Reference no: EM133002926

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.