Financial management I

BSBFIM801 Manage financial resources

This unit is about managing financial resources in a complex environment for a substantial business unit or organization.

Business leaders normally need to forecast future financial resource needs, analyze current asset performance and capacity to a standard expected in a commercial environment, and to set business targets. They also manage compliance, manage financial risk within agreed plans and mechanisms, and monitor compliance with financial projections.

This unit applies to the management of financial resources for complex and diverse operations or projects and is normally an essential aspect of senior management. It can relate equally to small-scale activities within a small to medium-sized organization or a significant activity in a large organization.

 

How you will be assessed

You will be assessed through:

 

Practical

CA RE

You will be responsible for your team's financial performance for an extended period. If possible, the assessment interview will take place in your workplace. The assessor will ask you how your systems works and to explain your key documents. Bring your financial records to the assessment interview. e.g. budget, balance sheet, profit and lost statement, project plan, financial risk management statement, staff meeting minutes, periodic reports, etc. Be prepared to explain them to your assessor.

You will be assessed in a safe environment and be required to show consistent performance of typical activities as a financial manager. Most assessment will comprise real situations , but, where necessary, will include case studies. You must have access to office equipment and resources, samples of workplace documentation, including contractual and procurement policies, and financial data and documentation.

You need to show that you have:

  1. Prepared a comprehensive financial plan according to organizational and legislative requirements.
  2. Monitored and managed financial resources over a full planning-cycle including setting targets, managing risks and improving compliance mechanisms.
  3. Effectively communicated financial reports and operational execution.
  4. Revised forecasts according to changes in budget deviations.

 

 

Interview/assignment questions

RK

  1. Fundamental roles
    1. What's the difference between:
      • what a manager does in financial management,
      • what a bookkeeper does in bookkeeping and
      • what an accountant does in accounting?
     
  2. Basic accounting principles and terminology
    1. What are assets?
    2. What are liabilities?
    3. What is equity?
    4. What is the difference between gross profit and net profit?
    5. What is the difference between fixed and variable costs?
    6. What is the difference between liquid and illiquid assets?
    7. What does a Profit and Loss statement tell you?
    8. What does a Balance Sheet tell you?
    9. What does cash flow tell you?
    10. Are there any benchmarks for average profitability in your industry? If so, what are they?
     
  3. Processes
    1. Outline your financial system.
    2. Explain how to:
      1. prepare budgets
      2. monitor budget compliance
      3. manage cash flow
      4. oversee the keeping of ledgers and presentation of financial statements.
     
  4. Your financial performance
    1. Explain your profit and loss statement and your balance sheet.
    2. Are you making a profit? (In a non-profit organization, this is a "working surplus.") Why or why not?
    3. Are you on track according to your financial plan?
    4. How do you categorize income for financial management purposes?
    5. What income patterns do you see? Explain the reasons for them.
    6. What expenditure patterns do you see? Explain the reasons for them.
    7. Business ratios
      1. What are your critical business ratios?
      2. How did you select them?
      3. What do you do to monitor them?
      4. What do they tell you?
    8. What are your conclusions about which things make a profit and which don't? Explain the reasons for your answer.
    9. What changes need to be made in your cost and income streams?
    10. What is the state of your assets? Are you satisfactorily allowing for asset items to be replaced?
    11. Describe your financial cycle(s).
    12. What are your main financial risks? How do you monitor them?
    13. Based on what you now know, what changes to your financial plan would you suggest?
     
  5. Compliance requirements
    1. What are the ATO requirements for your record-keeping and reporting? (PAYG income tax, BAS/GST, FBT, etc.)
    2. What other legal requirements do you have for reporting?
    3. What are the record-keeping requirements for auditing purposes?
    4. What are your organization's requirements for financial management?
     
  6. Economics and finance
    1. What are economic indices?
    2. Which economic indices apply to your organzation, including any industry-specific indices?
    3. Explain:
      1. the cost of capital,
      2. capital structure and
      3. working capital.
    4. Describe the principles of finance relevant to your organization’s operations.
    5. Explain risk and return.
    6. Finance and investment
      1. Describe the goal of financial resource management.
      2. What were the main finance and investment decisions made during this reporting period?
      3. What were the main options available to you?
      4. What factors did you have to weigh up?
      5. What did you decide/recommend?
      6. Looking at the outcomes, what would you do differently next time?

    Note: Your assessor may also ask you a variety of what if questions.

     

    Detailed requirements

    1. Forecast future financial resource needs El 1/PC, RS

    1. Establish and report on the capacity of existing financial systems.
    2. Forecast financial data and business system requirements.
    3. Analyze forecasted requirements.
    4. Prepare and plan budget forecasts according to organizational and statutory requirements.
    5. Prepare and present recommendations for budget expenditure or for modification of existing projections.

     

    2. Analyze current asset performance and capacity El 2/PC, RS

    1. Analyze the costs of, and returns from, assets and liabilities using standard accounting techniques to identify extent of debt and equity financing.
    2. Establish management responsibilities and legal requirements for reporting, in consultation with relevant organizational staff.
    3. Analyze and interpret financial reports and key information.
    4. Analyze and evaluate the effects of financial decisions on the ability of the organization to meet planned outcomes.

     

    3. Set business targets and compliance systems El 3/PC, RS

    1. Collect comparative and trend information and confirm needs for future budget and associated resources.
    2. Complete negotiations to secure resources according to relevant short-term and long-term needs.
    3. Allocate resources against the budget to maximise organization’s performance.
    4. Maintain accurate and up-to-date records of resource allocation and usage according to organizational and legislative requirements.
    5. Develop and review management systems which enable timely collection, management and processing of information.
    6. Complete and accurately report records of budget performance and expenditure according to organizational procedures and statutory requirements.
    7. Evaluate and improve budget audit mechanisms and compliance requirements as required.

     

    4. Manage financial risk. El 4/PC, RS

    1. Identify and analyze financial risk factors.
    2. Document and manage financial risks according to organizational policies and procedures.
    3. Implement procedures to regularly review financial risk management activities.

     

    5. Monitor compliance with financial projections. El 5/PC, RS

    1. Identify budgets deviations that adversely affect budget objectives.
    2. Promptly develop plans to remedy significant deviations from budget objectives and projections.
    3. Monitor and review financial documentation against organizational objectives.
    4. Revise and renew budget priorities to meet operational contingencies and risk management.
    5. Manage costs to targets set in the budget.

     

    6. Other.

    1. Manage tasks and contingencies on the job.

     

    Code for unit reqts:
    CA: Conditions of assessment
    El/PC: Element & criteria
    RE: Required evidence
    RK: Required knowledge
    RS: Required skills