Ambitio n in Action
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Ambitionin Action
Ambition in Action
www.sit.nsw.edu.au
HEAD TEACHER DEVELOPMENT PROGRAM –
FINANCAIL MANAGEMENT
Ambition in Action
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Today's Outcomes Basic Bookkeeping
Accounting Concepts
Financial Section
Budgeting and Control
Monitoring Progress
Questions???
Ambition in Action
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Basic Bookkeeping
It is important that accurate, timely and relevant information is collected and presented in a manner that will meet your needs and the needs of interested parties.
Ambition in Action
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Basic Bookkeeping
The bookkeeping system is a tool that enables management to analyse how the section is performing.
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Basic Bookkeeping
With an efficient bookkeeping system a manager would be able to answer questions like the following:
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Basic Bookkeeping
/ Is the business making a profit? / What is the level of expenditure? / Are some courses doing better then others? / Are expenses being kept under control? / Are there any areas which require urgent attention?
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Basic Accounting Concepts
The accounting process can be summarised by the steps listed below:
/ Business transaction
/ Source documents
/ Journal entry
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Basic Accounting Concepts/ General ledger
/Trial balance
/Financial statements
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Financial statements
/ Profit or Loss (Income Statement)
/ Balance Sheet
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Financial statements
/ Why are financial statements useful tools for business operators?
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Financial statements
/ The financial statements of the business are usually prepared at the end of the financial year by the accountant or by using an accounting software program. Many business owners simply take note of the bottom line and ignore other details.
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Financial statements
/ The financial statements of the business are usually prepared at the end of the financial year by the accountant or by using an accounting software program. Many business owners simply take note of the bottom line and ignore other details.
Ambition in Action
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Balance sheets
/ The financial statements prepared for most small businesses are the balance sheet and the profit and loss statement.
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Balance sheets
/ The balance sheet lists your assets and your liabilities. The difference between the two equals your owner's equity.
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Balance sheets
/ The items in your balance sheet are arranged under the following classifications.
/ Current assets/ Non-current or fixed assets/ Current liabilities/ Non-current or deferred liabilities/ owner's equity
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Profit and loss statements
/ The profit and loss statement is a list of all your business income less all business expenses, to arrive at a net profit or loss for the period.
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Profit and loss statements
/ It is prepared at the end of the financial year, but well organised businesses would prepare it at least on a quarterly basis.
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Profit and loss statements/ Profit and loss statement for L A Retailer Pty Ltd for year ended 30 June 2002 / Income $ $
/ Sales 150,000 / Less cost of goods sold / Opening stock 45,000 / Add purchases 60,000 / 105,000 / Less closing stock 24,400 / Cost of goods sold 80,600 / Gross profit 69,400 / Expenses $
/ Accounting 2,750 / Advertising 3,500 / Bank charges 475 / Borrowing expenses 750 / “Computer supplies 697 / Depreciation – equipment 1,220 / Electricity and gas 660 / Hire of equipment 200 / Insurance 2,350 / Interest expense 200 / Motor vehicle expenses 2,950 / Rent 10,000 / Repairs and maintenance 780 / Telephone and facsimile 950 / Salary and wages 45,000 / Superannuation 3,600 / WorkCover 850
76,932
/ Net loss $(7,532)
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The financial section
/ Source of finance
/ Liquidity
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The financial section
/ Finance is the lifeblood of a business. A good understanding of how money flows into and out of your business and how it affects value while it stays invested in your assets, is essential.
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/ For cashflow forecasts, some planners like to start with market research and funnel down to a prediction about sales and profits expected to flow from marketing strategies.
The financial section
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/ Others prefer to start with dollar targets, such as how much profit they must make for the business to be made financially secure, then calculate if the market can be tapped for this amount.
The financial section
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Sources of finance
/ Where does money come from?
/ For a business there are many possible sources of finance.
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Liquidity
/ Cash is the freest flowing asset of all. It flows like liquid - that’s why cash is used as a measure of liquidity. All businesses need access to cash.
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Liquidity
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Liquidity
/ Why is it important to know if there might be a cash deficit in any particular month?
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Liquidity JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN TOTAL
INFLOW (Receipts)
Sales/Services 9000 9000 9000 9000 11000 11000 5000 9000 9000 9000 9000 9000 108000Cash from ow ner 6000 0 0 0 0 0 0 0 0 0 0 0 6000GST Collected 900 900 900 900 1100 1100 500 900 900 900 900 900 10800Money from loan 33000 0 0 0 0 0 0 0 0 0 0 0 33000
TOTAL INFLOWS 48900 9900 9900 9900 12100 12100 5500 9900 9900 9900 9900 9900 157800
OUTFLOWS (Payments) JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN
Purchases/Stock 120 120 120 120 160 160 60 120 120 120 120 120 1460Accounting fees 110 50 50 50 50 50 50 50 50 50 50 50 660Advertising 1000 300 300 300 300 300 300 300 300 300 300 300 4300Bank Fees 840 24 24 24 24 24 24 24 24 24 24 24 1104Electricity 158 0 0 120 0 0 100 0 0 120 0 0 498GST paid 0 0 2700 0 0 2700 0 0 2700 0 0 2700 10800Insurance 1420 0 0 0 0 0 1420 0 0 0 0 1420 4260Lease equipment 100 100 100 100 100 100 100 100 100 100 100 100 1200Licences 90 0 0 0 0 250 0 0 0 0 0 0 340Loan interest 1015 931 846 762 677 592 508 423 338 254 169 85 6600Loan repayments 82 164 246 328 410 492 574 656 738 821 903 986 6400Memberships 210 0 0 0 0 210 0 0 0 0 0 0 420Phones - mobile 50 50 50 50 80 80 30 50 50 50 50 50 640Phones/fax - business 260 110 110 110 110 110 60 110 110 110 110 110 1420Plant & equipment 8600 60 60 60 60 60 60 60 60 60 60 200 9400Post & stationery 208 8 8 8 10 10 6 8 8 8 8 8 298Repairs & maintenance 50 50 50 50 50 50 50 50 50 50 50 50 600Vehicle costs - fuel & maintenance 210 210 550 210 550 490 160 210 210 210 210 210 3430Vehicle costs - insurance/registration 800 0 0 0 0 0 0 0 0 0 0 0 800Vehicle purchase/lease 28000 0 0 0 0 0 0 0 0 0 0 28000Wages 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 48000Workers Compensation 900 0 0 0 0 0 0 0 0 0 0 0 900TOTAL CASH OUTFLOWS 48223 6177 9214 6292 6581 9678 7502 6161 8858 6277 6154 10413 131530
OPENING BANK BALANCE 0 677 4400 5086 8694 14213 16635 14633 18372 19414 23037 26783Monthly surplus/deficit 677 3723 686 3608 5519 2422 -2002 3739 1042 3623 3746 -513CLOSING BANK BALANCE 677 4400 5086 8694 14213 16635 14633 18372 19414 23037 26783 26270
BUSINESS CASHFLOW FORECAST
Australian National Training Authority (ANTA) 2003. All rights reserved
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Budgeting and Control
/ Operational Budgets
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Budgeting and Control
/ Operational plans are developed as a framework for running your business. A budget is one of the operational plans in your business.
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Budgeting and Control
/ Budgets are often used as performance standards or targets for employees and management to work towards. Budgets can be very effective planning and control mechanisms, provided they are prepared prior to the period to which they relate and are regularly monitored.
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Operating budgets
/ Budgeting in TAFE must satisfy a number of objectivise:/ 1. The Annual Budget/ 2. The Authorised Budget/ 3. The Forecast/ 4. To provide means of projecting the likely financial year and update these when required.
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Operating budgets
/ Budget Models in TAFE are:
/ Annual Budget
/ Authorised Budget
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Operating budgets
/ Objectives of the TIFS budgeting facilities:
/ Enables institutes to record Annual and Authorised Budgets separately in the general ledger.
/ Allocate these budgets to appropriate accounting periods.
/ Record forecasts, where financial results are expected to vary from Budget and copy these to the Corporate Ledger.
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Types of Operating budgets
/ The research and development budget.
/ The sales budget.
/ The purchasing budget.
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Operating budgets
/ The human resources budget.
/ The finance and administration budget.
/ The budgeted income statement.
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Operating budgets
/ In large organisations like TAFE, these budgets would most probably be prepared on a departmental basis.
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The research and development budget
/ For those businesses that do, this budget is the means of projecting and quantifying this expenditure. A research and development budget will include both operating and capital expenditure.
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The sales budget
/ The sales budget would include estimates of:
/ sales volume
/ prices
/ selling expenses
/ marketing expenses
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The sales budget
/ These estimates are based on sales forecasting which is concerned with identifying sales demand and any likely impacts such as seasonality, etc.
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A basic sales budget
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The human resources budget
/ In this budget you would estimate the costs associated with employing, maintaining and retrenching staff. It many also take into account outsourcing the work to contractors.
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The purchasing budget
/ The purchasing budget includes all types of purchases within the business. Most expenses here would be classified as administration expenses.
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The purchasing budget
/ What is a purchasing agreement ?
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The administration and finance budget
/ The administration and finance budget deals with the provision of administration and funds for the whole business respectively.
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The administration and finance budget
/ Typical factors considered by this budget include costs of capital (e.g. interest) and administration costs such as accounting stationary, postage etc.
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The budgeted income statement
/ The budgeted income statement is also known as a budgeted or projected profit and loss statement. This is a combination of all of the above budgets and functions.
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The budgeted income statement
/ It organises all factors such as prices, volumes, revenues, costs and various expenses to provide the expected profit figure.
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Monitoring progress
/ There are some simple ways to check the progress of your business. Cost activity, profitability, liquidity and debt levels are easy to calculate and good business managers do this on a regular basis. Through TAFE this is done through the Buddy system.
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Monitoring progress
/ In practice, a business plan refers to the types of measures expected to be used and may quote previous figures as evidence of past performance.
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Monitoring progress
/ One simple tip: KEEP YOUR RECORDS UP-TO-DATE! Accurate, easy to read records of business income and expenses are necessary for measurements that can be used to monitor progress.
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Monitoring progress
/ A profit and loss statement and a balance sheet are the records from which these measurements are made.
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Questions ??????????????????
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