Financial Planning For Big Red Cycle Company – Strategies And Contingency Plan

AGENDA

Meeting Title

 Review of Financial Budget

Date

DD.MM.YYYY

Attendees

Accounting and Sales Department, Chairman, CFO

Agenda Items

Details of Agenda Items

Recommendations on the Course of Action

Planning

Proper planning is to be done to meet the requirements of the budget including materials needed, labor force requirement and seasonal fluctuations.

All managers from the finance, sales, and production departments should communicate clearly regarding concerns and goals to be aligned with the budget to avoid any future miscommunication.

Training

Training of accountants will be important to discuss in the agenda, so that any misstatement of the figures can be prevented in future budgeting practices.

Proper training should be given to the accountants on-the-job. The company, in this regard, can employ individuals who have past experiences in accounting to train the present team for better efficiency.

Use of historical information

It was identified that the budget prepared by the accountant department was faulty, which can hamper the synchronization between the strategic intents and practices of the company.

To avoid such mistakes in future, the company should use the historical data of at least 2 to 5 years old, which would give the accountant department a more accurate presentation of its future growth prospects and budgets.

Contingency Plan

Company Name:  Big Red Bicycle Pty Ltd

Person developing the plan:

Name:                                                            Position:

Risk identified: 20% possible decrease in the estimated sales and 10% possible decrease in the estimated profits for the year 2015-16

Details of strategies/activities to minimize risk of falling sales revenue

By when

By whom

Intelligent Sales forecasting will help the company to forecast the sales on the basis of information generated by using historical data

This strategy is used when the company’s sales is estimated to decrease by the end of a financial year

The intelligent sales forecast will be performed by the managers to reduce the risk of falling sales

Understanding competitive advantage

The company should focus on the competitive advantages that it has against the competitors, which will maximize its sales by attracting greater revenues from the customers

The departments related to the budget needs to have a complete list about the competitor’s pricing strategies that will influence the sales in the company

Implementation of plan

The company should implement the plan from the very beginning of the sales process

The sales department will be responsible for managing the sales revenue of the company

Concepts

Relevant Information

Record keeping requirements for ATO

While keeping the records, Bill should note the information disclosed in the bills of transactions, including the name of the payer, supplier or the receiver of the payment, the licensed business number held by the other entity receiving or paying the bill, the cost of expense of purchase incurred, the classification of goods purchased and expenses incurred along with the date of transaction and its documentation. It will also be mandatory to ensure that the records are true and original in order to ensure adequate accuracy and legitimacy of the process (ATO, 2016).  

GST

In the company, GST is charged along with the cost of the goods and therefore, Bill will need to segregate between the actual costs of the product from the GST charged. This estimation can help the company forecast if a return can be filed for GST, if the GST turnover is above or equal to $75,000. In such case, the company will need to register for the exemption, along with the details of taxable sales, tax invoices, make claims for GST credits, prepare a different accounting record for GST transactions and lodge for annual refunds based on the expenditure (ATO, 2015).

Cash flow

Cash flow includes inflow and the outflow of the cash in the company.

Income includes revenue, GST collected, general inflow of cash from rebates, miscellaneous, income from previous year. The cash inflow also includes interest, loan repayments. Capital income includes assets disposal such as land, plant & machinery, transfers from other accounts and capital inflow. Personal income, such as tax deductible and non-tax deductible are included. Expenses includes general & administration expenses, accounting fees, legal fees, bank charges, office supplies, dues & subscription, telephone bills, postage & printing, repairs & maintenance, payroll tax, advertising, employment expenses, superannuation, self amenities, wages & salaries, occupancy costs, electricity bill, insurance, rates, rent, water bills, waste removal, input tax credits, unallocated casual labor, unallocated freight, fuel & lubricants, sundry, plant vehicles, structures and overheads. Financial expenditure includes tax-deductible fees, non-taxable deductible fees and principal. Capital expenditure s includes land, plant & equipments, transfer & capital outflow and personal expenditure. 

Profit and loss statement

The profit and loss statement of the company can prove highly beneficial to gain an insight of the current financial transactions and plan the budget accordingly. Divided into separate heads to maintain transparency and adequacy, the Sales & Marketing dimension of accounts include advertising, direct expenses and other expenses which gives the total sales and marketing expenses. The research and development head includes technology licenses, patents and other specified expenses. General and administrative expenses includes wages & salaries, outside services, meals & entertainment, rent, telephone, utilities, depreciation, insurance and other specified expenses, which gives the company a total general and administrative expenses. By calculating sales & marketing and general & administrative expenses total operating cost of the company can be calculated. It also includes income tax, payroll tax, real estate taxes and other taxes, which can be used to calculate the net profit of the company at the end of the financial year.

Balance sheet

The balance sheet of the company includes assets, liabilities and capital. The current assets include cash, accounts receivable, reserve for bad debt merchandise expenses and notes receivable. Fixed assets, similarly, include vehicles and equipments and other assets include goodwill. These three types of assets make the total assets that the company owns. Subsequently, its current liabilities include accounts payable, sales taxes payable, income tax payable, payroll taxes payable, accrued wages payable and unearned revenues. Long-term liabilities thus include long-term notes payable and mortgage payable. These current and long-term liabilities make the total liability the company owes to its stakeholders. In the balance sheet, capital of the company includes owner’s equity, investment. By calculating the total assets, liabilities and capital Bill would obtain its net worth.

Budgeting process

According to the policies implemented by ATO, Bill should also note the information disclosed in the bills of transactions, which should include the name of the payer, supplier or the receiver of the payment, the licensed business number held by the other entity receiving or paying the bill, the cost of expense of purchase incurred, the classification of goods purchased and expenses incurred along with the date of transaction and its documentation. It will also be mandatory to ensure that the records are true and original in order to ensure adequate accuracy and legitimacy of the process (ATO, 2016).  

Using spread sheet for accounting

Bill Goodale can use excel sheet to record company transactions, offering an updated and accurate view of its financial positioning based on which, future budgetary planning can be performed. Using of excel will also help Bill Goodale to work simultaneously with the other users, allowing him to make proper utilization of time and information. This will allow Bill and other members of the accountant department to brainstorm with sufficient data to produce a realistic budget.