Financial Management Assignment: Budgeting, Analysis, and Reporting

This assignment solution addresses key aspects of financial management, including profit and loss calculation, budgeting, cash flow analysis, and resource allocation. It begins with an analysis of a marketing department's financial performance, calculating profit and loss based on provided data. The solution then explores research methodologies to understand the reasons behind profit or loss, emphasizing the importance of expense control and sales strategies. The assignment further delves into the analysis of cash flow trends, the application of taxes, and the advantages and disadvantages of financial management software. It also provides examples of how to allocate resources based on previous financial data, introduces a new budget item (health care), and outlines organizational policies for budget preparation. Additionally, the solution details a plan for circulating newly-written budgets to managers, identifies ways staff can misappropriate funds, and suggests resolutions for each. It also explains the use of aging summaries, provides a contingency example, and demonstrates how to use an audit trail to identify budget discrepancies. The assignment concludes with a detailed plan for managing finances, ensuring effective allocation of resources, and maintaining financial stability.

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Finance management
Name
Institution
Date

MANAGEMENT OF FINANCES 2
ASSESSMENT 1; ACTIVITIES
Identify an area of business and explain how you could use different forms of current and
present financial data to ascertain whether the department made a profit or a loss.
Let marketing be our area of business.
Keeping a Track on Profit and loss is very important to a successful business. To calculate profit
or loss you need to determine the following;
 Total income you get from sales
 The total amount of expenses that you incur
 The cost of inventory
Total income includes commissions received and discounts paid. Cost of inventory equals to
opening inventory plus purchases minus closing inventory.
For example
According to the financial statements for the year ended 31st Dec,2018, The marketing
department of Victoria’s company had a closing stock of $ 1 200, inventory as at 31st December,
2017 was $1 000,total purchases during the financial year was worth $ 13 000,transport cost was
$200 ,salary and wages amounted to$1 500. Their total sales amounted to $50 000. Determine
profit or loss during the financial year.
PARTICULARS AMOUNT ($) AMOUNT ($)
Sales 50000
(Less) cost of sales

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Opening inventory 1000
(Add) purchases 13000
(Less) closing inventory (1200)
Cost of sales (12800)
Gross profit 37 200
(Less) expenses
Transport cost 200
Salary and wages 1500
Total (1700)
Net profit 35 500
Activity 1 B
Using your answer from the previous activity, explain how you would undertake research
to review the reasons for the profit or loss.
In the previous activity, there was a profit of $35 500. To undertake research to review the
reasons for the realized profit you will need to check on the level of expenses, in this case,
expenses were low they amounted to $1700.you should also review the cost of purchases
compared to the number of sales. The selling price per unit should be hirer than the buying price
per unit in the Oder to be able to cater for the business expenses and realize a profit.
Activity 1C

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Using your business plan, identify your business’ critical dates in terms of income and
resource use and generation
DATES ACTIVITIES
July 1 beginning of a new financial year
July 14 summaries of withholding pay-as-you-go needed to be provided for the
employees
July 28 quarter 4 this guarantees contributions for a super fund
July 28 business activity statement is due for quarter 4
August 14 annual withholding payment summary report due for pay-as-you-go
August 28 annual report on taxable payments due
October 21 annual installment on pay-as-you-go due
June 30 end of the financial year
Activity 1D
Explain how and why you would analyze your business’ cash flow trends.
Cash flow helps keep track of cash inflows and cash outflows. Cash flow from operating firm
activities is compared to the company’s net income. In a case where the cash flow from
operating activities is consistently higher than net income, it’s usually assumed that the firms’
earnings are of high quality. If the cash flow from operating activities is lower than the net
income then the net income of the firm is not turning into cash for the company.

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It's important to analyze cash flow because it’s a great indicator of the firms' activities. it can
assist an investor to gauge the operating activities of the firm and see whether the operations are
generating ample money.
Cash flow – operations
Net income xxx
Depreciation and amortization xx
Total depreciation, amortization, and depletion xx
Amortization of securities xx
Change in receivables xx
Change in prepaid assets xx
Change in payables and accrued expenses xx
Change in other current assets xx
Change in liabilities xx
Changes in working capital xx
Cash from operations xxx
Note; you compare the amount of net income and the cash from operations.
Activity 1E
Which taxes are applied to your business?
Explain each one, including the rates and geographical variations, if applicable

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Activity 1F
In reference to your current financial management software, give all of the pros and cons you can
think of. Summarize whether you think the software is suitable for both your current needs and
future needs.
Pros
 It can handle several financial tasks. The good thing about financial software is its ability
to carry out a variety of tasks. The software can create financial statements reports, create
invoices, store and organize financial information.
 It can integrate with current systems
 Different software is designed to work with almost all systems.
 It provides real-time information. The software can help provide financial information
anytime you need it which is very important to a business
Cons
 It’s expensive. Financial software tends to be expensive even the simple software.
It needs training. Employees will need to switch from their duties for a while to learn the new
software which will also require training cost.
 You may still need additional financial programs. Despite, the cost of the software you
may still find that it can’t do everything you need to be done. This means you may need
to purchase another program. It can’t satisfy everything you need to do.
Conclusion

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Financial software is suitable for current business operations and future financial needs because
it helps a big deal and reduces confusion and big workloads. Its accuracy too is great.
Activity 2A
Give an example of how you could use previous financial data to determine the allocation of
resources.
Explain the figures and how you would allocate resources accordingly.
How to allocate recourses
When allocating recourses you need your previous financial data to help you in forecasting.
Previous financial data will help you identify previous strengths and weakness of the allocation
of recourses. Where recourses allocation was insufficient you consider increasing the level of
resources allocation to increase profitability. Where there was excess allocation of resources
compared to what was utilized, you reduce the number of resources to be allocated to avoid
wastage of resources. Audit trail could help with sufficient information on how to budget
allocation of resources.
Activity 2B
Identify a new item you could add to the budget in your business. Estimate the costs of the new
item and how it would be included within the budget.You need to estimate both upfront and
ongoing costs.
Heath care
Staying healthy is important. It increases the efficiency of employees. I could add allocation of
money on expenses such as health premiums, disability, vision, and dental insurance. the

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amount of allocation can be estimated to $9000.this new resources allocation would be included
in my budget as a business expenditure under health care, where the upfront cost would be 20%
and 80% to be the ongoing cost.
Activity 2C
Give an overview of the organizational policies and requirements you need to adhere to when
you are preparing budgets.
Be realistic
Allocation of resources should be realistic for it to allow you to stick to your budget most of the
time. This would help to reach your financial goals. Breaking your budget occasionally is not
bad, provided that you will get back to the budget as soon as possible. Track progress and record
you’re spending should keep proper records of expenses and income
Set debt payouts and saving goals. You have to find out whether you have an overage or a
shortfall budget. To determine the type of budget you have you subtract total expenses from the
income. If you make more money than your expenses, you can set realistic goals of saving and
pay off debt.
Determine your income. Calculate accurate total income including from income sources like
interests, dividend and rental income
Calculate accurate total expenses. It’s crucial to find out how much you are spending to
operate your business
Activity 3A

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Write a plan detailing how you would circulate newly-written budgets to managers and explain
any additional information they need to know, such as reporting requirements and financial
delegations.
A plan of circulating newly-written budgets
Gather information for your budget plan by Collaborate with members from various departments
to know the critical details from the prior year’s budget and actual records from the previous
year’s budget
Define and evaluate department goals
Prepare a Budget using the acquired information
Monitor the progress regularly
Be prepared to make adjustments to your budget
Additional information
Every department will be required to analyze the budget for the previous two years by comparing
actual and forecast budgets
ACTIVITY 3B
Identify five different ways staff could misappropriate company funds and suggest a
resolution for each.
 Expense reimbursement fraud – this is like claiming of expenses twice, forging
receipts, claims of inflated expenses and submitting false reimbursement complains.

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 Procurement fraud – this involves schemes like ordering excess products and then
returning some and pocketing the money or initiating a purchase of goods for personal
use.
Prevention - Rotate duties of employees in procurement
-every employee should have a vacation
 Payment fraud
This can include creating false customer accounts to generate false payments. it also includes
self-authorization payments, joining to process false claims for payment of benefits and changing
payee details on checks.
Prevention – use data mining to uncover any hidden fraud like false payments
- Review the vendor master file to check that the volume of bidding is reasonable and
consistent
 Health insurance fraud
This is where an employee conspires with a doctor to defraud an insurance company by giving
false receipts
Prevention – implement an anonymous ethics hotline to encourage employees to report
wrongdoing
 Personal use of company vehicles –often using company-issued credit cards for fuelling
company vehicle for personal use
Prevention – conduct random audits of the accounts to see what has been misused

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Activity 3C
Explain your organization’s use of aging summaries, in terms of accounts payable and
receivable, where applicable. Aging summaries are used to determine the following
The credit risk
Old accounts receivable are a sign of credit risk to the firm because; if customers have not paid
their debts it means they are unable to pay. to calculate the risk you are taking you should
compare total accounts receivables against the company standards
The amount of bad debt allowance
For the balance sheet to balance you have to all accounts payable should reflect. Aging accounts
receivable helps determine the allowance for bad debts
Analyses the aging bills you owe.
Accounts payables aging analyses the bills you are unable to pay
Cash flow problem.
When you are unable to pay accounts payables on time it means you need to take action to
correct a problem with cash flow.
Activity 3D
Give an example of a contingency that could occur at your workplace and explain how you
would revise the budget to deal with it.
Example of a contingency; Theft

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You have to set up a planning committee to handle that problem. It’s usually advisable to plan on
contingency although sometimes it’s usually hard to budget for contingency while other matters
are pressing. The committee should come up with plans between one to three days after the
disaster. It should also report throughout the process. Months following the contingency should
be spent restoring the lost and taking the business back to its full resolution.
The committee will be required to come up with a plan on how to get the stolen assets which are
used in daily activities as fast as possible.
Activity 3E
Give an example of how you could use an audit trail to identify a discrepancy in budget
allocations.
Firms ensure that budget plan is effective and realistic by evaluation and auditing
Audit trail contains the previous records of an audit. by comparing previous records of audit and
the previous budgets, it will be possible to identify any crisis raising from the budget.
Activity 3F
Identify three areas of compliance you could monitor in your workplace and explain how
you would ensure so.
Pre-activity approvals, Before undertaking any activity in the firm there should be a clear list of
activities to be done which should be Signed and stamped for approval by the head of the
department
Transaction reviews, for example, travel expense reports .you should investigate to know
whether real transactions took place, this will help reduce fraud.