Review of Overall Performance and Debtor Management Project

This article discusses the review of overall performance and debtor management project of XYZ LTD. It includes an analysis of budget versus actual figures, ageing analysis of accounts receivables, and recommendations for management.

Manage Finances
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Assessment Task-3
Review of overall performance
In the year 2016-17, the company earned profit from the conduct of conference to the
tune of $652,077. The total revenues of the company were 1,335,600 comprising revenues from
consulting fee, workshop, publications, and executive search services. The company incurred a
total cost of $683,523 in earning revenues of $1,335,600. The net profit margin is worked out to
be 48.82% which shows that the conference has been a grand success for the company.
Variation in Actual versus Budgeted Amounts: Income sources
The analysis of variations in actual performance versus the budgeted is essential to find
out the areas for improvement and plan for the future in a better way (Wyatt, 2012). The main
income sources of the company comprise consulting fee, workshop, publications, and executive
search. An analysis of budget versus actual figures as shown below:
Budget Actual Variation
INCOME
Consulting
fees
1,100,000.0
0
1,175,600.0
0 75,600.00
Workshops
48,000.0
0
36,000.0
0 (12,000.00)
Publications
5,000.0
0
2,000.0
0 (3,000.00)
Executive
search
108,000.0
0
108,000.0
0 -
Total
1,261,000.0
0
1,321,600.0
0 60,600.00
It could be observed that the variation in the consulting fee is $75,600 which indicates
that the company has been able to earn more revenues through consulting fee than budgeted.
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Further, the workshop revenues show a negative variation of $12,000. In the similar way, the
revenues from publications also show negative variation of $3,000. This indicates that the
company needs to put more focus on increasing the revenues from workshops and publications in
the next coming year. Further, the revenues from executive search are equal to what was
budgeted.
Variation in Actual Versus Budgeted Costs
The analysis of variations in the budgeted and actual figures of costs is also necessary to
find the areas for improvement and cost reduction (Shim, Siegel, and Shim, 2011). With this
view, an analysis of budgeted and actual costs of conference is presented below:
Budget Actual Variation
Salaries/wages 504,000.00 504,000.00 -
Superannuation 60,000.00 60,000.00 -
Cleaning 9,600.00 9,600.00 -
Accounting fees 6,000.00 6,823.00 (823.00)
Advertising and
marketing 500.00 5,000.00 (4,500.00)
Contract witer (e-book) 11,000.00 45,800.00
(34,800.00
)
Computer software 4,000.00 4,600.00 (600.00)
Motor vehicle expenses 5,000.00 5,183.00 (183.00)
Utilities 4,000.00 3,935.00 65.00
Insurance 4,000.00 4,028.00 (28.00)
Office supplies 1,500.00 2,100.00 (600.00)
Lease/loan payments 1,300.00 1,500.00 (200.00)
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Rent 42,960.00 42,960.00 -
Sundries 2,000.00 2,280.00 (280.00)
Travel and
Accommodation 5,000.00 5,386.00 (386.00)
Repairs & maintenance 1,500.00 1,200.00 300.00
Telephone 3,000.00 3,400.00 (400.00)
Total 665,360.00 707,795.00
(42,435.00
)
From the analysis, it could be observed that the total variation of cost is negative $42,435
which indicates that the company incurred cost in excess of what was budgeted. The fluctuation
was observed to be the highest in case of contract writer E-book. Further, the over spending on
the marketing and advertisement expenditure was also significant amounting to $4,500. Thus, the
company is advised to mark contract writer E-book and marketing and advertisement as the
potential area for cost reduction for next upcoming year.
Recommended Revisions to the Budget for Conference cost 2016-17
It has been anticipated by the management that the conference cost to be incurred in the
upcoming next year would be 10% higher than the previous year’s figures. The conference cost
incurred last year was $683,523; therefore, the revised cost for the next year would be
$751,875.30 (683,523*110%).
Proposed Conference Fee for 2017 Conference
The proposed conference cost for the year 2017 is $751,875.30. Further, the company
wants to earn a profit of 20% on the cost incurred. Thus, the desirable profit would be
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$150,375.06. This implies that the company would be required to earn revenues of $ 902,250.36.
Further, it is budgeted that 70 people will attend the conference. Hence, the conference charged
per person would be $12,889.29
Assessment Task-4: Debtor management project
The management of debtor is essential for the effective working capital management and
ensuring that the company does not face any financial crunch. As part of debtor management, the
management should control and supervise the issues pertaining to the credit period, credit limits
allowed, and the discounts allowed to the customers. The management should take appropriate
actions based on the ageing analysis of the debtors. The ageing analysis provides findings on the
debtors which are required to be written off as bad debt or which require provision to be made
(Bender and Ward, 2012). The ageing report of company XYZ as at June 30, 2018 has been
presented in the table given below:
Ageing report of Accounts receivables of XYZ LTD as at June 30, 2018
S.
no.
Debtor
name
Total
outstanding <30 days
>30 days < 60
days > 60 days
1 Mr A 100,000.00 80,000.00 15,000.00 5,000.00
2 Mr B 200,000.00 160,000.00 30,000.00 10,000.00
3 Mr C 250,000.00 200,000.00 37,500.00 12,500.00
4 Mr D 300,000.00 240,000.00 45,000.00 15,000.00
5 Mr E 350,000.00 280,000.00 52,500.00 17,500.00
6 Mr F 400,000.00 320,000.00 60,000.00 20,000.00
7 Mr G 450,000.00 360,000.00 67,500.00 22,500.00
8 Mr H 500,000.00 400,000.00 75,000.00 25,000.00
9 Mr I
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550,000.00 440,000.00 82,500.00 27,500.00
10 Mr J 600,000.00 480,000.00 90,000.00 30,000.00
Tota
l 3,700,000.00
2,960,000.0
0 555,000.00
185,000.0
0
From the table given above, it can be observed that total outstanding in the debtor of the
company is $3,700,000 out of which $185,000 is outstanding for more than a period of 60 days.
Based on the this analysis, the company can consider the debtors outstanding for less than
60days as good and it can make provision against the outstanding amount of more than 60days.
However, the usual terms of payment of the company are 10 days from the invoice date which
means that the company can offer discount on the payments made within a period of 10 days
from the invoice date. Based on the above analysis, 5 recommendations for the management are
presented below:
1. The outstanding of debtor should be segregating into categories such as
outstanding for less 30 days, more than 30 days but less than 60 days, and
more than 60 days.
2. The management should formulate a proper policy for discount and rebates to
the debtors on the payment made within 10 days from the date of invoice
(Gleeson, 2016).
3. The management should take appropriate steps for the recovery of the amount
which is outstanding for more than 60 days.
4. The management should recognize provision for bad and doubtful debts
appropriately in the books of accounts.
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5. The management should review the credit worthiness of the customers before
sanctioning them credit limit (Gleeson, 2016).
References
Wyatt, N. 2012. The Financial Times Essential Guide to Budgeting and Forecasting: How to
Deliver Accurate Numbers. Pearson UK.
Shim, J.K., Siegel, J.G., and Shim, A.I. 2011. Budgeting Basics and Beyond. John Wiley & Sons.
Bender, R. and Ward, K, 2012. Corporate Financial Strategy. Routledge.
Gleeson, D. 2016. Intelligent Accountant: Strategies, Concepts & Ideas to Transform Your
Practice. BookBaby.
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