BSBFIM601
ASSESSMENT-1
I am making a budget plan and am going to recommend financial managing application for the
business as a business manager. The company is named Houzit Pty Ltd, it is a retailer for home
wares. It is a growing business. It has 15 stores in Brisbane area. It has 150 staff members. It is
registered with ASIC. As per the review of financial structure of this company the report below
has been made.
Prepare Budgets
Profit Budget
PROFIT BUDGET 2019/20 Qtr1 Qtr2 Qtr3 Qtr4
Revenue 20% 24% 26% 30%
Sales 16,971,237 3,394,247 4,073,097 4,412,522 5,091,371
Cost of goods sold 9,673,605 1,934,721 2,321,665 2,515,137 2,902,081
Gross profit 7,297,632 1,459,526 1,751,526 1,897,384 2,18,290
Gross profit % 43% 43% 43% 43%
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 charge 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 64,272 16,068 16,068 16,068 16,068
&Maintenance
Rent 2,640,508 660,127 660,127 660,127 660,127
Telephone 14,997 2,997 3,599 3,899 4,499
Electricity Expense 26,780 5,356 6,427 6,963 8,034
Luxury Car Tax 12,000 12,000 - - -
Fringe Benefit Tax 28,000 7,000 7,000 7,000 7,000
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 29,612
Workers’ 41,560 8,312 9,974 10,806 12,468
Compensation
Total Expenses 5,841,371 1,458,488 1,395,172 1,444,514 1,543,197
Net profit (Before 1,456,261 1,038 356,260 452,871 646,092
Tax)
Income Tax 436,878 311 106,878 135,861 193,828
Net Profit 1,019,383 727 249,382 317,009 452,265
Sales Budget
SALES 2019/20 Qtr1 Qtr2 Qtr3 Qtr4
BUDGET Total Budget 20% 24% 26% 30%
Total Sales 6,971,237 3,394,247 4,073,097 4,412,522 5,091,3721
Bathroom fitting 30% 5,091,371 1,018,274 1,221,929 1,323,756 1,527,411
Bedroom fitting 25% 4,242,371 842,562 1,018,274 1,103,130 1,272,843
Mirrors 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% 3,394,247 678,849 814,619 882,504 1,018,274
GST Cash flow analysis
CASH FLOW 2019/20 Qtr1 Qtr2 Qtr3 Qtr4
ANALYSIS GST
GST Collected 1,697,124 339,425 407,310 441,252 509,137
Less GST Paid 12,281,358 282,913 306,854 326,325 365,267
GST Payable 415,765 56,512 100,456 114,927 143,870
Aged Debtors budget
AGED DEBETORS TOTAL Qtr1 Qtr2 Qtr3 Qtr4
BUDGET
Sales 16,971,237 3,394,247 4,073,097 4,412,522 5,091,371
% Debtors Sales 20% 20% 20% 20%
Total Debtors 100% 678,849 814,619 882,504 1,018,274
Current 84% 570,234 684,280 741,304 855,350
30 Days 10% 67,885 81,462 88,250 101,827
60 Days 5% 33,942 40,731 44,125 50,914
90 Days 1% 6,788 8,146 8,825 10,183
Assessment-2
Variance to Budget
Houzit Pty Ltd
Variance to Budget
1st Quarter ended 30 Sep 2019
Actual Results Budget- Actual- Variance % Variance F or
Qx Qx $ U
Sales $3,394,24 $3,371,200 -$ -1% U
7 23,047
– Cost Of Goods 1,934,721 1,955,296 20,575 1% U
Sold
Gross Profit 1,459,526 1,415,904 - -3% U
43,622
Gross Profit % 43% 42% -1% -2% U
Expenses
– Accounting Fees 2,500 2,500 - 0% -
– Interest Expense 21,127 28,150 7,023 33% U
– Bank Charges 400 380 -20 -5% F
– Depreciation 42,500 42,500 - 0% -
– Insurance 3,348 3,348 1 0% -
– Store Supplies 750 790 40 5% U
– Advertising 200,000 150,000 - -25% F
50,000
– Cleaning 3,256 3,325 69 2% U
– Repairs & 16,068 16,150 82 1% U
Maintenance
– Rent 660,127 660,127 - 0% -
– Telephone 2,999 3,100 101 3% U
– Electricity 5,356 5,245 - -2% F
Expense
– Luxury Car Tax 12,000 12,000 - 0% -
– Fringe Benefits 7,000 7,000 - 0% -
Tax
– Superannuation 37,404 37,404 - 0% -
– Wages & 415,600 415,600 - -1% F
Salaries 5,100
– Payroll Tax 19,741 19,741 - 0% -
– Workers’ 8,312 8,312 - 0% -
Compensation
Total Expenses $1,458,48 $1,410,572 -$ 11% F
8 47,916
Net Profit (Before $1,456,26 $ - -100% F
Tax) 1 5,333 $1,450,928
Income Tax $ $ -$ -100% U
436,878 1,600 435,278
Net Profit $1,019,38 $ - -100% F
3 3,733 $1,015,650
Note: F = Favorable, U = Unfavourable
DEBTOR AGEING RATIO
DEBTOR AGEING RATIO
2007/18 2018/19 2019/20
Trade $ 850,000 $ 975,000 $1,018,274
Debtors
Sales $14,550,100 $15,714,108 $1,697,237
Debtor Days 21 23 22
Issues
Increasing interest rates will upsurge costs due to the variable interest rates held on Houzit’s loans.
The advertising budget has only been partially spent. This can impact sales figures over the coming
reporting period.
Despite strong sales in the first quarter, economy in recession possibly will impact the budgeted sales
numbers.
Prices discounted to generate sales may impact gross profit margins
Potential issues regarding financial probity could include:
Bonus share scheme—a person with high financial probity would be objective and ethical in
preparing the financial reports. He should not be persuaded by the personal benefits that could
be gained by altering the number incorrectly.
Performance review—high financial probity would guarantee that the departmental reports for
each department would be prepared at arm’s length.
Variances
See budgeted variance report in the excel file.
Sales—1% - not all advertising spent; recession
Advertising 25% less - $50,000 unspent due to non-availability of national magazine space
Gross profit down from 43% to 42% - price discounts
Net profit up 400% + $4300 – advertising non-spend the benefit
Interest expense up 33% - international pressure up on interest rates ; credit shortage
Performance
Profitable quarter that is beyond expectations, but it is still a short margin for the quarter. Recommend
that this margin is considered in future periods to ensure that they are more considerable and are building
towards an annual margin in alignment with prior years.
Concern overdraft in gross profit (GP) %. Net profit could have been better given the $50000 savings in
advertising.
The average time for debtors to pay account is increasing. There should not be a concern to cash flow yet
as a majority of debtors remain within 30 days.
Wages and salaries a little high with 12.2% at Houzit as a % of sales, the industry average is nearly 11%.
Recommendation
Review the discount policy to protect the gross profit margin
Reduce loans to lessen exposure to growing interest rates.
Revise budget to include modifications to the advertising budget with the additional $50,000 to
the next quarter.
Review salaries and wages to cut costs and improve viability.
Evaluation
Monitoring and reporting can be shortened to monthly.
Restructure loan to fixed interest rate to takeout the instability of results.
Budgets must be prepared for all cost centers.
References
Retrieved from Australian Taxation Office 2017, pay as you go (PYG) income tax installment,
viewed on 27 November 2019, https://www.ato.gov.au/Business/Business-activity-
statements-
(BAS)/Pay-as-you-go-(PAYG)-income-tax-instalment/
Office of the Australian Information Commissioner (2019)
Privacy (Market and Social Research) Code 2014
Retrieved 20 November, 2019, from Australian Government: https://www.oaic.gov.au/privacy-
law/privacy-registers/privacy-codes/privacy-market-and-social-research-code-2019
Prompt Questions:-
Q1. The statutory requirements for tax compliances are listed below:
Ans:-
9% of wages and salaries is to be calculated and paid as superannuation for each quarter.
4.75% is payroll tax of wages and salaries for every quarter
Worker compensation is 2% of salaries and wages for every quarter
For every quarter the company tax is 30% of net profit before taxes.
Q2. Current compliance requirement and liabilities for this organization under the corporation
Act 2001
Ans:-
An annual return with information about the company and its activities must be submitted to
the Australian Securities and Investment Commission.
1. Keep sufficient financial records to explain reports and records must be kept for seven years.
2. Company to abide by the rules set by ASIC for the internal management of the company.
3. Directors are to act within the prescribed limits.
4. Directors must keep written records of minutes and resolutions.
5. Notify ASIC of the registered office and principle place of business.
6. Use company name and ACN on all public documents, business premises, cheques and ASIC lodged
documents.
7. Large companies must submit financial statements.
8. Public companies must have their financial statements audited.
Q3. Most suitable software for the Houzit Pty Ltd
Ans:-
A prioritised list of requirements addressing:-
1. For statutory needs of Houzit Pty Ltd especially in when need to assist in generation of monthly BAS
statements, and managing superannuation.
2. Workers or user needs the software for login access, multi-user, and secure data.
3. Houzit need software for security security reasons such as to provide a backup solution.
Identified software that:
My recommendation for Houzit Pvt. Ltd to choose MYOB software for accounting because it
works with the current technology capabilities as indicated in case study such as it will manage
the company accounts more efficiently in long run taking into account all legislative and
statuary requirements.
Q4. Principle of accounting in developing budget
Ans:-
a. Matching principle
The matching principle is applied in preparing a budget by making sure that the revenues for
the period are matched with the expenses incurred in earning that revenue for the period.
b. Account group
Account groups are used in preparing a budget by separating the revenue and expense
accounts into the profit budgets and the asset, liability and equity accounts into the capital
budgets like cash flow and capital expenditure.
c. Time period
Time periods are applied in preparing a budget by applying the accounting assumption that a
going concern can be divided into shorter time periods of weeks, months, quarters and years
for the purpose of budgeting and reporting.
Q7. List of the items I would recommend for inclusion in the budget
Ans
1. Water bill
2. Waste removal
3. Staff amenities (expenses on tea, coffee, milk, toilet paper)
4. Postage and printing
5. Stationary and office supplies expenses (paper, pens, computers etc)
.
Role Play
MC: Good day, Jim. How are you? I’m here today to present to you the variance report which I
have done for our company.
JIM: I’m very well, thanks. Okay, you may proceed with the presentation.
MC: (gives a copy of the report to Jim)
JIM: (reviews the report for 5 min)
MC: Do you have any questions regarding the variance report?
JIM: Thank you for this accurate report. By the way, can you summarize your findings?
MC: Sure. Based from my report, I have found five significant issues that are evidenced in the
provided case study information. Regarding variances, I have identified them by comparing
actual results with the established budget.
JIM: That’s good. Do you have any recommendations for the ongoing financial viability for the
organization?
MC: Based on the financial performance of the organization (According to the financial
information provided) to industry benchmarks for this organization in line with the retail trade
sector, I have put in my report 4 recommendations which I will reiterate it to you. First, Review
the discount policy to protect the gross profit margin. Next, Reduce loans to reduce exposure to
rising interest rates. Third, Review salaries and wages to reduce costs and improve viability.
Lastly, Revise budget to include adjustments to the advertising budget with the $50000 added to
the next quarter.
JIM: Thank you for that good recommendations, MC. I will see to it that we will consider all of
that one by one. Report approved.
MC: Thank you so much for listening to my report and for the approval as well.
