Budget and Financial Plans Management: Detailed Report 2016/17

This report provides a detailed analysis of budget and financial plan management, focusing on the operations of Big Red Bicycle Pty Ltd. It includes an examination of cash flow projections, operational plans, and a quarterly income statement budget for the financial year 2016/17. The report assesses the company's ability to achieve its target net profit, identifies potential errors in the budget, and suggests improvements for better financial planning. It also addresses how to manage uncertainties, adjust revenue and expenditure items, and ensure effective communication within the organization. Furthermore, the report outlines processes for monitoring actual expenses, controlling costs, and developing contingency plans, emphasizing the use of spreadsheets for variance analysis. It concludes with an analysis of the impact of economic slowdown on the company's financials and provides a list of accounts with under and over values.

Running head: MANAGE BUDGET AND FINANCIAL PLANS
Manage Budget and Financial Plans
Name of the Student:
Name of the University:
Authors Note:

1MANAGE BUDGET AND FINANCIAL PLANS
Contents
Assessment task 1:...........................................................................................................................2
Part 1:...........................................................................................................................................2
Part 2:...........................................................................................................................................3
Part 3:...........................................................................................................................................8
Part 4:...........................................................................................................................................9
Assessment task 2:.........................................................................................................................10
Part 1:.........................................................................................................................................10
Part 2:.........................................................................................................................................12
Part 3:.........................................................................................................................................14
References:....................................................................................................................................17

2MANAGE BUDGET AND FINANCIAL PLANS
Assessment task 1:
Part 1:
Sub part a:
Big Red Bicycle Pty Ltd is an Australian company involved in manufacturing and selling of
bicycle in Australia. Manufacturing and selling of bicycle is the primary activities of the
company to generate revenue for the business of the company.
Sub part b:
The responsibility of the team is to achieve the desired production level by making optimum
utilization of resources and achieve desired level of sales to maximize the amount of profit of the
company (Gitman, Juchau & Flanagan, 2015).
Sub part c:
Cash flow projections:
Cash flow projections is made with the objective to make effective use of cash resources of
company.
Operational plans:
Operational plans are made to effectively operate the business affairs of the company. The
company wants to earn a net profit after tax of $1,000,000 and the operational plan shall be
helpful in achieving the objective of the company (Bryson, 2018).

3MANAGE BUDGET AND FINANCIAL PLANS
Part 2:
Quarterly income statement budget has been selected for the purpose.
Part a:
The purpose of the team budget is to pool together the resources of the company to achieve the
overall objective of the company. Budgets help in communicating the roles and responsibilities
of different employees of the company. Budgets also work as a roadmap for the management.
The company aims troy achieve net profit before tax of $1,000,000 and as can be seen in the
following income statement for the financial year 2016/17 that the company is expected to earn
significantly higher amount of net profit before tax thus, taking appropriate steps would help the
company to achieve its objectives (Dudin, Kucuri, Fedorova, Dzusova & Namitulina, 2015).
Big Red Bicycles Limited for 2016/17
Gross revenue Financial
year
Q1 Q2 Q3 Q4
Sales 3,000,000.
00
750,000.0
0
750,000.0
0
750,000.0
0
750,000.0
0
Less:
Cost of goods sold (400,000.
00)
(100,000.0
0)
(100,000.0
0)
(100,000.0
0)
(100,000.0
0)
Fixed Direct wages (200,000. (50,000.0 (50,000.0 (50,000.0 (50,000.0

4MANAGE BUDGET AND FINANCIAL PLANS
00) 0) 0) 0) 0)
Commissions @2% (60,000.
00)
(15,000.0
0)
(15,000.0
0)
(15,000.0
0)
(15,000.0
0)
(A): Gross profit 2,340,000.
00
585,000.0
0
585,000.0
0
585,000.0
0
585,000.0
0
Expenses:
Administrative & general expenses
Accounting consultancy fees 20,000
.00
5,000.
00
5,000.
00
5,000.
00
5,000.
00
Legal expenses 5,000
.00
1,250.
00
1,250.
00
1,250.
00
1,250.
00
Bank charges 60
0.00
150.
00
150.
00
150.
00
150.
00
Supplies for office 5,000
.00
1,250.
00
1,250.
00
1,250.
00
1,250.
00
Printing and stationery 40
0.00
100.
00
100.
00
100.
00
100.
00
Subscriptions 50 125. 125. 125. 125.

5MANAGE BUDGET AND FINANCIAL PLANS
0.00 00 00 00 00
Telephone expenses 10,000
.00
2,500.
00
2,500.
00
2,500.
00
2,500.
00
Repaid and maintenance
expenses
50,000
.00
12,500.
00
12,500.
00
12,500.
00
12,500.
00
Tax on payroll 25,000
.00
6,250.
00
6,250.
00
6,250.
00
6,250.
00
Advertising and promotional
expenses
200,000
.00
50,000.
00
50,000.
00
50,000.
00
50,000.
00
Superannuation expenses 45,000
.00
11,250.
00
11,250.
00
11,250.
00
11,250.
00
Wages and salaries 500,000
.00
125,000.0
0
125,000.0
0
125,000.0
0
125,000.0
0
Amenities for staffs 20,000
.00
5,000.
00
5,000.
00
5,000.
00
5,000.
00
Occupancy costs
Cost of electricity 40,000
.00
10,000.
00
10,000.
00
10,000.
00
10,000.
00

6MANAGE BUDGET AND FINANCIAL PLANS
Insurance expenses 100,000
.00
25,000.
00
25,000.
00
25,000.
00
25,000.
00
Rates 100,000
.00
25,000.
00
25,000.
00
25,000.
00
25,000.
00
Rent 200,000
.00
50,000.
00
50,000.
00
50,000.
00
50,000.
00
Water charges 30,000
.00
7,500.
00
7,500.
00
7,500.
00
7,500.
00
Waste removal charges 50,000
.00
12,500.
00
12,500.
00
12,500.
00
12,500.
00
(B): Total operating expenses 1,401,500.
00
350,375.0
0
350,375.0
0
350,375.0
0
350,375.0
0
Net profit before interest and
taxes (A B)
938,500
.00
234,625.0
0
234,625.0
0
234,625.0
0
234,625.0
0
Less: Income tax @25% 234,625
.00
58,656.
25
58,656.
25
58,656.
25
58,656.
25
Net profit after tax 703,875
.00
175,968.7
5
175,968.7
5
175,968.7
5
175,968.7
5

7MANAGE BUDGET AND FINANCIAL PLANS
Sub part b:
(i) Its seems very much a possibility for the company to achieve its target of earning net profit
before tax of $1,000,000 as the master budget shows a significantly higher amount of net
profit before interest and tax.
(ii) No, the figures provided in the budget not seem correct as all the expenses have been divided
equally in different quarters. Except fixed costs no costs are expected to be incurred evenly
throughout the year thus, definitely there is some errors in the above budget.
(iii) No, it is not comprehensive as the master budget includes only table without any
explanations.
Sub part c:
The expenses should have been correctly segregated by using some standard basis in different
quarters along with the expected revenue. It is seldom that an organization earns equal amount of
revenue on every day, month and quarter of a year. As per the master budget of Big Red Bicycle
Pty Ltd this definitely needs to be changed to improve the quality of budget (Sekaran & Bougie,
2016).
Sub part d:
The operational manager shall be approached to discuss each and every single item mentioned in
the budgeted income statement. Because the ability of the company to generate revenue and earn
profit from business are dependent on the business operations of the company.
Part 3:
Sub part a:

8MANAGE BUDGET AND FINANCIAL PLANS
(i) A business organization has to operate in an uncertain environment. Most of the macro
economic factors that affect an organization are out of the control of the management of an
organization. Changes in these factors affect the financial performance and position of an
organization. An organization must have necessary flexibility to make changes in the budget
and operating activities to deal with any possible scenarios that may arise in the future. In this
case if the company fails to achieve the expected sales due to any untoward incident then the
company would not be able to achieve its budgeted profit. To deal with such circumstances
the company should continuously monitor the market demand and supply. Based on
assessment of market condition necessary changes shall be made to the operating budget and
quantity of productions. Flexibility is key to the successful management of an organization.
Thus, appropriate course of actions shall be taken based on the market condition and
situation.
(ii) The items of revenue shall be adjusted on the basis of expected consequences of such events
along with the items of expenditures. Generally particular percentages shall be added or
deducted to these items of revenue and expenditures.
(iii) Revenue and expenditures shall be reduced or increased as per the expected market condition
in the future and assessment of management.
(iv) The expected consequences on the business of the company due to changes in the market
conditions shall be evaluated to make necessary adjustments.
(v) In case the company fails to achieve the sales as per the master budget then the profit before
and after tax would reduce significantly.
Part 4:
Sub part a:

9MANAGE BUDGET AND FINANCIAL PLANS
The organization must have an effective communication line to disseminate the relevant details
about agree plan. Having proper hierarchy within the organization is very helpful to disseminate
the information in an orderly manner to the employees of an organization.
Sub part b:
Regular meetings shall be held to communicate the relevant details about organizational
objectives and the plan to achieve such objectives.
Sub part c:
Employees shall be asked to participate in the meetings and shall be encouraged to put forward
their point of views and opinion on organizational plan. This would be helpful in communicating
and gaining and agreements on different plans of the company.
Sub part d:
I. The procurement manager shall be given the responsibility of procurement of materials.
II. The production manager shall be responsible for the production of bicycles.
III. Sales manager shall be given the responsibility to maximise the sales of the company.
Sub part e:
The members shall give their feedback on each and every aspect of operational plan of the
company. Communicating the ideas in the meeting will be helpful to understand the roles and
responsibilities of different employees.
Sub part f:
A proper recruitment policy shall be in place to recruit skilful and talented employees as required
by the organization. Employees and workers shall be given the responsibility as per their skills

10MANAGE BUDGET AND FINANCIAL PLANS
and knowledge. Necessary training shall be help to improve the skills and knowledge of the
employee to help them to discharge their duties and responsibilities effectively.
Sub part g:
The funds of the company shall be used effectively by procuring quality raw materials at
relatively low costs and the employees shall be used effectively by using their skills and
knowledge in relevant operations of the company.
Assessment task 2:
Part 1:
Processes essential to monitor the actual expenses incurred:
I. Operations of the company shall be supervised effectively.
II. Expenditures must be incurred as per the financial plan until unless there is any changes
in the level of activity.
III. In case of any changes in the actual condition compared to the assumptions then
necessary adjustments shall be made to the financial budget.
In order to control costs the following processes shall be used:
I. Providing training to the employees to improve their ability to provide services to the
customers.
II. Technology shall be used to reduce cost of operations.
III. Changes in production process to make optimum use of raw materials and employee time.
Contingency plans monitoring and controlling processes:

11MANAGE BUDGET AND FINANCIAL PLANS
I. Business environment must be evaluated continuously to make adjustments to the operating
plans and when required.
II. Taking into consideration the business objective necessary modifications shall be made to the
operational plan of the company.
Feedback:
I. The performance of employees and labour shall be documented.
II. Rewarding employees’ base on their performance would be an effective way to encourage
and motivate employees to perform even better in the future as well as providing them
feedback about their performance.
III. Actual performance and expected performance shall be compared to assess the discrepancies
between the two to provide necessary feedback.
Spreadsheet to be used as a tool:
It is very easy to use a spreadsheet to calculate the variances between the actual performance of
an organization and the budgeted performance of the organization. With the effective use of
statistical and analytical tools present in spreadsheet it is relatively easy to calculate the
difference between the two.
Part 2:
a. With the economic slowdown the sales of the company is expected to be lower than as estimated
in the budget. Similarly the expenditures expected to increase significantly due to the economic
slowdown. The following elements shall be effected due to the economic slowdown.
I. Sales.