Manage Budgets and Financial Plans Assignment

Purpose of the Assessment - The purpose of this assessment is to assess the student in the following learning outcomes:

• Plan financial management approaches
• Implement financial management approaches
• Monitor and control finances
• Review and evaluate financial management processes

Task 1: Cash budget: service industry

Dr Healer is the manager of a medical clinic and is concerned about the cash flow shortages which arose somewhat unexpectedly recently in the practice. At 30 June the bank account showed an overdraft of $50 000. Dr Healer believes that the cash flow problems stem from lack of attention to outstanding patient accounts and the purchase of expensive medical supplies in large quantities at irregular intervals.

The good doctor has asked you to help design a spreadsheet to investigate the cash flow problems. You discover the following data:

Revenue:

May - $120 000 (actual)

June - $145 000 (actual)

July - $50 000 (budget)

August - $150 000 (budget)

September - $140 000 (budget)

Past experience shows that 40% of the consultation revenue is collected in the month of the visit, 30% in the following month, 20% in the second month after the visit, and 10% was never collected. From July new credit policies are expected to result in a collection pattern of 60%, 20%, 10% and 10% respectively.

The cost of medical supplies was $40 000 in June and is budgeted for $60 000 in August. Half of the suppliers' accounts are paid in the month incurred and half in the following month. Salaries of $40 000 per month and other costs of $25 000 per month are paid in the month incurred.

Required:

1. Prepare a cash budget for the 3 months, July to September to examine the cash flows projections (Use the spreadsheet template to prepare the cash budget).

2. You are aware that there are some suppliers' payment due in July and August. What relevant personnel you are required to discuss/negotiate the possible cash shortfall?

3. What possible contingency plan you can implement to avoid the forecasted cash flow shortfall?

Task 2: Alternative debt collection policies

As the manager of Corby and Danes Ltd, you are concerned about the current collection policy from credit customers.  The current policy is that all sales are to be made on credit, with the expectation that 70% of all accounts receivable are collected in the month immediately following the sale:  20% in the second month, 8% in the third month, and the balance written off as bad.

The actual sales for the four months January to April were as follows: January $40 000; February $50 000; March $60 000; April $60 000

The forecast sales for the next four months are: May $70 000; June $80 000; July $80 000; August $80 000

You need a report that will show how much cash you can expect to collect each month from accounts receivable for the period February to August.  You also like to know what the cash flow patterns would be if either of the two policies below were to be adopted from now (ie from May) on.

Policy 1: 80% of the accounts receivable to be collected in the month following the sale, 10% in the second month, 8% in the third month and the balance written off as bad.

Policy 2: 50% of the accounts receivable to be collected in the month following the sale, 40% in the second month, 9% in the third month and the balance written off as bad.  This policy will change the sales forecast as follows: May $80 000; June $90 000; July $100 000; August $100 000

Required:

1. Show what the existing report on cash collection from accounts receivable looks like. (Use the spreadsheet template to prepare the cash budget).

2. Show how the additional reports revealing the cash flow situation under the two proposed policies would look (Use the spreadsheet template to prepare the cash budget).

3. After analysing the data which policy you would recommend to improve the collection process for the month of May, June and July?

Task 3: Analysis of Collection Schedule, Cash flow statement and implementing financial management process

T Boyes & Co., a manufacturing company, need to produce a cash flow budget as part of an overdraft application with their bank. The following are some of Stock's budgeted figures:

Budgeted cash at bank on 1 January is $7590.

Though credit terms of sale are payment by the end of the month following the month of supply, Stock & Co. can expect 80% of the sales to be paid on the due date, with the remaining (20%) being paid during the following month. Creditors are paid during the month following the month of supply. Wages are paid in the month they are owed.

Required:

1. Utilising the following tables for format, prepare a cash budget for the quarter 1 January to 31 March 20XX.(Use the spreadsheet template to prepare the cash budget).

2. Managers of what divisions of T Boyes& Co. manufacturer are required to be disseminated about the forecasted financial plans? List the name of the divisions.

3. What contingency plan can be implemented to rectify the errors and achieve required financial objectives (Getting approval of the overdraft approval)?

4. What organisational protocols should be followed for reporting if loss is inevitable?

5. What support can be provided to the team members to ensure that proper management of finances is in action?

Attachment:- Assignment File.rar