Manage Budgets and Financial Plan 3 (1)

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Manage Budgets and Financial Plan 3 (1)

BSBFIM501 Manage Budgets and Financial Plans

Assessment 3

Variance Report

Explanation of Variance Report

Variances are the difference between budgeted amounts and actual income or expenses. People can use variance reports to make changes in financial forecasts and monitor the performance of a business or organization. Based on the variance report of Big Red Bicycle, it can be observed that the total profit of the business was lower than expected. This is because the total revenue was lower than expected and the total expenses were higher than expected. This happened in every quarter except in the Third Quarter when there was an profit higher than expected.

The main factors that cause this variance are sales forecasts and commissions. Both these revenues are generally lower and make a large difference to the total revenue. Other expenses are also affecting the variance slightly such as travel expenses, office expenses, repairs and maintenance and marketing expense. All these expenses add up to a significant amount of variance that causes the total profit to be much lower than budgeted.

Contingency Plan

The purpose of a contingency plan and budget is to deal with unexpected financial problems that arise suddenly. Contingency budgets are different from long-term financial planning, such as the planning and saving you need for retirement. Contingency planning prepares for things such as reduction in income, a sharp reduction in the value of your assets, unforeseen maintenance expenses or unexpected equipment expenses. When one of these situations arises, you’ll be able to implement a prepared contingency budget, altering your spending and saving to account for your business’s new financial picture.

Contingency Plan

Company Name: Big Red Bicycle PTY Ltd

Person developing the plan:

Name: Manager

Position: Financial Management

Modified implementation plan

The first thing I would change about the budget is the information and format of the budget. It is a requirement of the budget to state the name of the employee who was prepared the budget. The Budget must also state the cost centre which it was prepared for. Without this, the budget is less useful. The time of the budget and the quarterly months should also be explained. The budget would start in July 201X and finished in June 201X. The quarters are not specified and this can cause confusion, specifically when there are differenced in the quarterly budgets.

Any assumptions that were made about the budget must be stated...

Manage Budgets and Financial Plan 3 (1)
Last updated: Jul 2022

Page 1

at the end of the budget or in a different document as there are many discrepancies and factors that would affect the accuracy of the information. This should also talk about any estimation that were made and what the estimations were based upon.

It was noted that the Q3 has more sales than the other quarter years (Q1, Q2 and Q4). This means that the company is more popular during the Q3 period. The company should either spend more money to increase the popularity during the Q3 such as increase marketing or try to increase the sales in the other 3 quarters by spending more money in the Q1, Q2 and Q4 period. The budget should be spread evenly unless the company has specified the increase in a Quarter year. The marketing should be lowered overall because it is too high. This company that is quite small should in the market, should not be spending so much to market their products. The marketing should gradually increase customers and this means not to spend so much.

  • change about the budget is the information and format of the budget
  • state the name of the employee who was prepared the budget.
  • state the cost centre which it was prepared for
  • The time of the budget and the quarterly months should be explained
  • The quarters are not specified and this can cause confusion, specifically when there are differenced in the quarterly budgets.
  • Any assumptions that were made about the budget must be stated at the end of the budget or in a different document as there are many discrepancies and factors that would affect the accuracy of the information.
  • This should also talk about any estimation that were made and what the estimations were based upon.
  • spend more money to increase the popularity during the third quarter such as increase marketing
  • try to increase the sales in the other 3 quarters by spending more money in the first second and last quarter
  • spread evenly
  • Marketing should be lowered overall
  • Other feedback that was received from the team members are:

  • Full time workers wish to focus more on their own performance and goals instead of helping special arrangement employees that need guidance and support.
  • Some workers are working overtime due to their increased responsibilities however are not being paid overtime
  • Certain team members require training and coaching to help improve their performance.
  • One day training must have follow up activities to help team members remember and practice their new skills.
  • Casual workers should be replaced with full time workers to save money and also improve the overall performance of the organisation.
  • Employees should be more involved with decisions that will affect their responsibilities and performance.
  • ...

    Manage Budgets and Financial Plan 3 (1)
    Last updated: Jul 2022

    Page 2

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