Analyzing Financial Discrepancies in a Business

This assignment delves into the issue of financial discrepancies identified within a business, particularly concerning sales and gross profit variances. It recommends utilizing ratio analysis to enhance performance and suggests employing a prioritized budgeting approach to control expenses effectively. The document emphasizes the importance of financial forecasting and crafting comprehensive financial statements for improved business outcomes.

MANAGING OPERATIONAL PLAN

Table of Contents
INTRODUCTION.....................................................................................................................................1
ASSESSMENT TASK 1..............................................................................................................................1
Self directed business........................................................................................................................1
Sell shares to raise capital.................................................................................................................1
Identify skills, experiences and resources..........................................................................................1
Ethical business practices..................................................................................................................1
Business opportunity.........................................................................................................................2
Break even analysis...........................................................................................................................2
Develop a product or service.............................................................................................................3
Plan quality production process and sourcing of raw materials........................................................3
Sustainability principles for business.................................................................................................3
Marketing plan..................................................................................................................................3
Develop budget.................................................................................................................................4
Monitoring and controlling of plan....................................................................................................4
Produce financial statements............................................................................................................4
Provide return to shareholders.........................................................................................................5
ASSESSMENT TASK 2..............................................................................................................................6
Executive summary............................................................................................................................9
Identification of aim of operational plan...........................................................................................9
Ineffective areas of operational plan.................................................................................................9
Improvement suggestion.................................................................................................................10
Cost cutting opportunities without affecting quality or customer service.......................................10
Identify risk in plan and solution to resolve the problem................................................................10
Recommendation............................................................................................................................11
ASSESSMENT TASK 3............................................................................................................................11
List of personnel..............................................................................................................................11
Prepare one year budget and projected financial statements.........................................................12
ASSESSMENT TASK 4............................................................................................................................12
Prepare variance report...................................................................................................................12
Discrepancy in the report................................................................................................................13
Effectiveness of cost budgeting technique......................................................................................14
Recommendation............................................................................................................................14

CONCLUSION.......................................................................................................................................14
references............................................................................................................................................15
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INTRODUCTION
Business opportunity creates unique businesses establish by an enterprise owner to
resolve all the issues. This report is all about selecting food and beverage business of
restaurant in the Sydney Australia. The operational plan is managed by focuses on the
financial as well as qualitative aspects of the operational plan. Business plan develops by an
entity by focusing on several factors that are considered in an operational plan.
ASSESSMENT TASK 1
Self directed business
XYZ is a restaurant located in George Street in the Sydney, Australia to cater various
needs and expectations of all the users in the external market. George Street is a central place
in New South Wales comes under high streets in Sydney (Crane and Matten, 2016). The
uniqueness of this restaurant is that customer with no money can enter the restaurant and pay
money whenever they have. It attracts all kinds of users whether poor or rich people.
Important credentials of the customers held with the owner as a security.
Sell shares to raise capital
Selling shares is a proven way to raise capital for an entity as in this way the funding
requirement of the business gets fulfilled. Shares of the existing company can sell their share
to the investor. Equity can rise through an initial public offer in which news advertisement is
given in local newspapers of Sydney.
Identify skills, experiences and resources
This business requires creativity and innovation as the basic traits in attracting more
customers towards the restaurant. Interaction with the consumers is essential in explaining all
the benefits of the firm to them.
Ethical business practices
The restaurant owner is requiring in focusing on various factors as a code of conduct
in meeting all their needs is given as below:
 Employee compensation- salary and wage are decided by the user after analyzing the
ability of all the employees as workforce plays an integral role in catering various
services to the users.
 Food safety- Preparations of food include following various hygienic measures to
provide quality oriented and tasty food to the consumers. Allergy of the buyer is
considered as the important parameter while preparing food.
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Business opportunity
The customer has a facility not to pay the bill of the restaurants once in a month by
giving national identity card of Sydney or international passport as a security to the owner.
Break even analysis
Jan
Feb
March
April
May
June
July
August
September
October
Novemember
December
-6000
-4000
-2000
0
2000
4000
6000
BEP Units
BEP Units
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Develop a product or service
Free credit facility offered by the restaurant owner of XYZ is stealing the attention of
most of the users in Sydney. The social gap among rich and poor gets filled with this
opportunity when both can sit in a single restaurant.
Plan quality production process and sourcing of raw materials
Food quality can be tested by FSSAI to get the license of establishing a restaurant as
this may affect the life of an individual due to hazardous material included in a food. The
Raw material is purchased from local markets to save the cost. Vegetables and fruits are
purchased daily to provide fresh products to consumers.
Sustainability principles for business
Recycling of food is motto of this entity in which excessive food is processed into
various things in facilitating the needs of an individual.
Marketing plan
Marketing plan
Product
Credit facility launched by the firm not to pay the bill immediately
Price
Affordable pricing as price range starting from AUD$50
Place
Located in George street
Promotion
Discount vouchers and full waiver of the bill when consumer pay the bill of the restaurant earlier than the
stipulated period of 15 days
Develop budget
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Monitoring and controlling of plan
A Business plan is monitored by using various approaches such as budget
management and change management in which external changes are taken into account in a
business (Kew and Stredwick, 2017). Business processes are analyzed about all the
parameters such as quality and customer satisfaction.
Produce financial statements
Particulars Year1
Sales 220000
Cost of goods sold
Opening stock 50000
Purchases 25000
Closing stock 20000
Total COGS 55000
GP 165000
Variable costs 60000
Fixed costs 50000
Net profit 55000
Balance sheet
Assets Year 1
Current asset
Cash 20000
Trade receivable 4000
Total current asset 24000
Non-current asset
Food truck 20000
Delivery vehicle 30000
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Total non-current asset 50000
Total asset 74000
Liabilities and equity
Current liability
Accounts payable 10000
Bank overdraft 6000
Total current liabilities 16000
Non-current liability
Bank loan 30000
Total non-current liabilities 30000
Equity
Share capital 20000
Retained earnings 8000
Total equity 28000
Total equity and liabilities 74000
Provide return to shareholders
Dividend= Net profit*%
= $55000*15%
= $8250
Stock price= $2
Shareholder return= (Ending price –Opening stock price) + dividend received
= ($2-$1.5)+$0.825
= $0.5+0.825
= $1.325
ASSESSMENT TASK 2
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2007 2008
1290000
1300000
1310000
1320000
1330000
1340000
1350000
1360000
1370000 1366000
1320787
Sales
Sales
2007 2008
570000
580000
590000
600000
610000
620000
630000
640000
650000 643000
599850
Purchases
Purchases
2007 2008
719500
720000
720500
721000
721500
722000
722500
723000
723000
720937
Gross Profit
GP
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2007 2008
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
200000
186000
125256.24
Expenses
Expenses
2007 2008
500000
510000
520000
530000
540000
550000
560000
570000
580000
590000
600000
537000
595680.76
Net profit
Net profit
OPERATIONAL PLAN
Goals
 To satisfy customer ‘need through their products and services
 To capture larger market
 To showcase skills and traits of the business
 To charge affordable prices of products
Actions
 Adopt customer relationship management software in dealing with the issues of all the
customers
 Use market segmentation approach
 Advertising of Products
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 Using discounted prices for all the products sells by an entity
Human resources
 Personal relationship manager
 Marketing executives
 Customer representatives
 General manager
 Accountant
 Finance manager
 Marketer
 Surveyor
Physical resources
 Pamphlets for marketing campaigns
 Offering complimentary products to attract customers
 Conducting survey using questionnaires
 Newspaper advertising
Budget
Particulars Amount
Stationery 120
Advertising 500
Salary and wages 5000
Survey 1000
Total 6620
Longer perspective of goals
Goals of the firm is categorized into three aspects such as short term, medium term and long term goals to
achieve all the aims and targets within a given span of time.
Executive summary
Current operational plan of the whites’ goods Ltd is focused on the financial section
of the firm. This section shows the financial performance of two years of the firm.
Comparative income statement of an entity is reflecting the efforts apply by the concern in
achieving the desired aims and the objectives. Operational plan of the white good Ltd is a
guiding statement that helps an entity in improving the condition of the firm. It reflects the
way of handling team members in various departments by linking with the strategic goals of
the business. The current operational plan is focused on the financial section by including the
comparative income statements. The operational plan is analyzed to identify the weak areas
of the plan to improve the current performance of an entity with the passage of time. Strategic
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plans of the firm are linked with various aspects such as identifying the strength and
weaknesses of the firm, ensuring the survival of an entity in the external business
environment, growth areas and threats faced by an entity from their market rivals.
Identification of aim of operational plan
The focus of the current operational plan is to test the ability of the firm in dealing
with all the customers in the external market (Doz, 2016). Meeting needs and wants of the all
the buyer is essential for the corporation in retaining all the loyal buyers with the business for
a long period. This operational plan is useful for the firm in improving the qualitative
performance of the business along with the financial performance. A qualitative progress of
an entity includes increasing customer satisfaction level and monetary performance includes
increasing profit from one period to another.
Ineffective areas of operational plan
An operational plan is segmented into two parts such as qualitative and quantitative
depicting the condition of the firm. Ineffective areas of the monetary operational plan involve
negative sales and gross profit variances which affect the survival of the firm. On the
contrary, the qualitative plan involves capturing the larger market as a goal which is risky as
this covers higher expenses by the business concern.
Improvement suggestion
Improvement in the sale variances is linked with the gross profit variances as higher
sales generated by an entity will produce a higher gross profit. Sales can increases by the firm
by identifying sources of revenue (Lun, Shang, Lai, and Cheng, 2016). The sales variances
can alter by using sub letting option in which idle part of the office premises such as lawn
area, garden, backyard by giving on rent. Using these options costs of rent gets reduces
which, in turn, increases the sales. This change will create positive effects in the gross profit
of an entity.
Cost cutting opportunities without affecting quality or customer service
Discounting pricing strategy uses by the firm is one of the cost cutting opportunities
in which quality oriented product sold to the customers at lower prices (McKeever, 2016). In
this approach cost and margin of the firm remains the same but the structure has changed.
The Higher price of the product is displayed by deducting the discount to attract a variety of
users.
Original price= 500
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Margin= 100
MRP= 600
Dummy MRP= 800
Discount= 25% (200)
Discounted price= 800-200= 600
Identify risk in plan and solution to resolve the problem
Substitute products available in the market poses the biggest threat for an entity in
targeting large base of the customers as buyers have the power to switch from one product to
another. Competition in the market created due to this problem which is a serious issue which
affects the market share of the firm.
Position map and a market survey conducted by the firm will help an entity in
overcoming this issue by identifying all the competitors of the business.
Recommendation
It is recommended to the board of director of white goods Ltd to use ratio analysis in
ascertaining the monetary performance of an entity from one period to another. Differences in
the sales and Gross profit can be ascertained by determining gross profit and net profit ratio
in improving the progress of the firm.
ASSESSMENT TASK 3
List of personnel
Employees play an integral role in improving the performance of an entity as it
considers all the important factors taken into account in increasing the entire business
performance. Financial matters are discussed with the finance manager who will delegate all
the responsibilities among its subordinates in completing all the tasks and assignments in
providing quality oriented services to its external business users (Fulker, Timur, Dew and
Butler, 2016). Accountants and CPA will test the accuracy of the books of accounts by
expressing their true and fair view after analyzing the authenticity and validity of the
financial statements of the company. A different form of financial statements includes
income statement, balance sheet, and the cash flow statement to depict the financial
performance of an entity. Operation department of White goods Ltd focuses on employing
employees for various departments separately in enhancing their entire performance such as
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human resources, financial, production, information technology and operational department
in an entity.
Prepare one year budget and projected financial statements
Assumptions
 Sales is decreases by 15% as 12 % is decreases from 2008 to 2009 and rests 3% is
effect of increasing the sales prices by 8%.
 Purchases is rise to 5% from 2008to 2009
 Reduction of 47000 as part time salary of the staff member reduces the expenses in
the year 2009
Working notes
Particulars Oct Nov December Year 2008
Credit sales 8124 1502 2328 11954
Cash Sales 111837 103136 13860 228833
Total sales 119961 104638 16188 240787
Particulars Oct Nov December Year 2008
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Purchases 40605 26910 55335 122850
Particulars Oct Nov December Year 2008
Expenses 41752.08 41752.08 41752.08 125256.2
ASSESSMENT TASK 4
Prepare variance report
Variance analysis is the essential technique of standard costing used by the operations
department to track the progress of their employees. This approach is used by an individual in
comparing their actual results with the standard results to determine the discrepancies.
Corrective action is taken by the supervisors by rectifying negative variances by knowing the
root cause behind the errors. Positive variances depict the entire performance of the firm
which gets increases by maintaining the positivity in a business.
Discrepancy in the report
In the above variance analysis report, there is only one positive variance and rest two
variances are negative. Sales show positive variance and expenses and purchases show
unfavourable variances.
Focussing on three areas of the above variance analysis report is Total sales,
Expenses, and purchase in identifying the cause behind the increasing or decreasing item.
The positive or negative variances are occurring by comparing the actual item with the
budgeted figures. There are various reasons given below for all the three items:
Positive Sales variance
 It shows higher efforts of the business in market its products in the external market
 Lesser competition faced by the firm
 Latest and wide variety of products offered to attract customers
 Higher customer service steals the attention of the consumers
 Unique selling price of the company
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Negative Expenses variances
 Expenses increases in the firm due to poor cost control in an entity
 Higher costs incurred by the firm in doing advertising campaigns
 In reducing market competition new machines equip by the firm
 Salary and wages expenses incurred in providing quality oriented customer
services to its customers.
 Spending more time in office premises increases utility bills
Unfavourable purchase variance
 Raw materials are purchased in advance to overcome the problem of shortage of
materials in the market.
 Wide product range attracts large number of buyers
 In promoting sales, more material purchase by an entity
 Outsourcing the business processes by purchasing finishes output from outside the
firm
 Reducing competition in the external market
Effectiveness of cost budgeting technique
Variance analysis is part of the incremental budgeting technique in which changes in
the budget shows the deficiency of one year’s figures (Rosenfeld, 2017). In these budget
results of the previous budget is compared with the next budget to determine the
discrepancies.
Advantages
 Easy to use method with simplified structure in executing the approach
 It helps in analysing the funding requirement of the business by evaluating the budget
continuously
 It facilitates its users in managing the progress of the firm by eliminating large
deviations
 Comparison gets easier with the help of this budget
Disadvantages
 Figures of latest year depends on the previous year in analyzing the next year’s
accuracy
 Time consuming process in comparing the new budget with the old budget
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 It is not suitable approach to analyse the performance of an entity
Recommendation
It is recommended to decrease the higher expenses and purchases by using
prioritization method in which entire expenses are categorized into two parameters such as
important and less important. All the transactions come under the important category is
included in the books of account and rest other transactions is not considered by an entity. In
this way, expenses control by the business concern whose results reflect the increasing
performance of an entity.
CONCLUSION
After evaluating the information mention in the above assignment, it has found that
discrepancies identify by the management in the financial section. Problems in sales and
Gross profit variances can resolve by using ratio analysis as one of the important measures.
Financial performance of an entity gets improved by crafting financial statements and various
projections in form of forecasting of the sales and the revenue.
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REFERENCES
Books and Journals
Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and
sustainability in the age of globalization. Oxford University Press.
Doz, Y., 2016. Managing multinational operations: from organisational structures to mental
structures and from operations to innovations. European Journal of International
Management. 10(1). pp.10-24.
Fulker, D., Timur, A., Dew, K. and Butler, J., 2016. A Case Study of the Grey Oaks
Community and Club: Creation of a High-Performance Culture Through the Innovative
Use of a Data-Driven Business Plan. International Journal of Hospitality & Tourism
Administration. 17(1). pp.72-99.
Kew, J. and Stredwick, J., 2017. Business environment: managing in a strategic context.
Kogan Page Publishers.
Lun, Y. V., Shang, K. C., Lai, K. H. and Cheng, T. C. E., 2016. Examining the influence of
organizational capability in innovative business operations and the mediation of
profitability on customer satisfaction: An application in intermodal transport operators in
Taiwan. International Journal of Production Economics. 171. pp.179-188.
McKeever, M., 2016. How to write a business plan. Nolo.
Pietrzyk, R. and Rokita, P., 2016. A decent measure of risk for a household life-long financial
plan–postulates and properties. In 34th International Conference Mathematical Methods
in Economics. Conference Proceedings(pp. 687-692).
Rosenfeld, C.M., 2017. When Common Sense Is Not Sensible. Journal of Financial Service
Professionals. 71(1). pp.11-16.
Online
Shareholder’s return, 2013. Available through: <
https://www.accountingtools.com/articles/total-shareholder-return-definition-and-
usage.html> [Accessed on 30th August 2017].
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