Financial Management Report: Planning and Control at BRB Bicycles

This report provides a detailed analysis of financial management practices at Big Red Bicycles (BRB), covering financial planning, implementation, and control. It discusses the role of the finance team, long-term financing strategies, and the importance of contingency planning in response to economic uncertainties like recession and stock market crashes. The report outlines the organizational processes for disseminating financial information, including budgeting methods and communication strategies with internal management and external stakeholders. Furthermore, it examines cost control processes, variance analysis, and the use of spreadsheets for budget preparation. The report also emphasizes the significance of regular monitoring, evaluation, and adjustments to financial plans, recommending the use of the REAL model and various financial documents to assess effectiveness. Finally, it highlights the importance of board approval for any changes in financial management processes, ensuring alignment with organizational goals and objectives. Desklib provides access to this and many other solved assignments to aid students in their studies.

Financial Management

Table of Contents
ASSESSMENT TASK 1.................................................................................................................3
1. Financial Plans.........................................................................................................................3
2. Making Changes to financial Plan...........................................................................................3
3. Contingency Planning..............................................................................................................4
4. Financial Management Approaches.........................................................................................5
ASSESSEMENT TASK 2...............................................................................................................6
1. Monitor and Control Finances.................................................................................................6
Review variances.........................................................................................................................7
Review and evaluation process ...................................................................................................9
REFERENCES..............................................................................................................................11

ASSESSMENT TASK 1
1. Financial Plans
a)
The name of the organization is Big Red Bicycles (BRB) and the activities it conducted is that it
manufacture and produces Bicycles in order to sold it retailers in Australian market.
b)
The name of the team is Finance team which manages the money in the BRB organization. The
team undertaken the following activities:
 Book-keeping and management of cash flows.
 Budgeting and forecasting.
 Sourcing long-term financing (Bulturbayevich and et.al., 2020).
 Management of taxes and company's investment.
 Financial reporting and analysis for key strategic decision etc.
c)
The responsibility in the given case is implementation and monitoring of long-term sources
plans. In this, various long-term sources such as debt, equity, bonds cost and returns are
analysed by the financial team member of BRB company. They will analysed it to acquire the
funds from the market to diversify the product range of the company which further help in
reducing the poor sales of its Bicycles products. The long-term finance helps the company to
generate more and more money with greater flexibility (Al Breiki and Nobanee, 2019). That's
why it is recommendable to the company to generate funds from debt and equity in the
ratio 2:1 for product diversification and managing working capital.
2. Making Changes to financial Plan
a)
The purpose of the financial plan to diversify the BRB products range to further achieve
the net profit before tax of $1000000. The financial plan helps the company to control the
income, expenses and investment of the BRB company which help the company to achieve its
objectives and goals (Grafova and et.al., 2017). The long-term financing create a strategy for
achieve them.
b)

1. The set financial plan of long-term sources such debt financing and equity financing in
the ratio of 2:1 is achievable. It is because in Australia, the debt and equity sources of
funding is most easily accessible and have simple calculation of cost.
2. The set plan is accurate because it helps the company to generate to reduce its tax as debt
financing give tax benefit and equity help the company to generate more money for
product diversification (Birkenmaier and Fu, 2019).
3. The set financial plan is comprehension because it will address all the events from
running a business to uncertain contingent transaction which may happen in near future.
The set financial plan also include the investment of finance in profitable project.
d)
Cash flow is one of the area that could be adjusted in order to make improvement in current
financial plans (Zimpel and et.al., 2017). It is because this area basically indicates the liquid
position of the company which need to be required to settle the debts and return money to
shareholders.
e)
Chief Financial Officer (CFO) is the person to whom the approaches to financial plan is being
discuss and clarify by the finance teams. They are the senior executives responsible for
managing the financial actions of the company and tracking the cash flows and financial
planning (Yang, 2021).
3. Contingency Planning
Contingent situation Example: During the implementation phase of financial planning, the
BRB company can face the problem of economic recession and stock market crash and for this
they also need to prepare the contingency planning.
a) The contingency plan include:
1. The consequence of stock market crash is that businesses will loss their money and the
impact of which they are unable to pay off its debt and equity liabilities. The economic
recession will dampen the BRB accounts receivables and slow down its supply chain and
liquidity (White and et.al., 2019).
2. In order to identify the required adjustments to financial plan, the finance team will
consult the risk management team and financial expert.

3. The BRB finance team will adopt possible actions such as creating contingency and
capital reserves along with the adoption of investment appraisal technique in order to
cope with this risk.
4. Creating reserves helps the BRB company to return its debt and equity liabilities even at
the time of recession and stock market crash. Investment appraisal helps the company to
invest the raised money in higher return investment projects such as diversifying products
range.
5. If the contingency planned was implemented the company is able to return its interest and
principal liabilities of debt and equity and also able to generate more returns from
reinvestment.
4. Financial Management Approaches
a)
The organizational process the finance team will adopt to disseminate the relevant details of
financial planning is hierarchy. In this, the teams will discuss the information with the board of
directors such as CEO, CFO etc. of the BRB company.
b)
The steps taken to disseminate the information are conducting annual general meetings in which
the information related to sources of finance and investment appraisal is being discussed for
diversification of product range (Grafova and et.al., 2017).
c)
The budgeting method will be used by the BRB finance team to communicate the information
regarding the financial plan with internal management. While on the other hand, to raise fund the
company will use the organization website to release the issuance of debt and equity information.
d)
The finance team have the responsibility to prepare the budgets, optimal capital structure,
identifying profitable investment projects, managing risk attached with assets etc. as compared to
other teams.
e)
The feedback is one of the best way to know about whether each of the financial teams are
achieving their daily targets or not (Yang, 2021). This is also helpful for understanding whether

team members have understand their roles and responsibilities and the organization main
objective of product diversification or $1000000 net profit after tax.
f)
The training and development support method is being used by the finance team to ensure that all
team member are able to perform their work in an effective manner. Training is required to do
the financial management work in best manner possible.
g)
In BRB company, financial systems will be used to access the aspects of finances such as
accounting measures, revenue and expenses schedule, wages and balance sheet verification. This
help the teams to reduce the wage cost of the company (White and et.al., 2019).
ASSESSEMENT TASK 2
1. Monitor and Control Finances
a)
An organizational resources planning is the processes which helps the finance teams to establish
formal set of processes for comparing budgets to the actual results. For this, the team will use the
Team Management software such as connect team, Wrike etc.
b)
The cost control process adopt by the team is training and development along with the
identifying primary and secondary sourcing which further help the team to monitor and control
the cost incurred while financial functions (White and et.al., 2019).
c)
Contingency plan is basically a backup plan which must be monitor and control by the finance
teams and for this the team manager need to ensure that all employees knows their roles when
disaster occurs. The proper online training is provided to the employees for reducing the effect of
contingency.
d)
The both formal and informal process will be used to provide feedback on the team's expenses
and the cost incurred in performance of their financial functions. This will helps the team to
know their mistakes and also help to make it two-way street conversation.
e)

The steps involved in using spreadsheets for the preparation of budgets are as follow:
 Step1: Create a workbook.
 Step2: Planning of needed data.
 Step3: Creating headings and subheadings.
 Step4: Label the row.
 Step5: Adding boundaries.
 Step6: Creation of result tables.
 Step7: Format and write formulas (Zimpel and et.al., 2017).
 Step8: Script conditional formatting.
The above steps need to be followed to make a simple budget spreadsheets.
Review variances
a)
Values below the original plan:
 Sales variance
 Production variance
 Direct material variance
 Direct labour variance
Values above the original plan
 Variable production overhead variance
 Fixed production overhead variance
 Efficiency variance
 Volume variance
 Profit variance
b) List of accounts
Sales variance a/c
Standard sales = 2000
Actual sale = 1800
Variance: 200 / 2000 * 100
= 10%
Production variance account

Standard product = 1500
Actual production = 1300
Variance: 200 / 1500 * 100
= 13.33%
Direct material variance account
Standard price per unit * actual unit of material consumed – actual material cost
= 10 * 1300 – 1300 * 4
= 7800
Direct labour variance account
(Standard hours for actual production – actual hours) * standard rate
(3000 – 2500) * 3
= 1500
Variable production overhead variance account
(actuqal output * standard rate) – (actual output * actual rate)
= (1300 * 2) – (1300 * 1)
= 1300
Fixed production overhead variance account
(Budgeted production hour – actual production hours) * (fixed overhead absorption rate / time
unit)
(3000 – 2500) * (3 / 2.5)
= 250
Total variance account
Actual cost – Standard cost
(1300 * 10) – (1500 * 12)
= (5000)
C)
Contingency is a situation that is related to the expected future situation that may arise.
This is a event that is occurred out of the unexpected reason. These are the situation that just
occur ion the organisation or business environment and create a massive impact over the
organisation operations and functions (Espíndol And et.al., 2019). The impact of these operations
is very massive. In order to maintain the financial objectives these contingency situation would

create a negative impact over company operations. These situation arises extra burden of cost
over operations of company.
D)
The achievement of the financial goal require regular basis of the monitoring. This
involves on the basis of the requirements of the product make necessary changes. The financial
environment is a very constantly changing environment (Nonik and et.al., 2019). On the basis of
the needs and requirements of the market this involves making necessary changes and
modifications. In case of any requirements is analysed related to the situation this would be
required additional approval from the senior authority.
e)
All the planning related to the finances are required to approve from the board of
directors of company. This is also essential to project the factual record and data about the
potential impacts.
Review and evaluation process
a)
The reliability of the financial management practice would be conducted with support of
the REAL model. This will include managing revenue, expenditure, assets and liabilities of
company.
b)
Documents like balance sheet, income statement, cash flow statement and such like documents
that will be used to collect the information for assessing the effectiveness of the financial
management process.
c)
The assessment of the financial management technique would be done with support of
graphs and spread sheet records. This will be done with support of the Excel tool (El Filali and
Hassainate, 2018). The example of projection of company process can be stated in the following
manner.

d)
The certain financial management areas such as determination of financial needs,
selection of sources of funds and such like areas could have been improved by the company.
This is recommended that this can be conducted with support of proper research about the
market.
e)
Any changes in financial management process require approval from the board of
directors. This involves communication is required over email. The projection is done with
support of all the financial records and data. Proper report needed to submit of the modification
inserted.
f)
The organisation process is like modifications are communicated with the senior
authorities over email. The time frame is finalised of getting the approval done. IN case of any
query or issue this is also coordinated over email by the board of directors (Pradabwong and
et.al., 2017). Once the directors agreed with the modification the approval is granted over email
to the project head.
g)
Improved financial management process always allow the organisation to mitigate its
financial objectives. The improved financial management create a positive impact over the

financial goals of company as it support the organisation in more appropriate manner to achieve
the financial goals of company.
REFERENCES
Books and journals
Al Breiki, M. and Nobanee, H., 2019. The role of financial management in promoting
sustainable business practices and development. Available at SSRN 3472404.
Birkenmaier, J. and Fu, Q. J., 2019. Does consumer financial management behavior relate to
their financial access?. Journal of Consumer Policy. 42(3). pp.333-348.
Bulturbayevich, M. B. and et.al., 2020. Modern features of financial management in small
businesses. International Engineering Journal For Research & Development. 5(4).
pp.5-5.
El Filali, Y. B. and Hassainate, M. S., 2018. The Contribution of Management Control to the
Improvement of University Performance.
Espíndola, S. C. N. L. And et.al., 2019. The Standardization of administrative processes: a case
study using continuous improvement tool. Brazilian Journal of Operations &
Production Management. 16(4). pp.706-723.
Grafova, T. O. and et.al., 2017. Tools of financial management of reputational risks.
Nonik, V. and et.al., 2019. Portrayal of the Concession Agreement Transactions Through the
Financial Statement Improvement. Journal of Corporate Responsibility and
Leadership. 6(3). pp.47-65.
Pradabwong, J. and et.al., 2017. Business process management and supply chain collaboration:
effects on performance and competitiveness. Supply Chain Management: An
International Journal.
White, K. and et.al., 2019. The relationship between financial knowledge, financial management,
and financial self-efficacy among African-American students. Financial Management,
and Financial Self-Efficacy Among African-American Students (October 12, 2019).
Yang, L., 2021. Auditor or Adviser? Auditor (In) Dependence and Its Impact on Financial
Management. Public Administration Review. 81(3). pp.475-487.
Zimpel, R. and et.al., 2017. Characteristics of the dairy farmers who perform financial
management in Paraná State, Brazil. Revista Brasileira de Zootecnia. 46. pp.421-428.