Financial Analysis and Management Report for VTI Homecare

This comprehensive financial report analyzes the financial performance of VTI Homecare Pty Ltd, addressing key aspects of financial management. The report begins with an overview of strategic planning, corporate governance, and the suitability of financial management software like MYOB, Xero, and Freshbooks. It then delves into accounting principles, including the matching principle, account groups, and the importance of budgeting and probity. The report presents a detailed variance analysis of the company's budget, examining sales, cost of goods sold, and various expenses. It assesses the sales budget, profit budget, cash flow analysis, and aged debtor's budget. Furthermore, it explores the reasons for variances, the implications of a falling gross profit margin, and provides recommendations for improving sales, product innovation, and internal controls. The report concludes with suggestions for enhancing accounting software and implementing internal control systems. This report is a valuable resource for students and professionals studying finance and accounting.

Running head: MANAGE FINANCES
Manage Finances
Name of the Student:
Name of the University:
Author Note:

1MANAGE FINANCES
Table of Contents
Task 1.........................................................................................................................................2
Answer to Question 1.............................................................................................................2
Answer to Question 2.............................................................................................................2
Answer to Question 3.............................................................................................................3
Answer to Question 4.............................................................................................................3
Answer to Question 5.............................................................................................................3
Answer to Question 6.............................................................................................................4
Answer to Question 7.............................................................................................................4
Answer to Question 8.............................................................................................................4
Task 2.........................................................................................................................................5
Answer to Question 1.............................................................................................................5
Answer to Question 2.............................................................................................................5
Answer to Question 3.............................................................................................................6
Answer to Question 4.............................................................................................................8
Answer to Question 5.............................................................................................................8
Answer to Question 6.............................................................................................................9
Answer to Question 7.............................................................................................................9
Answer to Question 8.............................................................................................................9
Answer to Question 9...........................................................................................................10
References................................................................................................................................11

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Task 1
Answer to Question 1:
An organization is required to carrying out strategic plan for effective achievement of
their business plan that is mainly assumed by management. It is regarded as prerequisite
concerning statutory and current requirement. This incorporates lowering prices of product by
decreasing rate of gross profit by 1% that helps in generating stable sales revenue in period
that are hard-hitting for business. Moreover, for an organization to secure and capture a
higher proportion of market share, budget concerning advertisement has also increased by
amount of $ 70000. There has also been increment of amount of salaries and wages that are
paid to staffs and employees by an amount of $ 172500. Amount of payroll tax as considered
by organization is calculated as a percentage of salaries and wages. Amount of
superannuation to be charged is allowed at 9% of salaries and wages. Effective corporation
tax rate of company is 30% and computation of compensation given to workers is 2% of
salaries and wages.
Some of the tax liabilities under tax legislation that VTI Homecare Pty Ltd is liable to
pay incorporate Luxury Car Tax, GST, Payroll tax and Fringe Benefits Tax.
Answer to Question 2:
An organization is required to have a defined corporate governance and code of
conduct so that they are capable of carrying out their operations seamlessly. VTI Homecare
Pty Ltd should also have corporate governance structure along with code of conduct
according to current compliance requirement as per Corporation Act, 2001. Financial or
annual report of organization corresponding to Australian securities and investment

3MANAGE FINANCES
commission should be capable of reflecting true and fair view of financial data. Furthermore,
in order to have compliance with Australian corporation act, 2001 it is also essential to have
their financial statements audited by appointment of auditors. VTI Homecare Pty Ltd is also
required to have their board of directors that will b appointed or elected by shareholders.
Answer to Question 3:
The suitability and effectiveness of software that is used in financial management
such as MYOB is attributable to the fact that it assist in providing overall financial
performance of business and thereby widening the scope of visibility. Such software
facilitates the flowing up of operations of complex business activities by simplifying it.
Moreover, the convoluted structure of management is also simplified by the employment of
this particular software. Entire process of accounting is efficiently consolidated with the help
of financial management software.
Answer to Question 4:
Xero and Freshbooks are the two types of financial management software that are
available commercially. These two software’s are in contemporary with MYOB.
Freshbooks is one of the best accounting software offering cloud solutions to small
business and firms. This particular accounting software supports a large number of languages.
This particular software can function on any kind of devices such as Windows, Mac, i phone,
i pad and android. Organization employing Freshbooks is capable of efficiently and
effectively performing functions such as expense tracking, time tracking, online invoicing
and other related features (Coad et al. 2015). However, one of the drawbacks of this
accounting software is its cost as it may not be affordable by small business owners.
Xero is cloud-computing software that is for medium sized and small sized business
that assists them in meeting their business requirements relating to operations and it is

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irrespective for what purpose and types of business they are employed. Simplifying of
transactions, pain setting up, elaborated view of any business financial health along with
many other related benefits or this accounting software facilitates advantages. They are
capable of functioning on every kind of operating system such as androids, Mac, i phone, i
pad and Windows. Costs of purchasing of this software are the only potential disadvantage.
Answer to Question 5
Answer to part a:
In order to ascertain the profits pertaining to any business, it is essential to make or
have a record of income as they arrive and their corresponding income. This is regarded as
one of the matching principle of financial accounting.
Answer to part b:
Account group are summarized accounts effecting the creation of master records as its
criteria. It helps in determination of screen layout in specific code area of company for
creating general ledger account (Van 2016). Furthermore, account group also helps in
selection of account number using number interval when there is a creation of general ledger
account.
Answer to part c:
It is always recommended for organization to prepare budgets for specific and
considerable time period. There are many advantages for business with the help of budget
preparation such as company will be able to make forecast of their expected sales in a more
accurate way.

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Answer to Question 6:
Probity is the confirmed and complete integrity and maintaining honesty and
uprightness in any particular accounting process. In this regard, probity is about maintenance
of financial probity that is illustrative of the fact that management of funds have been
accounted for and have been met legally.
Answer to Question 7:
Gross profit of organization has been reduced in financial year 2016-2017 by 1% and
this is indicated by dates. Over the first quarter of 2016-17, there have been increment in
wages and salaries of employees and reduction in expenses concerning advertisement.
Answer to Question 8:
Amenities of staffs, transportation cost and other related office expense are some of
the items that are involved in VTI Homeware Pty Ltd budget preparation.
It is recommended to organization to adopt internal control system in different areas
of operations such as segregation of duties. There will be mitigation of risks of fraud and
errors in books of account due to segregation of duties. This in turn would help auditors is
executing their tasks.
Task 2
Answer to Question 1:
VTI Homeware Pty. Ltd.
Variance to Budget
Actual Results Budget-Q1 Actual-Q1 $ Variance
Sales $3,394,248 $3,371,200 $23,048
Cost of Good Sold $1,934,721 $1,955,296 -$20,575

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Gross Profit $1,459,527 $1,415,904 $43,623
Gross Profit % 43% 42%
Expenses
Accounting Fees $2,500 $2,500 $0
Interest Expense $21,127 $28,150 -$7,023
Bank Charges $400 $380 $20
Depreciation $42,500 $42,500 $0
Insurance $3,348 $3,348 -$1
Store Supplies $750 $790 -$40
Advertising $200,000 $150,000 $50,000
Cleaning $3,256 $3,325 -$69
Repairs & Maintenance $16,068 $16,150 -$82
Rent $660,127 $660,127 $0
Telephone $2,999 $3,100 -$101
Electricity Expense $5,356 $5,245 $111
Luxury Car Tax $7,491 $12,000 -$4,509
Fringe Benefits Tax $6,500 $7,000 -$500
Superannuation $37,404 $37,404 $0
Wages & Salaries $415,600 $410,500 $5,100
Payroll Tax $19,741 $19,741 $0
Workers' Compensation $8,312 $8,312 $0
Total Expense $1,453,480 $1,410,572 $42,908
Net Profit (Before Tax) $6,047 $5,333 $714
Income Tax $1,814 $1,600 $214

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Net Profit $4,233 $3,733 $500
Answer to Question 2:
CASH FLOW ANALYSIS - GST 2016/17 Quarter 1 Quarter 2 Quarter 3 Qaurter 4
GST Collected $1,697,124 $339,425 $407,310 $441,252 $509,137
Less: GST Paid $1,290,219 $291,773 $306,854 $326,325 $365,267
GST Payable $406,905 $47,652 $100,456 $114,927 $143,870
Answer to Question 3:
Sales budget:
Sales % 2016/17 Quarter 1 Quarter 2 Quarter 3 Qaurter 4
Budget Total Budget
Total Sales 100% $16,971,237 $3,394,248 $4,073,097 $4,412,521 $5,091,371
Kitchenware 30% $5,091,371 $1,018,274 $1,221,929 $1,323,756 $1,527,411
Bedroom decorative 25% $4,242,809 $848,562 $1,018,274 $1,103,130 $1,272,843
Gifts 15% $2,545,685 $509,137 $610,965 $661,878 $763,706
Decorative Items 10% $1,697,124 $339,425 $407,310 $441,252 $509,137
Lighting fixtures 20% $3,394,247 $678,850 $814,619 $882,504 $1,018,274
Preparation of sales budget by organization has been done by gathering relevant
information. Sales budget helps organization in identification of changes in value of sales
revenue generated in a specific time period. It can be depicted from above table that there has
been increment in sales volume of bedroom decorative from $ $848,562 in first quarter to $
1272843 in 4th quarter. Sales of lighting fixtures have also increased from $ 678850 first
quarter to $ 1,018,274 in 4th quarter. This increase in sales volume of bedroom decorative and
lightning fixtures depicts that there is a rising market demand of these products.
Profit budget:

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PROFIT BUDGET 2016/17 Quarter 1 Quarter 2 Quarter 3 Qaurter 4
Revenue- 20% 24% 26% 30%
Sales $16,971,237 $3,394,248 $4,073,097 $4,412,521 $5,091,371
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 % 43.00% 43.00% 43.00% 43.00% 43.00%
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 $750 $900 $975 $1,125
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 $7,491 $7,491
Fringe Benefits Tax $26,000 $6,500 $6,500 $6,500 $6,500
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 Expense $5,834,863 $1,453,480 $1,394,672 $1,444,014 $1,542,697
Net Profit (Before Tax) $1,462,770 $6,047 $356,760 $453,371 $646,592
Income Tax $438,831 $1,814 $107,028 $136,011 $193,978
Net Profit $1,023,939 $4,233 $249,732 $317,359 $452,614
It can be ascertained from looking at the figures as mentioned in profit budget in the
first quarter, firm has turn around and they have gained a considerable amount of profits in
next quarter of this particular year.
Analysis of cash flow:
CASH FLOW ANALYSIS - GST 2016/17 Quarter 1 Quarter 2 Quarter 3 Qaurter 4
GST Collected $1,697,124 $339,425 $407,310 $441,252 $509,137
Less: GST Paid $1,290,219 $291,773 $306,854 $326,325 $365,267
GST Payable $406,905 $47,652 $100,456 $114,927 $143,870
In this particular table, inflow and outflow of tax flow has been depicted. The total
amount of goods and services tax that has been collected and paid by company is provided. It
can be seen that total amount of GST that has been paid is computed at $ 406,905.
Aged debtor’s budget:

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AGED DEBTORS BUDGET TOTAL Quarter 1 Quarter 2 Quarter 3 Qaurter 4
Sales $16,971,237 $3,394,248 $4,073,097 $4,412,521 $5,091,371
% Debtor Sales 20% 20% 20% 20% 20%
Total Debtors $3,394,247 $678,850 $814,619 $882,504 $1,018,274
Current $2,851,168 $570,234 $684,280 $741,304 $855,350
30 Days $339,425 $67,885 $81,462 $88,250 $101,827
60 Days $169,712 $33,942 $40,731 $44,125 $50,914
90 Days $33,942 $6,788 $8,146 $8,825 $10,183
It can be ascertained from above table that for all quarter of years, debtor sales are
increasing. Over the quarter, there has been gradual increase in total value of debtors of
business.
Answer to Question 4:
The financial transactions relating to debtors have been recognized and are met on
legal terms and this is representative of the fact that while preparing the budget, business has
taken into consideration financial probity issue. Business is required to make proper
authentication of funds and figures mentioned in the budget and then carrying forward.

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Answer to Question 5:
Actual Results Budget-Q1 Actual-Q1 $ Variance % Variance F or U
Sales $3,394,248 $3,371,200 $23,048 0.68% U
Cost of Good Sold $1,934,721 $1,955,296 -$20,575 -1.06% U
Gross Profit $1,459,527 $1,415,904 $43,623 2.99% U
Gross Profit % 43% 42% 1.00% U
Expenses
Accounting Fees $2,500 $2,500 $0 0.00% F
Interest Expense $21,127 $28,150 -$7,023 -33.24% U
Bank Charges $400 $380 $20 5.00% F
Depreciation $42,500 $42,500 $0 0.00% F
Insurance $3,348 $3,348 -$1 -0.01% U
Store Supplies $750 $790 -$40 -5.36% U
Advertising $200,000 $150,000 $50,000 25.00% F
Cleaning $3,256 $3,325 -$69 -2.11% U
Repairs & Maintenance $16,068 $16,150 -$82 -0.51% U
Rent $660,127 $660,127 $0 0.00% F
Telephone $2,999 $3,100 -$101 -3.36% U
Electricity Expense $5,356 $5,245 $111 2.07% F
Luxury Car Tax $7,491 $12,000 -$4,509 -60.18% U
Fringe Benefits Tax $6,500 $7,000 -$500 -7.69% U
Superannuation $37,404 $37,404 $0 0.00% F
Wages & Salaries $415,600 $410,500 $5,100 1.23% F
Payroll Tax $19,741 $19,741 $0 0.00% F
Workers' Compensation $8,312 $8,312 $0 0.00% F
Total Expense $1,453,480 $1,410,572 $42,908 2.95% F
Net Profit (Before Tax) $6,047 $5,333 $714 11.81% U
Income Tax $1,814 $1,600 $214 11.81% F
Net Profit $4,233 $3,733 $500 11.81% U
VTI Homeware Pty. Ltd.
Variance to Budget
Answer to Question 6
Section of expenses has witnessed variations due to anomaly in the system of
accounting leading to recording of wrong values of transaction. Reason of variance is
attributable to the fact that rising price of raw materials due to rising inflation. Frauds and
accounting errors might be another reason for occurrences of these variances.
Answer to Question 7:
Fall in gross profit margin of business is indicative of the fact that financial
performance is not favorable. This depicts that revenue is not generated as planned by
company. Therefore, organization is required to boost sales for undertaking promotional
activities and adopting advertising campaigns. Furthermore, for maintaining proper

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accounting records, there should be segregation of duties and employing quality accounting
software.
Answer to Question 8:
It is recommended that entire process of making sales should be restructured by
appointing proper techniques as discussed by management of business. For enabling products
to thrive in market and attract more customers, marketing executives of organization should
consider ways for product innovation and development. For mitigation of any risks associated
with business, there should be implementation of adequate internal control system.
Answer to Question 9:
VTI Homeware Pty Ltd has been identified with one of the most important problem
concerning their accounting software and inability of administration to make accurate
forecasting of their sales and revenue generation. Therefore, it is recommended to
organization to install competing accounting software that will help in making proper
estimates along with facilitating internal control system. Modification of internal control
system should be done and product development and innovation should be done.