Statutory And Organizational Requirements For VTI Homecare Pty Ltd

Strategic Plan for Achieving Business Goals

Answer to Question 1

The current statutory and organizational requirements that have been considered are that the management of the firm assumes a strategic plan in order to achieve the business plan effectively. This included the reduction in the gross profit rate by 1 % for effectively lowering the product prices for ensuring a stable sales revenue even in tough trading period. The advertising budget has also been increased by an amount of $70,000 for securing a greater portion of the market. The wages and salaries have also  been increased by an amount of $172,500. The statutory requirements cover the superannuation to be 9% of wages and salaries. Payroll tax is 4.75 % of wages and salaries. Workers compensation is 2% of wages and salaries and company tax has been 30%.

The tax liabilities of the for VTI Homecare Pty Ltd under taxation legislation has been the GST, Payroll Tax, Luxury Car Tax, and Fringe Benefits Tax.

Answer to Question 2

The current compliance requirements for VTI Homecare Pty Ltd under the Corporations Act 2001 has been that there should be a defined code of conduct and a corporate governance structure for executing the day to day operational proceedings of the company. The financial reporting of the company to ASIC, should be prepared in such a way that the prepared statements reflect the true and fair view of the company. The audit of such statements should also be executed annually in order to comply with the Corporations Act, 2001. Most importantly, VTI Homecare Pty Ltd should also have a Board of Directors elected by the shareholders of business.

Answer to Question 3

The effectiveness and suitability of financial management software (MYOB) lies in the fact that it aims to widen the scope of visibility over the performance of business. It simplifies the complicated business activities speed up the flow of operations by further simplifying the intricate structure of management. A financial management software effectively consolidates the entire accounting process (Lipi, Rama and Agaraj 2015).

Answer to Question 4

The other commercially available software is the FreshBooks and Xero. These two financial management accounting software have been contemporary with MYOB.

FreshBooks is the accounting software that has been one of the best cloud solution for small business owner. The software can be run on any device with windows, android, Mac, iPhone or iPad. The software also supports a huge number of languages. The software facilitates online invoicing, expense tracking, time tracking and other related features. The only disadvantage being the cost of affording the software may be a problem for the small business owners.

Xero is the accounting software that has been designed to meet the operational requirements of business irrespective of the type of business for which it is being used. The facilities offered by Xero are painless setup, simplifies transactions, a proper view into the current financial health of business and other related advantages. The software can be run on any device with windows, android, Mac, iPhone or iPad. The oly potential disadvantage is the cost of thee software.

Answer to Question 5

Reduction in Gross Profit Rate

The matching principle can be applied by recording the expenses along with corresponding income so that the profit can be ascertained.

The account group refers to the summary of accounts that can be grouped on the  basis of a specific criteria depending and can be accessed while preparing the  budgets.

The preparation of the budgets for a specific time-period is always recommended as this leads to more realistic forecasts.

Answer to Question 6

The implication of probity is that it leads to financial probity. It insures that the funds management has been fully accounted with and has been legally met.

Answer to Question 7

The dates are reduction in the gross profit by 1% in the financial year of 2016-17. The reduction in the advertisement expenses in the first quarter of 2016-17 and increase in salary and wages over the first quarter of 2016-17

Answer to Question 8

The items that can be included in the budgets for VTI Homeware Pty Ltd are transportation, staff amenities and office expenses.

The new internal control like segregation of duties should be implemented within the different areas of operation within the organization including the operation of accounting. The segregation of duties, while accounting, will mitigate the occurrence of error or fraud in the books of accounts, thus help the auditor in executing his task.

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
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
Net Profit	$4,233	$3,733	$500

Answer to Question 2

CASH FLOW ANALYSIS – GST	2016/17	Quarter 1	Quarter 2	Quarter 3	Quarter 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	%	2016/17	Quarter 1	Quarter 2	Quarter 3	Quarter 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

The sales budget has been prepared after the collection of the relevant information. The most significant factor that arises from the sales budget is that the revenue generated from the sale of bedroom decorative has leaped from $848,562 to $1,018,274. This indicates that the current demand in the market is bedroom decorative (Choi 2016).

PROFIT BUDGET	2016/17	Quarter 1	Quarter 2	Quarter 3	Quarter 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

The profit budget shows that the firm has turned around from the first quarter and has invariably gained a good percentage of profit in the next few quarters of the year.

CASH FLOW ANALYSIS – GST	2016/17	Quarter 1	Quarter 2	Quarter 3	QUArter 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

This budget reveals the total amount of GST to be paid that has been computed as $406,905.

AGED DEBTORS BUDGET	TOTAL	Quarter 1	Quarter 2	Quarter 3	Quarter 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

The debtor sales have been constant for all the quarters of the year. However, the total debtor value of business has gradually increased over the quarters as revealed in the above table.

Answer to Question 4

The issue of financial probity that was considered during the preparation of the budgets was that all the financial transactions especially in case of the debtors have been legally met and financially recognized. Any figure or fund included in the budget should have been properly authenticated, and then carried forward (Eguia, Lamikiz and Uriarte 2017).

Answer to Question 5

VTI Homeware Pty. Ltd.
Variance to Budget
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

Answer to Question 6

The variances that have occurred are mainly in the section of expenses. This may be due to the fact that the anomaly in the accounting information system has recorded the wrong values of the transactions. Moreover, an inflation in the economy, rise in the price level or rise in the price of the raw materials might also be the reason for the obtained variance. The occurrence of fraud or mistake in recording the transactions might be another reason for the variances (Fiels, Leon and Geene 2016).

Answer to Question 7

The financial performance of the firm has not been up to the mark. This is because as revealed by the variance report the gross profit margin has decreased by a percentage. This reveals that the company is not able to obtain revenue as planned. Therefore, the management of the firm should take enough initiative in carrying out rigorous advertising campaigns and other promotional activities in order to boost the sales of the company. Moreover, strong internal controls like segregation of duties and a quality accounting software should be implemented in order to carry out the task of accounting properly and accurately.

Answer to Question 8

The particular recommendation for the organization at this point should be that the management of the company should sit and discuss restructuring the entire sales process. Newest methods of marketing should be adopted and most importantly the executives should consider innovation of their products in order to survive and prosper in the current market. Enough internal controls should also implemented in the organization in order to mitigate any kind of risk of fraud or other associated risks related to the business operations (Kristensen 2015).

Answer to Question 9

The primary issue that had been identified in VTI Homeware Pty Ltd was that the accounting software used in the firm did not enable the administration of the firm to estimate the future revenues or expenses thus, impairing the preparation of the budgets. Therefore, the management should consider immediately installing a new software system. The projections for improving the financial position of business should be implemented in the upcoming financial year and most importantly the management should consider innovating their products or starting an entirely new line of products (especially in the bedroom decorative as their sale is high) in order to be back in business. The internal controls existing in the organization should also be reviewed and modified and new controls should be implemented in order to make the implemented strategy, a success.

References

Choi, T.M., 2016. Multi-period risk minimization purchasing models for fashion products with interest rate, budget, and profit target considerations. Annals of Operations Research, 237(1-2), pp.77-98.

Eguia, J., Lamikiz, A. and Uriarte, L., 2017. Error budget and uncertainty analysis of portable machines by mixed experimental and virtual techniques. Precision Engineering, 47, pp.19-32.

Fiels, K.M., Leon, M. and Geene, B., 2016. 2015-2016 EBD# 14.9-FY 2017 Total ALA Budget Request.

Kristensen, T.B., 2015. Using adapted budget cost variance techniques to measure the impact of Lean–based on empirical findings in Lean case studies. In POMS 26th Annual Conference–Washington DC, USA–8-11. May 2015. Production and Operations Management Society.

Luh, W.M. and Guo, J.H., 2016. Allocating sample sizes to reduce budget for fixed-effect 2× 2 heterogeneous analysis of variance. The Journal of Experimental Education, 84(1), pp.197-211.

Lipi, I., Rama, R. and Agaraj, X., 2015. Implications of Accounting Information System Implementation in SMEs: A Study on Retail Business in Vlore Region. Mediterranean Journal of Social Sciences, 6(3), p.553.