Reference no: EM133002923

SITXFIN004 Prepare and monitor budgets

Learning Outcomes

On successful completion of this unit, the learner/trainee will be able to;

• Prepare budget information.
• Prepare budget.
• Finalise budget.
• Monitor and review budget.

As well as demonstrating the performance criteria, to be assessed as competent, the learner must demonstrate their ability to apply the required knowledge and skills in a range of situations.

1. Prepare budget information. 1.1.Determine and confirm scope and nature of required budgets.
1.2.Identify, access and interpret data and data sources required for budget preparation.
1.3.Analyse internal and external factors for potential impact on budget.
1.4.Provide opportunities for colleagues to contribute to budget planning process.
2. Prepare budget. 2.1.Draft budget based on analysis of all available information.
2.2.Estimate income and expenditure and support with valid, reliable and relevant information.
2.3.Reflect organisational objectives within draft budget.
2.4.Assess and present options and recommendations in a clear format.
2.5.Circulate draft budget to colleagues and managers for input.
3. Finalise budget. 3.1.Negotiate budget according to organisational policy and procedures.
3.2.Agree on and incorporate modifications.
3.3.Complete final budget in a clear format within designated timelines.
3.4.Inform colleagues of final budget decisions and application within relevant work area, including reporting and financial management responsibilities.
4. Monitor and review budget. 4.1.Regularly review budget to assess actual performance against estimated performance and prepare accurate financial reports.
4.2.Incorporate all financial commitments into budget and budget reports.
4.3.Investigate and take appropriate action on significant deviations.
4.4.Analyse changes in internal and external environment and make necessary adjustments.
4.5.Collect and record relevant information to assist in future budget preparation.

Performance Evidence

Evidence of the ability to:

• prepare a budget for a business that meets the specific business' needs
• demonstrate the following when preparing the above budget:
• consultation on components
• analysis of factors that impact on the budget
• completion of draft and final versions of budget within designated timelines
• monitor and review the above budget against performance over its life cycle.

Knowledge Evidence

The following knowledge must be assessed as part of this unit:

Demonstrated knowledge required to complete the tasks outlined in elements and performance criteria of this unit:
• types of budgets:
• cash budgets
• cash flow budgets
• departmental budgets
• event budgets
• project budgets
• purchasing budgets
• sales budgets
• wage budgets
• whole of organisation budgets
• budget terminology
• specific industry sector and organisation:
• role and nature of budgets
• budget formats, budget performance and financial reports
• financial reporting procedures and cycles
• features and functions of accounting software programs used to prepare and monitor budgets
• internal and external factors that impact on budget development:
• growth or decline in economic conditions
• human resource requirements
• new legislation or regulation
• organisational and management restructures
• organisational objectives
• scope of the project
• shift in market trends
• significant price movement for certain commodities or items
• supplier availability and cost
• budget preparation and monitoring practices and techniques:
• sources and contents of data required for budget preparation:
• competitor research
• customer or supplier research
• declared commitments in areas of operation
• financial information from suppliers
• financial proposals from key stakeholders
• income and expenditure for previous time periods
• departmental, event or project budgets
• grant funding guidelines or limitations
• management policies and procedures
• organisational budget preparation guidelines
• performance information from previous periods
• techniques for making budget estimates
• common reasons for deviations and budget deviation management.

Assessment Task 1:

Addresses some elements of required foundation skills and knowledge as shown in the Assessment Mapping documents

Questions
1. Describe the purpose of each of the following budgets:
a. Cash/Cash flow budget
b. Departmental budget
c. Event budget
d. Project budget
e. Purchasing budget
f. Sales budget
g. Wages budget
h. Organisation wide budget.

2. Define each of the following budget terminology.

a. Budget variance
b. Balanced scorecard
c. Financial forecast

3. Describe why companies may choose to develop budgets.

4. Explain the use of electronic spreadsheets in developing budgets and give two of their key features.

5. List five ways to improve cash inflow and give examples.

6. Identify and explain three types of financial statements and their purpose.

7. Describe the type of entity that is required to have financial reports audited.

8. Explain three key principles relating to the management of a chart of accounts.

9. Explain the purpose of a profit and loss statement and give two of its key features.

10. Explain the purpose of financial reporting procedures.

11. List the two common reporting cycle periods for financial reporting.

12. For the listed accounting software, describe two key features and two functions of the accounting software.
Accounting software
a. Xero
b. MYOB

13. Explain how each of the factors below impact on budget development.
Factors
a. growth or decline in economic conditions
b. human resource requirements
c. new legislation or regulation
d. organisational and management restructures
e. organisational objectives
f. scope of the project
g. shift in market trends
h. significant price movement for certain commodities or items
i. supplier availability and cost

14. Explain how each of the data below can assist in preparing a budget
Data
a. competitor research
b. customer or supplier research
c. declared commitments in areas of operation
d. financial information from suppliers
e. financial proposals from key stakeholders
f. income and expenditure for previous time periods
g. departmental, event or project budgets
h. grant funding guidelines or limitations
i. performance information from previous periods

15. Explain the importance of each of the following budget preparation practices
a. management policies and procedures
b. organisational budget preparation guidelines

16. Describe two techniques for making budget estimates.

17. Explain the concept of budget deviation management.

18. Give three common reasons for deviations from budgets.

Project Assessment 2 Budget planning project

Addresses some elements of required foundation skills, Knowledge skills and Performance Evidence as shown in the Assessment Mapping documents

Activities
Complete the following activities.

1. Carefully read the following scenario:
Blue Healer is a health resort and convention centre based in the Blue Mountains near Sydney which has been operating for 5 years. The resort, Blue Healer, is made up of five areas: catering, spa, meeting rooms accommodation, and administration.

Blue Healer is very popular due to its competitive pricing structure, quality service and state of the art facilities.

The resort was set up by Paul Byrnes, a burnt-out consultant who wanted to provide a service for corporate executives to retreat from their business for at least a short time. Paul had a lot of networks and to date most of the business has been from Paul's existing networks and word of mouth referrals. The business has a functional web site.

Sales continue to increase but Paul wants to retire completely and step back from the business. Thus, he has hired a Resort Manager to oversee the business (you). An important aspect of the business that he wants the Resort Manager to focus on is preparing and monitoring budgets.

Current staff include an Accounts and Administration Manager, Resort Supervisor, Housekeeping staff, receptionist and contract therapists.
Profit and loss reports show the status of the business' financial health.

2. Determine and confirm scope and nature of the budgets

In your new role, the first step you need to take is to the determine the scope and nature of all of the budgets that need to be prepared for Blue Healer.

Draft an email to send to Paul to find out this information. Ensure your email includes questions that will provide all of the information you need to know, as well as identifies internal data sources that you need to access.

Paul Byrnes (your assessor) will answer your email so that you are able to forget ahead with developing the required budgets.

3. Develop a Marketing Budget Briefing Report
As per the response provided to you, you are to focus on developing a Marketing Budget including Briefing Report.

Use Marketing Budget Briefing Report Template to develop your report.

Review profit and loss for previous financial years to identify amounts spent on marketing for the previous two financial years, as well as the information provided to you by Paul

Identify at least two sources of information on recommended marketing expenditure that could be used to inform the marketing budget.

In addition, identify external factors that could impact on the marketing budget. This means that you should conduct market research on trends within the industry in terms of growth and opportunities and the types of marketing that similar businesses are conducting.

4. Send an email to the CEO and Accounts and Administration Manager (your assessor)
The text of the email should be in grammatically correct English, written in an appropriate (polite, business-like) style.

It should introduce and summarise the contents of the attachment.

Attach your Marketing Budget Briefing Report to the email.

Ask for input on your Marketing Budget Briefing Report. The CEO and Accounts and Administration Manager (your assessor) will provide you with feedback for input into your budget.

5. Draft Marketing Budget
You are required to draft a Marketing Budget based on your Marketing Briefing Report and the input provided from the CEO and Accounts and Administration Manager (your assessor).
After considering the internal and external factors you are requested to develop the Marketing Budget for 2019-2020, you should use the accounting software/suitable available application used by your organisation. The income & expenses that will be impacted by inflation are as follow:
Accommodation increased by 5%
Room hire increased by 10%
Catering increased by 2%
Advertising and marketing increased by 10%
Insurance increased by 2%
Motor vehicle expenses increased by 2%
Rent & Rates increased by 5%
Desktop publishing for brochures increased by 5%
Brochure development increased by 5%
Save this document as draft Marketing Budget and send it via email to the CEO and Accounts and Administration Manager (your assessor). Your email should clearly outline the options for marketing expenditure as per your marketing budget, as well as your recommendations for the budget.
You will discuss your draft budget at a meeting with the CEO and Senior Managers. Your assessor will advise you of the date of the meeting.
6. Participate in a budget meeting.
The next part of the assessment requires you to participate in a meeting with the CEO (role-played by your assessor) and the Accounts and Administration Manager (role-played by another student to discuss the marketing budget. At the meeting, the CEO will attempt to negotiate another option for the budget. You are required to demonstrate your negotiation skills to persuade the meeting participants that your budget is the best option.
At the meeting, you will need to:
• Explain the marketing budget you have developed and the various options.
• Seek input on the budget.
• Negotiate for your budget as presented.
During the meeting, you will need to demonstrate effective communication skills including:
• Speaking clearly and concisely
• Using non-verbal communication to assist with understanding
• Asking questions to identify required information
• Responding to questions as required.
7. Revise the marketing budget
Following the meeting, revise your marketing budget to incorporate feedback from the CEO and Accounts and Administration Manager.
You are to revise your marketing budget and send it out as Final Marketing Budget within 2 days of holding the meeting. You will be assessed on meeting this timeline.
Save this document as Final Marketing Budget and send it out via email to the CEO and Senior Managers.
The text of the email should be in grammatically correct English, written in an appropriate (polite, business-like) style.
It should introduce and summarise the contents of the attachment.
8. Meet with colleagues to discuss the marketing budget.
The final part of the assessment requires you to meet with colleagues to confirm the Marketing Budget for the year.
You are also required to introduce the team to the company's Finance Policies and Procedures. This is to ensure that they understand financial management responsibilities and reporting arrangements so that the marketing budget can be accurately implemented and monitored.
These requirements form part of the company's requirements for finalising budgets.
At the meeting, you will need to:
• Discuss the overall budget allocation for marketing
• Discuss the amounts allocated to each marketing activity
• Provide an outline of the Finance Policies and Procedures.
During the meeting, you will need to demonstrate effective communication skills including:
• Speaking clearly and concisely
• Using non-verbal communication to assist with understanding
• Asking questions to identify required information
• Responding to questions as required.
• Using active listening techniques to confirm understanding.

Project Assessment 3 - Budget monitoring and review project

Addresses some elements of required foundation skills, Knowledge skills and Performance Evidence as shown in the Assessment Mapping documents

Activities
Complete the following activities.
1. Carefully read the following scenario:
Assume it is twelve months later and you are reviewing the marketing budget against actual amounts using the Marketing Expenditure Report.
Note: that the company deems a standard variance in budgets of up to 5% acceptable.
You have also been recently informed that a competitor has set up a resort in the nearby area and you are required to assess how this will impact the marketing budget for the following year.
2. Develop a Marketing Budget variance Analysis and Recommendations Report
Review the marketing budget expenditure to assess actual performance against estimated performance.
Based on your review and using the accounting software, prepare a report that shows actual expenditure against budgeted expenditure. Include graphs to make your report clear.
Save this report as Marketing Performance Budget Report.
Prepare an accompanying report, Marketing Budget Analysis and Recommendations Report, that analyses:
• Projected budget and actual budget
• Deviations from the budget
• Reasons for deviations
• Recommendations for next year's budget based on marketing performance and new competitor.
Use the Marketing Budget Analysis and Recommendations Template to guide your work.
3. Send an email to management
The text of the email should be in grammatically correct English, written in an appropriate (polite, business-like) style.
It should introduce and summarise the contents of the attachments.
Attach the following to your email:
• Marketing Budget Performance Report
• Marketing Budget Report Analysis and Recommendations

Attachment:- Prepare monitor budgets.rar