility that the clothing retailing will
increase about 0.3% with seasonal increase of about 2.2% in cloth retailing.
Figure 2: Retail Trade, Australia
Based upon the information and past trends in the retail clothing it is recommended that there
will be increase in the sales of the clothes in year 2019. It is estimated that Australian GDP will
be having a growth of 2.5% supported by an estimate of 2% growth in retail sector. It is less in
comparison to past performance which was 3.7% in year 2013-2017. It is also observed that
fashion is rapidly changing with the change in the season various products are having huge
change in demand within short period of time (O’Sullivan, et al., 2017). It is required that the
major spending by the company should be on promotion with managing finance and managing
funds so that they are able to maintain good market position in the competitive market.
Summary of Recommendations
As per analysis of the sales budget it is clear that company is having good amount of sales in the
6 months starting from 1st quarter and in the 4th quarter. So it is needed that the organization must
focus on advertisement of the products in the remaining period of six months so that the sales
can be boosted. The company is also required to provide additional discounts on its product
range so that it will be having more sales during this period of time (Lanen, 2016). It is also

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suggested that organization will need to introduce more products in the portfolio so that it will be
having more business in future.
While analyzing the production budget it is analysed that organization must focus on more
efficiency and there is need to bring the cost of material and labour hours also needed to be bring
down as company is facing issues of lower profits (Drury, 2013). Company must also analyse the
costs and overheads so that the costs which are not giving productive returns they need to be
eliminated.
While analyzing the cash position of the organisation it is recommended that the organization
need to take more amount of money at the time of sales company will have to increase cash
collection to 25% at the time of sales. At the same time it is needed that the payments for the
purchases are needed to be brought down to 20% at the time of purchases and remaining
payment must be paid in 40%, 20% and 20% in the following months respectively (Weil, et
al.,2013). It will also help to repay the loan that is to be repaid by the company.
Company also needs to develop some branding strategy since it is analysed that the Australian
market is having high competition. It is also recommended that the company have to admit its
presence on online platform which is preferred as the best method for selling the products its
global presence and any time accessibility are the key attracting features for the companies
(Szymoszowskyj, et al., 2016).

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References:
Australian bureau of statistics (2017) 8501.0 - Retail Trade, Australia, Nov 2017. [Online].
Available at:
http://www.abs.gov.au/ausstats/abs@.nsf/0/3DDA13ECDC094B1CCA257734002042F2?
Opendocument [Accessed on: 19 January 2017].
Drury, C. M. (2013) Management and cost accounting. Berlin, Germany: Springer.
IBISWorld (2017) Clothing Retailing in Australia: Market Research Report. [Online]. Available
at: https://www.ibisworld.com.au/industry-trends/market-research-reports/retail-trade/other-
store-based-retailing/clothing-retailing.html#readMore [Accessed on: 19 January 2017].
Lanen, W. (2016) Fundamentals of cost accounting. USA: McGraw-Hill Higher Education.
Matz, A., Usry, M. F., and Hammer, L. H. (2011) Cost accounting: Planning and control.
Cincinnati: South-Western Pub. Co.
O’Sullivan, G. A., Hanlon, C., Spaaij, R., and Westerbeek, H. (2017) Women’s activewear
trends and drivers: a systematic review, Journal of Fashion Marketing and Management: An
International Journal, 21(1), pp. 2-15.
Szymoszowskyj, A., Szymoszowskyj, A., Winand, M., Winand, M., Kolyperas, D., Kolyperas,
D., ... and Sparks, L. (2016) Professional football clubs retail branding strategies, Sport, Business
and Management: An International Journal, 6(5), pp. 579-598.
Weil, R. L., Schipper, K., and Francis, J. (2013) Financial accounting: an introduction to
concepts, methods and uses. USA: Cengage Learning.

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Weygandt, J. J., Kimmel, P. D., and Kieso, D. E. (2015) Financial & Managerial Accounting.
US: John Wiley & Sons.
Zimmerman, J. L., and Yahya-Zadeh, M. (2011) Accounting for decision making and
control, Issues in Accounting Education, 26(1), pp. 258-259.