Houzit Pty Ltd. Financial Management

This assignment focuses on the financial health of Houzit Pty Ltd. It requires analyzing their current financial status, examining proposed budget modifications (including a reduction in gross profit margin, an increased advertising budget, and salary raises), and suggesting improvements to internal controls for risk management. The analysis should encompass recommendations for debt management, wage payments, discount strategies, customer security, asset identification, and cash balance reconciliation.

Running head: MANAGE FINANCE
Manage Finance
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
Sales and Profit Budget...................................................................................................................1
Answer to Prompt Questions...........................................................................................................4
Answer to Question 1:.....................................................................................................................4
Answer to Question 2:.....................................................................................................................5
Answer to Question 3:.....................................................................................................................5
Answer to Question 4:.....................................................................................................................6
Answer to Question 5:.....................................................................................................................6
Answer to Question 6:.....................................................................................................................7
Answer to Question 7:.....................................................................................................................7
Answer to Question 8:.....................................................................................................................8
Reference.........................................................................................................................................9

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Sales and Profit Budget
SALES and
PROFIT
BUDGET
2011/12 Qtr 1 Qtr 2 Qtr 3 Qtr 4
Revenue 100% 20% 24% 26% 30%
Sales $16,971,236 $3,394,248 $4,073,097 $4,412,521 $5,091,370
– Cost of Goods
Sold $9,673,604 $1,934,721 $2,321,665 $2,515,137 $2,902,081
Gross Profit $7,297,632 $1,459,527 $1,751,432 $1,897,384 $2,189,289
Gross Profit % 43% 43% 43% 43% 43%
Expenses
– Accounting Fees $10,000 $2,500 $2,500 $2,500 $2,500
– Interest Expense $84,508 $21,127 $21,127 $21,127 $21,127
– Bank Charges $1,600 $400 $400 $400 $400
– Depreciation $170,000 $42,500 $42,500 $42,500 $42,500
– Insurance $13,390 $3,348 $3,348 $3,348 $3,348
– Store Supplies $3,749 $937 $937 $937 $937
– Advertising $350,000 $200,000 $50,000 $50,000 $50,000
– Cleaning $16,282 $3,256 $3,908 $4,233 $4,885
– Repairs &
Maintenance $64,272 $16,068 $16,068 $16,068 $16,068
– Rent $2,640,508 $660,127 $660,127 $660,127 $660,127
– Telephone $14,997 $2,999 $3,599 $3,899 $4,499
– Electricity
Expense $26,780 $5,356 $6,427 $6,963 $8,034
– Luxury Car Tax $12,000 $12,000 $0 $0 $0
– Fringe Benefits
Tax $28,000 $7,000 $7,000 $7,000 $7,000
– Superannuation $187,020 $37,404 $44,885 $48,625 $56,106
– Wages & Salaries $2,078,000 $415,600 $498,720 $540,280 $623,400
– Payroll Tax $98,705 $19,741 $23,689 $25,663 $29,611
– Workers’
Compensation $41,560 $8,312 $9,974 $10,806 $12,468
Total Expenses $5,841,371 $1,458,676 $1,395,209 $1,444,476 $1,543,010
Net Profit (Before
Tax) $1,456,261 $851 $356,222 $452,908 $646,280
Income Tax $436,878 $255 $106,867 $135,872 $193,884
Net Profit $1,019,383 $596 $249,356 $317,036 $452,396

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Table 1: Sales and Profit Budget
(Source: Created by Author)
CASH FLOW
ANALYSIS – GST 2015/16 Qtr 1 Qtr 2 Qtr 3 Qtr 4
GST Collected $1,697,124 $339,425 $407,310 $441,252 $509,137
Less GST Paid $1,281,358 $283,046 $306,881 $326,298 $365,133
GST Payable $415,765 $56,378 $100,429 $114,954 $144,004
Table 2: Cash Flow Analysis
(Source: Created by Author)
AGED
DEBTORS
BUDGET
TOTAL Qtr 1 Qtr 2 Qtr 3 Qtr 4
Sales 16971236 3394247.63 4073096.73 4412521.274 5091370.368
% Debtors
Sales 20% 20% 20% 20%
Total Debtors 100% $678,849 $814,619 $882,504 $1,018,274
Current 84.00% $570,233 $684,280 $741,303 $855,350
30 Days 10% $67,885 $81,462 $88,250 $101,827
60 Days 5% $33,942 $40,731 $44,125 $50,914
90 Days 1% $6,788 $8,146 $8,825 $10,183
Table 3: Aged Debtor Schedule
(Source: Created by Author)
Sales Breakup for the Department

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Departments Sales % Sales
Bathroom Fittings 30% $5,091,371
Bedroom Fittings 25% $4,242,809
Mirrors 15% $2,545,685
Decorative items 10% $1,697,124
Lighting Fixtures 20% $3,394,247
Total 100% $16,971,236
Table 4: Sales breakup
(Source: Created by Author)
Answer to Prompt Questions
Answer to Question 1:
The current statutory requirement for tax compliance are much that company has to pay.
The tax is allocated by a company on their taxable income as per as the various provision of the
Income Tax Assessment Act 1997. At the time of positioning the assets, the company has to pay
the taxes, as it is the part of the income tax or capital gain tax. The current tax that is levied on
the company’s profit is 30% of the profit. There are many provisions that are applicable to the
business and the company has to imply these provision along with GST act as it is the important
part of the business (Franks 2014). GST is important so that it can claim input tax credit on

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payments that are made to the suppliers inclusive of GST. Income Tax return is also mandatory
as indicates income and deduction. There are many other reports that company has to prepare
that are business activity statement, GST annual return, PAYG withholding annual reports and
tax payments and returns.
Answer to Question 2:
The Houzit limited is proprietary company that is registered under Corporation Act 2001.
Thus, the company has to obey various act as follows like there should one Australian resident
director of the company. Secretary is not mandatory in such companies but registered office and
postal address should be there. There should be record of financial statement, the company
should notify to the Australian society if there is any change in the member of the company, and
no requirement should be there to loge constitution with ASIC.
Answer to Question 3:
The financial management software’s are commercially available in different types in
Australian markets. Among various software two popular software are MYOB and Quick book.
The popularity of the software mainly depends its lower price and ease in presentation and
preparation of financial management software as analyzed from Quick Book. Quick book also
maintains security and encryption level as that of the bank. Whereas in case of MYOB being an
accounting software it helps the business to take decisions by providing critical data analysis. It
has both online and offline interface (Beaumont 2015). This software is compiled with ATO thus
the company receives regular updates on the latest development taxes. Therefore from the above
discussion company selects MYOB as financial management software.

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Answer to Question 4:
Matching principle is considered to be a major standard of accounting that is underlying.
Under the concept of matching principle it is required that the expenses and the related revenues
must match during the same period. In case of accrual basis accounting, it is required by the
matching principle that all the expenses shall be recorded as and when they are incurred. Thus if
an organization follow the guidelines of matching principle then it can keep track of its expenses
quite smoothly. At time of preparing budget, matching principle data can be utilized to forecast
future expenses more effectively. As a result of which, the organization can allocate more fund
in crucial areas. This also helps in maintaining a good liquidity position of the company.
The summary of accounts on the basis of certain criteria which effects the creation of
master records in accounts is called account group. Account groups helps in classifying several
accounting item in a systematic sequence which in turn helps in increasing the effectiveness of
the budget. Thus due to accounts groups the budget becomes more effective and successful.
Time is an essential element in the budgeting process. Period provides a target for which
the budget is being prepared. Budget may be for short term as well as for long term. Short-term
budgets are essential to frame long-term budget. Errors and mistakes can be determined through
short-term budget that assists in the development of a long term.
Answer to Question 5:
The term probity can be defined as an act of performing the desired task with complete
priority, integrity and honesty. Adherence to the principle of probity at the time of preparing of
budget and financial management is very essential. It is very important to perform the true and

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honest analysis of the current situation for the assumptions to be realistic, as the entire budgetary
process requires forming estimations. In this regards, the principle of probity assures that every
estimation regarding the budget has been made accordingly and there exist no such figures that
has been stated ambitiously or deliberately. Further in order to improve the budgetary process in
reality, honest analysis and examination of the budget is ensured by this principle of probity.
Answer to Question 6:
The most important initiatives for Houzit Pty Ltd. is the reduction in the rate of gross
profit by 1% to maintain a steady growth in sales. Secondly, it was decided to rise the
advertisement budget by 70%. Thirdly, the salaries and wages must be raised by $172,500 while
hoping to allow the high number of staff to earn decent sales commission that in turn would help
in maintaining Houzit’s growth in sales.
Answer to Question 7:
The items that are recommended for inclusion in the budgets of Houzit Pty Ltd. Are as
follows the interest expenditure of the company can be reduced if the company pays the loan in
time, payment methods of the wages should be in the same level as of the industry, discount
offers should be reduced by the company as it provides long-term interest of the company. These
are the recommendation that are provided in order to improve the situation of the company
(Unda 2015). These things are applied when the company is facing down turn in the market. So
in order to save the expenditure in salaries and wages of the employee financial viability is
important as it analyze the financial budget of the company.

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Answer to Question 8:
The modified internal control that manages risk management are:
The Customers should be secured as customer’s base of the company is increasing so
effective measures should be taken to secure customers. Then the discounts should be reflected
in the invoice as it would be re given to the clients. Along with the cash registered the cash
balance should be verified. It is necessary to confirm that work has been completed as given to
the workers and invoice should be signed (McLaney and Atrill 2015). The service manager
should authorize overtime amount.
The Unique code should be given for the proper identification of the assets. Settlement of
the debtor’s balance should be done on monthly basis. Job role should be clearly defined to the
workers and rosters should be done. Last necessary suggestions includes that an individual
person should do the reconciliation of cash balance.

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Reference
Beaumont, S.J., 2015. An investigation of the short‐and long‐run relations between executive
cash bonus payments and firm financial performance: a pitch. Accounting & Finance, 55(2),
pp.337-343.
Franks, J., 2014. LibGuides: Graduate Accounting Empirical Research: Accounting & Finance
Databases.
McLaney, E.J. and Atrill, P., 2014. Accounting and Finance: An Introduction. Pearson.
Unda, L.A., 2015. Board of directors characteristics and credit union financial performance: a
pitch. Accounting & Finance, 55(2), pp.353-360.