Analyse finances and prepare budgets
Grow Management Consultants is a consultancy business specialising in leadership consultancy and has been operational for the last five years. The company offers a range of services to assist companies to assess leadership behaviour of existing managers and performance metrics and to design and implement customised leadership programs based on the assessment. Services are offered Australia-wide.
The company employs a General Manager (you), 2 Principal Consultants (who are also Directors), 1 Senior Consultant, an Administration Officer and Receptionist.
Over the last two years, the company has diversified and offers regular professional development workshops on all aspects of leading and managing staff. These workshops are conducted approximately every 3 months in all major cities including Sydney, Brisbane and Melbourne. In 2018 – 2019, the company ran a total of 36 workshops. The company has also recently produced an E-book about leadership techniques.
The intention is to replace the workshops with the annual conference in the next financial year as the workshops were not well attended and client feedback indicates a personalised, company focused approach in the form of consulting services is the service of choice.
The E-book has had reasonable sales but there needs to be a wider selection of books, as well as more marketing. The plan is to generate $10,000 worth of sales for the e-books during the next financial year and increasing over time.
As the General Manager for the company and with responsibility for finances, you are currently completing the financial planning for the year ahead. This involves a review of the company’s business plan, previous year’s profit and loss statement, the current business plan and strategic directions and cash flow statements. Based on the review, you will be establishing budgets and allocating funds. In developing the budget you are to assume a 5% increase in cost of sales, as well as a 10% increase in sales for consulting services and executive search.
As per the business plan, the company plans to run an annual conference starting in 2020. The costs for the conference have been estimated by the Principal Consultant as set out in the Estimated Conference Costs document. Conference attendance is aimed at 100 people paying $750 each.
The Principal Consultant has also asked you to review the current accounting software used by the business. The company is currently using MYOB but as it has grown, the Principal Consultant wishes to review whether this is the best accounting software for the business. He has also requested that the software have a cloud feature.
Complete the following activities: 1. Conduct research in preparation for your financial performance report. • Review the scenario information above and the 2018-2019 Profit and Loss Statements and the 2018-2019 Cash Flow Statements provided to you. Using this information, identify areas of the business that have generated a profit and those that have generated a loss. • Conduct research to establish why those areas have made a profit or loss. Your research should include a review of the financial data provided to you, economic conditions and business trends that may have resulted in the profit or loss. You will be required to report on your findings in the financial performance report as outlined below. • Conduct research on financial software systems as per the scenario information. Make notes for use in your report. 2. Prepare a financial performance report for the Principal Consultants using the template provided by your assessor that includes an:
Overview of the purpose of the report.
- Analysis of the previous year’s (2018-2019) profit and loss statement for Grow Management Consultant, including revenue generated, cost of sales, gross profit/loss margin and net profit/loss margin.
- Analysis of overall business performance including the performance of each of the income streams for 2019-2020.
- Outline of reasons for profit or loss based on your analysis of the data and research on economic conditions and business trends.
- Analysis of the organisation’s goals and priorities for the upcoming financial year as documented in the Strategic Business Plan and financial resources required to achieve these goals, as well as key dates.
- An analysis of cash flow trends as per the cash flow statements.
- Review and analysis of at least three other financial software packages that the business could use, including the advantages and disadvantages of each, as well as the advantages and disadvantages of MYOB that is currently used.
- Develop budget forecasts for the next financial year.
- Ensure that the analysis of the previous year’s data and future plans as indicated in the business plan is taken into account in determining projected income and expenditure.
- As per the organisation’s financial management policy and procedure, the budget forecasts are to be submitted in Excel. Develop a suitable format within Excel for your budget.
- Ensure that your budget includes the estimated income and costs for the conference and e-book to be implemented in 2020. This is provided to you as a separate document.
- Assume a 5% increase in all general costs, as well as a 10% increase in income for consulting and executive recruitment service. Input costs and income for the conference and e-book as per the data indicated in the document.
- Circulate report and budgets
- Ensure your documents are accurate and error free, and set out in a standard business format.
- Submit the completed report and budgets to the learning management system (Moodle)
Assessment task 2: Review project
This assessment task requires the student to review the profit and loss statement for 2019 – 2020, as well as the cash flow statement for Grow Management Consultants.
What do students need to complete this assessment?
|Computer and Microsoft OfficeAccess to the internet for research Profit and Loss Account 2019 – 2020Cash flow statements 2019 – 2020.|
What do students have to submit?
|Report on performance, including revisions to budget.|
Instructions to students:
It is now one year later and you are required to review the profit and loss account for 2019 – 2020, as well as the cash flow statement.
The Principal Consultant has also asked you to focus on reviewing the conference costs as while there was very positive feedback from the conference and the company wishes to run it next year, there needs to be revisions to the budget and a potential price increase for the conference fee to make the conference profitable.
The Principal Consultant would like you to report on a proposed conference fee given a 10% increase in all the recorded costs for the conference as shown in the profit and loss statement (and that match the conference costs for the document you reviewed in Assessment Task 1) and assuming 70 people will attend the 2020 conference. The Principal Consultant would also like a 20% return on the conference costs.
Complete the following activities:
- Analyse financial information
Analyse the information provided in the profit and loss account and cash flow statement including:
- Review of overall performance and gross/net profit margins.
- Calculation of variation in actual versus budgeted amounts for each income source.
- Calculation of variation in actual versus budgeted costs, focusing particularly on conference costs.
- Recommended revisions to the budget for conference costs for 2020 – 2021.
Proposed conference fee for 2021 conference assuming attendance of 70 people and to make a profit of at least 20%.
- Based on your analysis of the profit and loss account, develop and submit a short report that includes your analysis as above.
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