Project Assessment Task 2

The following task must be conducted in a safe environment which could be your own workplace or at
the institute’s simulated workplace where evidence gathered demonstrates consistent performance of
typical activities experienced in the financial management field of work and include access to:
• Office equipment and resources
• Samples of workplace documentation, including contractual and procurement policies
• Financial data and documentation
• Case studies and, where possible, real situations
For this task you are to complete the following steps to demonstrate your ability to monitor manage
financial resources over a full planning-cycle.

PART A
Prepare for the task by completing the following steps to forecast the future financial resource needs:

• Search and take account of the current financial systems and documents of the entity
(the company you have chosen and the industry)

• The type or name of financial system used (E.g. Budget, profit & Loss statements,
Cash flow statements/ balance sheet)

• What are the areas it covers, e.g.: reporting, payroll, sales, receivables, payables etc.

• How the organisation uses the system to process information through strategic and
tactical management to develop actual operating procedures.

• Do a forecast and prepare an analysis on current financial data, systems requirements

and write a short report

Forecast and document the data and business system requirements

• What are the reports prepared by the business need to be described, For
example:

• Balance Sheet (The 2019-20 Provided),

• the Budget (2019-20 Provided)?

Using them analyse the budget variances and describe the reasons behind the variance.

Analyse the forecasted requirements. Provide the analysis

• Following the analysis prepare a complete financial plan which include budget forecasts
following the organisational and statutory requirements

Forecasting will help managers cope with seasonality, sudden changes in demand levels, price-
cutting manoeuvres of the competition, strikes, and large swings of the economy. In determining
which forecast techniques you need to apply you need to analyse the forecast requirements. This
means that you need to decide what you want to forecast including:

• Sales

• Expenses

• Cost of goods sold

• Cash flow

• Labour costs

Budget forecasting (Prepare using the Budget Template

provided for 2020-21)
Budget forecasts are essentially the predictions of a businesses’ income and expenses and are
used to create projections for a business.
The relevance of historical financial reports to forecasting (use the 2019-20 budget figures)

Statutory requirements that are relevant to financial management include those relating to:

• Internal control procedures – this is a process for assuring the achievement of an

organisation’s operational objective. It is concerned with the reliability of financial
reporting and compliance with laws, regulations and policies

• Quotas and types of transactions – these are related to government subsidy rules
and consumer protection laws

• Reporting of duty, excise and other overseas government charges

• Reporting periods – such as Australian Taxation Office reporting requirements

• Audit requirements

• International, national and local trade and trade agreements – such as those
 impacting on the way in which goods and services are transported

• Prepare a brief report to the management making recommendations on budgeted

expenses or any changes which need to be made to the budgeted projections.
REPORT
Budgets should be reasonable, and the projections applied to the budget in terms of expenditure
and income must be achievable. Once you have cited a budget, you may need to prepare and
present recommendations for budget or for modification of existing projections. These
recommendations can relate to issues such as:

• Costs identified in the budget are unrealistic

• Expenditure timing may be too quick

• Categories should be added or removed from the budget

• Existing projections are unrealistic

• Income is too low or higher than projected

PART B
Analyse the current asset performance and capacity by performing the following steps:

• Using standard accounting techniques, conduct a balance sheet analysis analyse the
costs of assets and liabilities, and the returns from them, to identify and document the
extent of debt and equity financing
When analysing the cost of and returns from assets and liabilities you need to apply accounting
techniques. An analysis of the assets, liabilities, and equity of a company can be conducted through
a balance sheet analysis. This analysis is conducted at set intervals, such as annually or quarterly. The
process of balance sheet analysis is used for deriving actual figures about the revenue, assets, and
liabilities of the company.
Performing a balance sheet analysis includes the following steps:

The main steps include:

• The primary step involves adding up liabilities and the paid-up equity share capital. The
sum must tally with the sum of total assets. After the process of tallying is done,
contrast the total assets with total liabilities.
• The next step involves looking at the current assets and liabilities. Sometimes, it is
considered as a good sign to have more unsecured liabilities.
• Another important step is calculating the ROA by dividing the net income by assets.
• The fourth step involves special concern for copyrights and patents. It is important to
consider the ratio between invested amount for research and the consequent returns.
• Next step involves calculating the debt asset ratio by dividing total liabilities by total
assets. A lower liability dimension reflects a better performance by the company.
• Another step includes estimating the receivables turnover ratio which signifies the
relation between investment in sales and money receivable. A better financial status is
reflected in high amount of money receivables.
• Another important ratio is the inventory turnover ratio which indicates the company’s
capability of producing goods with available assets.
• The final step includes analyzing other features of the company including goodwill,
credit ratings, and current projects. This analysis is helpful in evaluating the company
activities in near future.
Assets and liabilities and equity

• Consult your organisation staff or trainer and students if done as a simulated workplace
task to find out the responsibilities of the management and legal requirements for
financial reporting.

Lodging reports with the Australian Security and Investment Commission. The reports that require
lodging are as follows:

Document Section of the Corporations Act

Statement of financial position as at the end of the year (if 295(2) & 296(1)
consolidated accounts are not required by Accounting
Standards)

Statement of comprehensive income for the year (if 295(2) & 296(1)
consolidated accounts are not required by Accounting
Standards)

Statement of cash flows for the year (if consolidated accounts 295(2) & 296(1)
are not required by Accounting Standards)

Statement of changes in equity if consolidated accounts are not 295(2) & 296(1)
required by Accounting Standards)

Consolidated financial statements, if required by accounting 295(2) & 296(1)

standards– which may include parent entity financial
information where [CO10/654] conditions are met.

Notes to financial statements (disclosure required by the 295(3)

regulations, notes required by the accounting standards, and
any other information necessary to give a true and fair view)

Directors' declaration that the financial statements comply with 295(4)

accounting standards, give a true and fair view, there are
reasonable grounds to believe the company/scheme/entity will
be able to pay its debts, the financial statements have been
made in accordance with the Corporations Act

Directors' report, including the auditor's independence 298-300A

declaration

Auditor's report 301 & 308

1

Management responsibilities
When establishing the responsibilities that management personnel have with regard to reporting it
is important that this is done in consultation with relevant staff within the organisation to ensure
that they reflect the organisation's values and goals.

Management responsibilities may include:

• Establishing and implementing organisational policies

• Following organisational procedures

• Following the guidelines with regard to reporting

• Ensuring that reporting is ethical

• Ensuring that reporting meets professional standards

• Carry out an analysis on the financial reports and supporting notes, then write a short
report on the findings.

• Do an evaluation and present in a report on the impact that financial decisions made by
the management will have on the organisation’s ability to meet its planned goals and
objectives.
For example, your organisation may have not met its budget for costs in relation to a particular
product, and the decision to invest further funds into that product could have implications for other
products that the company develops.

Finance and investment decisions

The type of decisions you might make that have financial implications could include:

• Investing decisions – this includes both short-term and long-term reallocations of

company funds. Short-term investment decisions include the level of current
assets necessary for day-to-day operations; on the other hand, long-term
investment decisions could refer to fixed asset purchases, mergers, acquisitions
and company reorganisations

• Financing decisions – this decision is dependent on the size of the company, the
finance options available to the company and the needs of the company. When
making financial decisions, you need to consider the best finance mix or capital
structure for the company. The important elements to consider include:

o The nature and riskiness of the business operation

o The capital structure (debt-to-equity ratio) desired

o The length of time that assets will be needed

o The cost of alternative financing 2

• Dividend policy – these decisions require that the company choose between the
following three dividend alternatives:

o The stable dividend policy

o The constant payout ratio

o The regular low dividend policy

The policy chosen should be the one that maximises the value of the company’s stock. To determine
this, you would need to compare the effects of different policies on the company’s valuation.

2
http://www.flexstudy.com/catalog/schpdf.cfm?coursenum=96088
When analysing and evaluating the effects of the financial decisions, you will need to review the
following information:

• The amount that the financial decision cost the organisation in terms of:

o Expenses such as time and effort of personnel

o Outlay of finances in terms of cash investment

• The financial benefits of the financial decision including revenue or capital growth.

PART C
Perform the following steps to set the business targets and compliance mechanisms:

• Collect comparative and trend information from the industry and computer systems,
then use this to confirm and document needs for future budget and associated resources

The process of collecting comparative information involves the production of statements that reveal
information for more than one accounting period. The financial statements that may be included in
this package are:

• The income statement

• The balance sheet

• The statement of cash flows

Comparative statements provide a comparison of the company’s financial performance over

multiple periods. They can also provide a comparison of expenses to revenues and the proportion of
various items on the balance sheet over multiple periods.

Trend information involves collecting information to spot a pattern in the information. It is

commonly used to predict future events. It can involve mathematical techniques that seek to
identify future expenditure based on past expenditure.

Comparative and trend information may include:

• Availability of external funding sources – this provides an indication of additional

finance that is available if required for future budgeting.
 • Benchmarks as agreed – the benchmarks provide a standard that has been set
and whether these have been met.

• Business activity – a comparison of business activity can indicate the level of

activity that may be included in the budget.

• Expenses – the comparison and trend of expenses provides information for

forecasting the expenses included in the budget.

• Liquidity – this provides a good indication of the organisation's ability to turn

assets into cash when required.

• Profitability – this provides an indication of how profitable individual products or

services may be.

• Sales – comparison and trend of sales information provides an indication of

whether sales and market share is increasing which can be incorporated into the
budget.

Utilizing comparative and trend information is important to confirm the needs for
future budget and associated resources. In determining categories for the budget,
you need to compare to previous years budgets and classify and code the data
you have collected in accordance with the organization

• Complete negotiations to secure resources in accordance with relevant short-term and

long-term needs. Document the outcomes of these negotiations

< Business Name> , just like other Organisations has finite access to resources. As a result, you
cannot be guaranteed the resources that you require to meet your short-term and long-term needs.
Therefore, you may need to negotiate to find a way that every department gets its due share.

In order to complete negotiations to secure resources, you need to present a resource proposal, or
business case, which includes a description of the resources that you are requesting to be assigned
to your project or department and a description of how you propose to utilise these resources.

Negotiations are usually made up of the following stages including:

1. Preparation – Plans set out for a meeting with all the parties concerned.

2. Discussion – Each party puts forward their point of view, and try and seek areas of
 common interests and identify differences.

3. Clarification of goals – This involves ensuring that the overall goals, interests, and
points of view of each party are clarified.

4. Negotiating towards a win-win outcome

5. Agreement – Once negotiations have been finalised; Agreements need to be

tabled

6. Implementation of a course of action

Effective negotiating may result in parties identifying the following:

• The priority of the resources to meet the organisations overall objective

• Opportunities to share resources to meet the needs of all parties

• Maximise the organisation’s performance by allocating the required resources against
the budget. Document this resource allocation, and maintain accurate and up-to-date
records of the resource allocation and usage throughout the cycle according to
organisational and legislative requirements

Budgets have two main functions:

• Estimate as realistically as possible the cost of completing the objectives of the

project or department.

• Provide a means to monitor the financial activities of the project or department.

Allocating resources against the budget involves listing all the categories that are required.
Commonly the following type of categories may be listed:

• People

• Travel costs (such as airline tickets)

• Vehicles (such as petrol, servicing, registration)

• Equipment (such as machinery and computers)

• Consumables and supplies

• Subcontracts

The budget will place a financial value of each of the resources and identify how much will be
allocated to the resource. When allocating resources, the following must be considered:

• The minimum amount of the resource that is required – this will determine how
much is necessary.

• How much can be budgeted toward the resources – understanding the amount
available will provide an indication of the amount that can be allocated?

• What are necessities and therefore priorities for the organisation – there will be
resources that must be allocated against the budget as they are necessities for the
 organisation to operate.

• What may need to be achieved to increase the amount available for the resource
– there may be actions that can provide additional budget toward resources, such
as an increase in sales or capital investment.

Maintaining accurate and up to date records of resource allocation and usage is an important part of
financial management. There are several different records you need to keep in order to maintain
up-to-date information about resource allocations.

These include:

• Details of stock on hand - at the beginning and end of the financial year
• A list of debtors and creditors - for the entire financial year
• Capital gains details - records of asset purchase dates and agreements, records of sale
etc.
• Depreciation details - original purchase agreements or tax invoices, a depreciation
schedule
• Expense records - receipts, cash registers, copies of statements and invoices, credit card
documentation, details of payments by cash etc.
• Staff and wages details - full details of wages, employment contracts, tax deducted,
fringe benefits, superannuation, etc.
• Basic accounting records - stock records, accounts receivable, accounts payable, other
records
• Agreements - sales and purchase contracts, loan agreements, rental agreements, lease
agreements, franchise agreements, sale and leaseback agreements, trading
agreements with suppliers, legal documentation
• Develop, review and document the management systems which enable timely collection,
management and processing of information

A management system is made up of a framework of policies, processes and procedures that ensure
the organisation can fulfil all the tasks required to achieve its mission and objectives.

Reviewing the management systems involves undertaking an audit of the organisation's policies and
procedures to ensure that they afford and inform timely collection and management and processing
of information.

Reviewing and developing policies

Policies provide consistency and direction within an organisation, enabling everyone to understand
the expected standards. They also commonly encompass legislative compliance matters and help
support the promotion of positive work cultures. Policies generally include:

• Purpose or intent of the policy

• Scope (what areas or staff the policy covers)

• Responsibilities for implementation

• Applicable legislation, standards, and code of practice

Reviewing and developing policies to ensure that management systems inform timely collection and
management of information requires that you ask the following questions:

• Do the policies ensure that the collection of information responsibilities are

allocated?

• Does the management system provide the responsible parties with access to
information?

• Do the procedures enable the parties to hand over the information in an accurate
manner?

• Is the information collected according to the policies, reliable?

• Is management informed of who is responsible for what pieces of information?

• Accurately complete the records of the budget performance and expenditure, ensuring
to report these in accordance with organisational procedures and statutory
requirements

Regular monitoring of budget expenditure is important both to verify the expenditure against the
targets assigned but also to identify changing patterns or circumstances that need corrective actions.
In most organisations, there are procedures in place to monitor the progress of the budget at regular
intervals such as on a monthly basis. To monitor budget expenditure, you need to have the following
types of information:

• Full year budget for the activity and profile for the year to date. Planned
expenditure patterns should be taken into consideration in this budget report
including staff costs and non-staff costs which may peak and trough at points in
the year

• Actual expenditure to date - the amount that has been spent over a period of
time.

• Future expenditure commitments - the amount that needs to be allocated for

predicted expenses.

• The balance of annual budget remaining.

• Doing a forecast outturn - Expected position against the budget at the end of the
year taking into account all anticipated expenditure

• Explanation of any positive or negative variances when comparing expenditure

and forecast outturn to the budget

• Action plan in order to address negative variances

According to statutory and regulatory requirements, there are a number of reports that must be
provided to ASIC. These reports include completion of forms that have been developed by ASIC as
part of the lodgement process and can be found at the following web link:

http://www.asic.gov.au/regulatory-resources/regulatory-index/financial-reporting/

Recording sales figures, revenue, and expenditure

Income and expenditure statement
This is a statement of actual income and expenditure at a particular point in time.

The cost report

The cost report is based on information provided in the Income and Expenditure Statement and the
original budget.

Cash flow report

Cash flow is the rate at which expenses are made against income.

Purchase Orders

Invoices

Petty cash
You may need to allocate a petty cash ‘float’ to each department. You don’t really want to have to
write out cheques for minor items like sticky tape and coffee.
• As required, evaluate and improve budget audit mechanisms and compliance
requirements. Document all evaluations and provide the updated and improved
mechanisms and compliance requirements

The process involved in auditing a budget requires that the procedures applied in the development
of the budget, including resource allocation, be evaluated and recommendations for improvement
are made.

Financial audits involve applying an audit methodology such as interviews with staff and detailed
examination of the budgeting policies and procedures.

The type of questions that audits tend to examine include:

• Are the budgets integrated with the business plans?

• Are the budgets based on output delivery targets?

• Is there a dedicated budget team?

• Are adequate guidelines produced?

• Are responsibilities appropriately allocated?

• Are budgets adequately managed?

• Are budgets adequately reviewed?

• Is monitoring of revenue and expenditure against budgets adequate?

Auditing a Budget
Auditing generally involves checking financial records to determine their accuracy. Auditing a
budget is more specific, it involves checking to see if the figures represent a realistic view of the
business's operations.

The bigger the organisation, the bigger the budget. The bigger the budget, the more potential there
is for incorrect estimates in the budget figures. This situation makes auditing the budget harder,
particularly if the data is incomplete, missing or unavailable.
Before auditing the budget, you should have the following information from the past three to five
years available to you:

Once budgets are set, it is important to regularly measure and control the actual income and
expenditure to ensure that the budget does not blow out.

Legislative Compliance requirements :

Most companies in Australia will conform to statutory requirements governed by one or more of the
following authorities:

• The Corporations Act 2011 (supervised by ASIC)

o The Corporations Act 2011 is an act of the Commonwealth of Australia

that sets out the laws dealing with business entities in Australia at federal
and interstate level.

• Australian Securities and Investment Commission

o The (ASIC) is an independent Australian government body that acts as

Australia's corporate regulator. ASIC's role is to enforce and regulate
company and financial services laws to protect Australian consumers,
investors and creditors.

• Australian Taxation Office

o The (ATO) is an Australian Government statutory agency and the principal

revenue collection body for the Australian Government. The ATO has
responsibility for administering the Australian federal taxation system and
superannuation legislation.
• Australian Securities Exchange

• Financial Reporting Council

o The Financial Reporting Council (FRC) is responsible for overseeing the

effectiveness of the financial reporting framework in Australia. Its key
functions include the oversight of the accounting and auditing standards.

• Australian Accounting Standards Board

o The AASB is an Australian Government agency that performs several

functions under the Australian Securities and Investments Commission Act
2001.
PART D
Manage the financial risk over the full planning-cycle by completing the following steps:

• Identify and analyse financial risk factors. Provide the findings of the analysis
• Manage and document the financial risks as they arise, according to organisational
policies and procedures
In documenting financial risks, you need to follow the procedures and policies in place in your
organisation. Many organisations have risk management committees made up of representatives of
various departments within the organisation. The financial risk management policy should include:

• The rationale for managing risk

• The objectives of risk management

• The links between risk management and the strategic plans of the company

• Guidance on what is considered acceptable risk

• Advise on who is responsible for managing risk and the support available to them

• The level of documentation required

• Plans for a review of the risk management policy

In most organisations, you will be required to complete a report outlining the financial risk that you
recommend that your organisation undertake. The reports should outline:

• The details of the financial risks undertaken

• The methods adopted to mitigate the risks

• Alternative courses of action to avoid the risk

• The company areas that the risk might affect

Many companies have specific communication policies that outline how certain decisions will be
communicated to the rest of the company. It is important to note that the financial reports are a
method of communication and should be written clearly and according to accounting principles.
• Develop and implement procedures to regularly review the financial risk management
activities. Provide the procedures and document the regular reviews conducted

Not managing risks, could expose organizations to:

• Unacceptable levels of financial loss relative to strategic and operational targets

• Breaches of legislative or regulatory non-compliance

• Damage to the company’s reputation

• Unacceptable interruption to the provision of services to customers

• Damage to relationships with its customers and key stakeholders

• Health and safety challenges

Implementing financial risk management procedures, therefore, involves undertaking risk

identification, assessment, and treatment. This includes risk ownership by the appropriate
management when issues are allocated for risk treatment.

The activities involved in financial risk management processes, can include researching the risks
which involve the following:

• Speaking to the people who identified the risk

• Gathering statistical evidence and other numerical data to assess the extent of the
identified risks

• Asking people involved in the relevant work area to explain how the risk impacts
on them and the way they operate

• Reviewing historical information that contains information about the risks and
their impact

Risks are generally quantified in terms of the likelihood that they will occur. This is known as
probability and is based on chance occurrence.
The impact or consequence of risk is another method used to measure risks and relates to the
implications if the risk eventuated

Understanding the magnitude of the risk you have identified should involve the following factors:

• Consider the effect of a risk on the total organisation rather than just on the work
area relating to the risk category

• Consider the time delay that might occur if the risk occurs. Time delay is a
consequence that may not be obvious but can have a flow-on impact on other
aspects of the organisation

It is important to combine the probability and impact assessments together when analysing the level
of risk that a situation causes.

Consider the following table that provides a rating for the combination of these two elements:

Depending on the nature of the risk there are a number of different ways in which we can respond
to risk.

• Avoid the risk – otherwise known as removal of risk or risk prevention; this
involves working on altering your project plan so that the circumstance that may
give rise to the risk no longer exists

• Risk mitigation – otherwise known as risk reduction involves finding ways to

reduce the risks
• Transfer the risk – moving the impact of the risk to a third party

• Risk deferral – deferring aspects of the plan to a date when the risk is less likely to
occur

• Risk acceptance – dealing with the risk as part of the contingency rather than
altering the plan
PART E
Perform the following steps to monitor compliance with the financial projections:
• Identify and document the deviations from budgets that generate an adverse effect on
the budget objectives
A variance is a difference between actual results and planned results. Variance analysis is often used
to evaluate performance; variances can be favourable or unfavourable. Measuring the variance is a
fundamental control tool in budgeting. The variance can be measured in different ways, including:

• Units

• Dollars

• Percentages

The analysis will reveal whether the variance is beneficial or if it requires investigation because it is
problematic.

Unfavourable variances (U) can be further classified into:

• Cost variance caused by the unit cost prices being higher than estimated

• The turnover of stock being higher than estimated

• Sales variance where sales prices were lower than forecast

• The number of sales was lower than expected

• The sale of different products was fluctuating from the sales history

If a variance has occurred, you will need to investigate the reasons why this happened.

Backtracking through the process can often identify the causes of variation. In some cases, the
actions of a department or a combination of personnel and departments may be responsible for the
variance. It is important to analyse this carefully before making any adjustments to the budget or
taking corrective action.
Using financial reports to identify variations
Financial reports provide information that can be used to determine variations in the budget. These
reports are often read and analysed in comparison with other reports.

This is usually done with budgeted figures, and actual figures are taken from the Cash Flow Budget,
the Profit and Loss Statement and Balance Sheet respectively:

• The Cash Flow Budget is examined to produce budgeted figures.

• Profit and Loss Statements and Balance Sheet provide actual figures

• The difference between budgeted figures and actual figures will reveal variations,
which may be deemed to be favourable or unfavourable

• Promptly develop and document action plans to remedy significant deviations from
budget objectives and projections

Modifications to budget & plan

Revision of the budget and plans is often required to either fine-tune the requirements or to change
direction based on the previous monitoring indications.

Revision can be for one or a combination of factors, including:

• Inappropriate initial budgeting/planning requirements

o - budgets set too high or low which are soon shown to be unrealistic

• Poor management practices

o - poor monitoring, so a result is now unavoidable

• Unforeseen changes in the marketplace

o - new technological improvements to a product range, political instability,

unexpected weather conditions
The process of revision my include looking at:

• Proposed trends

• Budgetary/financial extensions

• Historical data of previous situations

• Marketplace information

• Strategies and alternatives plans/budgets

Developing an Action Plan

If you have identified a deviation from the budget, it is important to implement an action plan to
address the issues. An action plan is a document that lists the steps that must be taken in order to
achieve a specific goal. It also provides information and clarifies what resources are required to
reach each goal and determines a timeline for when specific tasks need to be completed for
achieving each goal.

Developing an action plan involves a number of steps including:

• List the tasks that you need to complete to accomplish the budgets objectives.
This might comprise of finding alternative suppliers of material required to
produce the company’s product.

• Look at each task in more detail and match the work with the skill set of the
members of your team in order to delegate each task.

• Determine the resources you need to address each task

• Determine the timeline you need to have each task completed by

• Review your action plan once all of the tasks have been completed to ensure that
you have met the objectives.

You need to check that the budget forecast avoids the deviations you identified
previously now that you have implemented your action plan
• Monitor and review the financial documentation against organisational objectives,
revising and renewing the budget priorities as required to meet the operational
contingencies and risk management, and managing the costs to targets set in the budget.
Document the monitoring, managing, and reviewing activities, and provide all the
revised/reviewed budget priorities

Operational contingencies and risk management processes may arise and require a review of budget
priorities. Developing a plan to address risks could include:

• Clarifying the organisational goals and objectives

• Defining the time periods

• Identifying the trigger to contingency plans

• Determining resource restrictions

• Reducing and managing risks

• Identifying operational inefficiencies

Monitoring to meet contingencies

.Key processes to effectively manage approved budgets include:

• Monitoring and reporting against internal budgets on a consistent and regular

basis

• Revising the internal budget through a controlled and coordinated process

• Forecasting to manage gaps between budget estimates and actual results

• Reviewing and improving internal budget processes by monitoring the accuracy

and timeliness of budget setting processes
The best way to monitor business expenditure is to have it recorded on your computer. There are
many software programs specifically designed to help monitor money in and money out of the
business. In larger organisations, you will always have a computerised system for monitoring.

you will need separate documents for each specific type of transaction, to provide information and
ensure control.

Financial transactions include:

• Cash sales and purchases

• Purchases of business assets

• Petty cash

• Cheque purchases

• Credit card sales and purchases

Manage costs to targets set in the budget
Cost management is a process that involves planning and controlling the budget. It is a form of
management accounting that allows the company to predict expenditures that are impending and to
help reduce the change of going over budget. Expected costs need to be calculated both within a
projects period as well as before a project commences. It is important to record all expenditure to
make sure that they stay in line with the cost management plan. After the project or year is
completed the predicted costs and actual costs can be compared and analysed, helping future cost
management predictions and budgets.

Businesses need to ensure there are effective means of monitoring and reporting of budgets. In
order for this to occur the following needs to take place.

• Develop and implement a budget timetable.

• As a minimum, these reports need to be developed and circulated monthly,

although more regular timeframes often exist.

• Budget holders need to be seen as the persons accountable for taking action
whilst it may actually be performed by less senior managers within the business.

• The monitoring of reports needs to include statements of actual expenditure and

forecasts of expenditure to the year.