Reference no: EM132986557

Assessment 2 Project - Plan and implement financial management approaches

Scenario

Endurance Fitness is a chain of functional fitness centres in and around Melbourne.

Read an overview of Endurance Fitness's operations and strategic goals in Appendix A: Endurance Fitness Business Plan Extract 2019.

Since March 2020, Endurance Fitness's operations have suffered greatly due to COVID-19 lockdowns enforced by the Victorian Government. The company has had to close, re-open, and once again close its gyms in response to the dynamic COVID-19 situation.

Overview of changes to operations in response to COVID-19

10th March 2020 - 30th June 2020

Gyms were not allowed to be open to public as part of COVID-19 lockdowns. Endurance Fitness began offering online classes so that members could work out with Endurance Fitness coaches from the comfort of their own homes.

Impact on income

In Q3 and Q4 of 2020, the company's income was significantly impacted by lockdowns.

• All memberships were suspended until 30th June 2020.
• A $50 per month virtual membership plan was offered to members, for 4 months. This worked out to as little as a quarter of the average membership fee.
•Approximately 47% of the company's 400 clients switched to the $50 virtual membership.
The remaining clients chose to remain on suspension until 1st July 2020, paying nothing.
•However, the company added an income stream through a program to rent out gym equipment such as weights, barbells, dumbbells, and rowers, to members, so that they can complete workouts from home.

Impact on operating expenses

In Q3 and Q4, expenses were affected as follows.

• Wages were significantly lower since the trainers, who were on part-time or casual rosters, did not have any shifts and only the three head coaches were conducting live video work outs for members.
• The Marketing Manager also took a 60% salary cut to work from home.
• Cleaning/ maintenance costs, consumables, retails stocks and merchandise related expenses were significantly lower as the gyms were closed.
• Bank fees were significantly waived as a COVID-19 response.

• The company incurred a further cost for video-conferencing software subscription, at
$279.90 per month. In Q3 the company incurred this cost for only the month of March. However, in Q4 the company incurred this cost in all months.

Endurance Fitness expects to re-open doors on 6th July 2020. At that time, the company plans to discontinue the $50 virtual membership, and resume charging clients usual membership rates.

This decision is based on communication from the Victorian Government that lockdowns will be lifted on 6th July. However, government communiqués stress that the situation is dynamic and the decision to lift lockdowns on 6th July is not absolute. The government will continue to monitor the COVID-19 situation and may change plans if required.
You are the Finance Manager of Endurance Fitness.

Based on the unexpected COVID-19 situation described in the scenario, you must formulate a contingency plan for FY2021, and revise the budget for FY 2021 (year ending 30th June 2021), to maximise the company's profits in 2021.

Before attempting this task, you must ensure you have read and understood the following:
• Business scenario highlighting COVID-19 response, given above
• Appendix A: Endurance Fitness Business Plan Extract 2019
• Appendix B: Endurance Fitness Financial Management Policy Extract (budget contingency planning)

Part A: Identify changes to financial plan and budget

You have decided to adjust the 2021 budget for 20% shortfall, based on the contingency planning guidelines in the Endurance Fitness Financial Management Policy Extract (Appendix B).

Research and answer the following questions:

1. What two contingency strategies can you implement to maximise profits in 2021?

2. Is the current 2021 budget accurate, achievable, and logical? Why is reducing the budget necessary?

3. Will income and expenses both reduce equally in the revised budget?

4. Identify three information sources you can use in developing your

Prepare your responses in a separate typed document attached to this assessment pack.

Part B: Role play - Negotiate and confirm changes to financial plan and budget

Conduct a meeting with your colleagues Vanessa Choi (Operations Manager) and Maria Lorenzo (Centre Manager - Airport West), and present your recommendations for changes to the financial plan and budget for 2021.

The aim of this meeting is to gain the team's agreement and support for the changes you are proposing.

During the meeting, you must:
• Discuss your recommendations for the 2021 financial contingency plan
• Make your recommendations for changes to the 2021 budget
• Negotiate the changes to be made by incorporating ideas from team members if they are able to provide suitable rationale for them
• Make detailed notes of changes as agreed by the team
• Summarise changes discussed and gain the team's agreement for implementing the changes
• Ensure that you use language that is suitably complex for an audience comprised of senior management

This is a role play. You must play the role of Arvin Krishnan, the Finance Manager. Your assessor will organise volunteers to play the roles of the other two managers. Alternately, your assessor will play one of the roles themselves.

Your assessor will observe, record and assess your performance using the Role Play Observation Checklist for this task.

Prior to the assessment, read the Role Play Observation Checklist to understand the skills and behaviours you are expected to demonstrate to satisfactorily complete this task.

Part C: Prepare contingency plan and revise budget

Based on the changes agreed with your team members, you must now prepare a contingency plan for FY2021.

1. Use the Financial Contingency Plan template in contingency plan for Endurance Fitness.

document the financial

In your plan, you must include the following:
• At least two risks you have identified
• At least three strategies to reduce risks and maximise profits that you have agreed with the team (including budget changes)
• At least three monitoring methods for strategy
• At least two changes to budgets agreed with team
• At least two resources required to implement contingency plan (such as human resources, technology, etc.)
• At least two methods of staff support required to implement contingency plan (such as access to specialist advice, peer support, etc.)
• At least five actions to implement contingency plan, and against each action, its priority, the person responsible for implementing it, and monitoring frequency

2. Using the template in

You must also add any line items necessary, based on contingency plan.

The Microsoft Excel template contains most of formulae you require for the budget calculation.

Part D: Role play - Present contingency plan and revised budget to team

Present your final contingency plan and revised budget to the team, to ensure that they understand:
• the budgetary constraints that will affect their job roles in 2021
• their roles and responsibilities in implementing the financial contingency plan
• the support you will offer them in implementing the plan

1. Prepare slides for a 10-minute to your team.

Your slides must cover the following elements of your contingency plan:
• Risks
• Strategies to maximise profits
• Monitoring methods
• Resources required
• Support you will provide the team in navigating this change
• Implementation Action Plan
• Revised budget, with an explanation of assumptions and changes Your
2. Make your presentation to your team. You will have no more than 10 minutes for the presentation.

This is a role play. You must play the role of Arvin Krishnan, the Finance Manager. Your assessor will organise your classmates to play the roles of the other managers. Your assessor will also organise a meeting space with project and computer for your presentation.

Prior to the assessment, read the Role Play Observation Checklist to understand the skills and behaviours you are expected to demonstrate to satisfactorily complete this task.

Ensure that in both your slides and your presentation, you use language that is suitably complex for an audience comprised of senior management