Budget Preparation

1. Budgeting and Financial Reporting
Task 3.1 Establish Budget and Allocate Funds:
Use previous years financial data provided in the scenario for ABC Company.
I. Identify the main income and expense resources.
Income Expense
Live Virtual Reception Services,
Inbound Services, Outbound Services
& Market Research for Business
Client.
Wages & Superannuation
II. Based on the scenario provided undertake appropriate research to make informed estimate
of newitem for inclusions in annual budget. List the newitems below.
 Wage increase in existing staff $ 50,000.
 Additonal Loan $ 100,000.
 Reduction in price/service.
 Increase in Advertisment Expense @ 10%.
Task 3.2 Implement Sales Budget:
A) ABC Company is increasing its advertising budget by 12 % in the next financial year. Part of
their marketing strategy is to increase sales of the outbound service by 10%each quarterfor the
next financial year.
I. Use Template2 – Calculation Worksheet (separate excel file), and prepare a simple sales
budget for the outbound service.
o Include the amount of sales and the average gross profit margin.
o Review profit and loss statements, cash flows and ageing summaries for 2018/2019.
o Consider that ABC plans to run a cost-cutting project to bring the gross profit margin for
the service to 42% from the third quarter of the financial year
Additionally:
o consider information about historical sales data
o forecast the amount of sales based on historical data and the scenario provided
o consider organisational and statutory requirements

2. Reply:
Note:
1. Increase sale of the outbound services by 10% each quarter.
2. As per Management opinion GP 'll increase by 42% from Q3. That refelects for Q3 GP will become
$31,82,599 & for Q4 it will become $40,24,677.
- I am presuming here ABC Company will enhance the Selling price/unit. Or
- Company can enhance the unit of sale.
- Second possibility is that there will be change in cost of goods sold.
II. Use the Template 2 – Calculation Worksheet provided in the excel spreadsheet and create a
profit budget for 2019/2020
Reply:

3. III. Use Template-1 to send an email to all managers to supervisors, invite them to a meeting to
discuss details of the budget and delegations with them. Attach a copy of the budget for
review.
Reply:
To: Name ofManager; Name ofSupervisors
CC: Finance Head
Subject: Budget 2019-20 for review
Dear Friends,
This mail has reference to the above-mentioned subject.
Find appended the copy of the Budget for review and further discussion. We are planning this
meeting on 12.10.2020 in the finance meeting hall. You guys are invited for further discussion
and share your inputs in this regard.
Best regards,
Name
Finance Manager
Mobile Number:
Email ID:
Special Note:- As we don’t have department wise data, wouldn’t be able to provide the micro
level analysis.
B) Conduct a brief meeting with senior management team to explain financial decisions and
outcomes of the budget clearly and use listening and questioning techniques to exchange
information and obtain agreement. This is a Role-Play in a simulated work environment.
Schedule a time with the trainer and assessor in week 5 of the classand participate in the briefing
session with the trainer and assessor. (Duration: 10-15 minutes)
During the briefing address:
 Budget inclusions
 Reporting requirements
 Financial delegations
Provide a summary ofwhatwasdiscussed during the meeting inthe space below.(100-150words)
Reply:
Budget Inclusion-This budget take care the Operating aspect- which includes the revenue and
expense numbers. Ultimately provide an overview of company function by projecting the planned
operation for upcoming year i.e. 2019-20. Cash budget- planned to have adequate funds available
and to use extra funds profitability.

4. Reporting Requirements – In this budget Manager and Supervisor devoted their time and energy
to finalise the budgeting process. This budget covers the future planning alongwith control over all
activities of the organisation. Last week I had a fruit full discussion along with the respective
stakeholders which include the managers and supervisor of departments. First of all, I connected
with the marketing team to understand whether we stand in term of sales number. In that discussion,
there was some genuine reason shared by the marketing team, on those basis sale number changed
for Q3 & Q4. The rest of the departments are in line with budget numbers.
Financial deligation- purchase contracts with material procurement, Operating expenditure will be
taken care by cost center head, Accounting head with respect to final approval. A list of delegation
will be notified to all cost centers. In signing the purchase who put the request will sign along with
cost center head.
C) After the brief meeting, you have been asked by the CEO to prepare a report and address the
following:
 What has been done or will be done to ensure that there are not opportunities for
misappropriation of funds?
 What other financial risks have been considered in financial planning and measures that
have been or will be put in place to avoid them or mitigate their effect?
 What has been planned and/or implemented to maintain an audit trail and ensure correct
financial transactions?
 What is the best-suggested approach to comply with due diligence?
Reply:
Report Summary(80-120 words):
 Issue a purchase order for purchase, check all purchases online and monitor spending,
take care accounts receivable, control the inventory and last but not least always have a
cash reserve to meet unexpected event. From signature perspective going to include four
eye principle. First signature from the person who is looking for material and second
signature from the HOD i.e. the head of department.
 Financial Risk includes the market risk, credit risk, liquidity risk and operational risk.
Under market risk we have to keep monitor the competitor to keep a close eye on
marketplace. Credit risk maintain the proper funds to meet our show at the same time
take care exigencies. Liquidity risk keep more marketable assets to meet the cash
requirement. Under Operational risks is avoid the fraud, lawsuits, and personnel issues.
 Always issue a purchase order (PO) for purchases. Keep a track of Good Receipt (GR).
Expenditure done shall reimburse only after receiving the invoices.

5.  Hire the independent internal auditor who can take care due diligence aspect.
Risk Log
Risk Description Likelihood
Rating 1-5
Potential Impact
Rating 1-5
Risk priority
Recommended risk
treatment
Opportunities for
misappropriation of
funds
2 2 1  PO along with GR
 Invoices
Financial risks 1 1 2  Tap on Cash flow and
Banks
Audit trail and correct
financial transaction
2 2 1  Internal Audit
Due diligence 2 2 1  Internal Audit
Task 3.3 Report on Finances:
The board has asked you to review the financial performance of ABC Company and explain how
the actual results compared with the budget you prepared at the beginning of the quarter. Use
provided scenario and address below requirements:
I. Identify and analyse variances (favourable and unfavourable):
 Calculate the variances using Template 2 – Calculation Worksheet
 Provide a summary of the analysis of the variances that you have identified in the space
provided below
Please note, submit a copy of the calculated variances as a separate Excel spreadsheet file
using Template2 –Calculation Worksheet
(100-150 words)
 Summary of Analysis:
Compartive with the budget there is a unfavourable trend in Sale numbers. In expense part
including the Rent, Advertising, Cleaning, Accounting Fee & Insurance shows the
unfavourable trend i.e. Actual numbers are higher comparitive to Budget numbers.
Overall Q1 perfromance through a Net Loss figure of $ (431,322).
II. Suggest changes to the budget to respond to the significant factors that have occurred in the
first quarter 2018/2019 as outlined in the scenario (Appendix 1). Prepare recommendations to
ensure financial viability of the organisation in 2020.(100-150 words)
 More negotiation required in terms of material sourcing from vendors. May be
required to add new vendors.
 While doing Revenue-Segment analysis it includes the Outbound Services shows
the unfavourable trend, require more push in tems of increasing the clients at the
same time Top line.

6.  In front of Expenses need to check the alternate aspects to reduce the expense,which
ultimately will help in increasing the Bottom line.
III. Evaluate the effectivenessof financial management processes. (100-150 words)
After analysis of Q1 profermorance,top management decided to reduce the prices at the same
time increase in advertisement cost helped in improving the top line of the company. The
additional loan taken also help in improving the working capital of company.
Q2 Budgeted Numbers: