Reference no: EM132194069
Purpose
You will demonstrate your skills and knowledge by completing a scenario-based project.
Task overview and context
You receive an email from Mike Booth, Managing Director: Financial Operations.
Subject: Preparing for the new budgeting cycle
Hello,
The new budgeting cycle is about ready to begin. It is a hectic time of the year because we need to have all of the organisation's budgets in place by the beginning of the last quarter in the financial year.
As the Finance Manager for BizOps Enterprises, much of this workload will be allocated to you.
I have provided a list of tasks that you will need to perform throughout the budgetary cycle in the ‘Instructions to the candidate' section that follows.
Regards,
Mike Booth
Managing Director: Financial Operations
Instructions to the candidate
You will need to access and read the following BizOps Enterprises policies, procedures, reports and templates:
• Budgeting and financial planning procedures
• Company business plan
• Financial reports
• Cashflow worksheet and assumptions
• Profit and loss worksheet and assumptions
• Balance sheet worksheet and assumptions
• Risk management policy
• Risk management procedures
• Risk management plan template
See the ‘Resources required' section for how to access these documents.
Complete the following tasks.
1. Access and read the budgeting and financial planning procedures to familiarise yourself with the responsibilities and procedures of the budgetary process.
Using this document as a guide, prepare a plan and time line with critical dates for preparation of the organisation's budgets for the next financial year (2016/17). Assume that it is now early March 2016.
2. Access and read the company business plan. Note the business goals that are listed to maintain financial stability. Put the financial information into a spreadsheet and prepare a histogram that clearly shows the financial plan for the next five years.
Use the histogram and the supporting dot-points from the business plan to prepare a one-page document that promotes the direction that future budgets will need to take.
3. Access and read the financial reports, which have been collated from the organisation's financial system. Using these reports, prepare a report on the organisation's current financial position to guide the planning for budget preparation. This report needs to:
• demonstrate analysis of the:
net profit margin
net profit ratio
cashflow return on assets
return on owner's equity ratio
• demonstrate horizontal analyses of the areas of the business that have the greatest impact on the business's profit or loss
• identify major variances in the profit and loss budget and explain the likely impact on the business's annual performance
• show the organisation's current position in relation to the previous years by summarising the cashflow trends
• contain a list of recommendations for ongoing maintenance of financial viability.
4. Prepare preliminary 2016/17 budgets for the whole organisation that align with the business plan objectives and will set a framework for the budget committee to use through the budgetary development process.
The base information, worksheets and underlying assumptions for each preliminary budget have been provided. It is preferable to develop the budgets using spreadsheet software. The budgets that you need to prepare include:
• a forecasted cashflow budget for the 2016/17 financial year
• a forecasted profit and loss budget for the 2016/17 financial year
• a forecasted balance sheet as at 30 June 2017.
5. Access and read the risk management policy and risk management procedures. Identify and assess key financial risks to the organisation in achieving its objectives in the 2016/17 financial year.
Develop a risk management plan, using the template, with appropriate contingency responses for the factors that are identified as high risk. The risk management plan should also contain contingency responses in the event that the identified risk controls will not be sufficient to manage the issues. Ensure that suitable triggers are identified to determine when contingency responses should be implemented.
6. Prepare a risk management plan to ensure that the risk of funds misappropriation and discrepancies is minimised. This risk management plan should identify the internal controls relating to funds misappropriation and discrepancies.
7. Prepare a checklist that can be used to review the effectiveness of BizOps's budgeting and financial planning procedures and helps to ensure compliance with organisational and statutory requirements.
8. Develop and provide an audit checklist to guide staff in collecting and assessing information to review financial management software, managing risks of misappropriation of funds, ensuring systems are in place to record all transactions, maintaining an audit trail and complying with due diligence.