1. Ambition in Action

2. Ambition in Action www.sit.nsw.edu.au HEAD TEACHER DEVELOPMENT PROGRAM – FINANCAIL MANAGEMENT

3. Ambition in Action www.sit.nsw.edu.au Today's Outcomes  Basic Bookkeeping  Accounting Concepts  Financial Section  Budgeting and Control  Monitoring Progress  Questions???

4. Ambition in Action www.sit.nsw.edu.au 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.

5. Ambition in Action www.sit.nsw.edu.au Basic Bookkeeping  The bookkeeping system is a tool that enables management to analyse how the section is performing.

6. Ambition in Action www.sit.nsw.edu.au Basic Bookkeeping  With an efficient bookkeeping system a manager would be able to answer questions like the following:

7. Ambition in Action www.sit.nsw.edu.au 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?

8. Ambition in Action www.sit.nsw.edu.au Basic Accounting Concepts  The accounting process can be summarised by the steps listed below: /Business transaction /Source documents /Journal entry

9. Ambition in Action www.sit.nsw.edu.au Basic Accounting Concepts / General ledger /Trial balance /Financial statements

10. Ambition in Action www.sit.nsw.edu.au Financial statements /Profit or Loss (Income Statement) /Balance Sheet

11. Ambition in Action www.sit.nsw.edu.au Financial statements /Why are financial statements useful tools for business operators?

12. Ambition in Action www.sit.nsw.edu.au 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.

13. Ambition in Action www.sit.nsw.edu.au 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.

14. Ambition in Action www.sit.nsw.edu.au Balance sheets /The financial statements prepared for most small businesses are the balance sheet and the profit and loss statement.

15. Ambition in Action www.sit.nsw.edu.au Balance sheets /The balance sheet lists your assets and your liabilities. The difference between the two equals your owner's equity.

16. Ambition in Action www.sit.nsw.edu.au 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

17. Ambition in Action www.sit.nsw.edu.au 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.

18. Ambition in Action www.sit.nsw.edu.au 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.

19. Ambition in Action www.sit.nsw.edu.au 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)

20. Ambition in Action www.sit.nsw.edu.au The financial section /Source of finance /Liquidity

21. Ambition in Action www.sit.nsw.edu.au 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.

22. Ambition in Action www.sit.nsw.edu.au /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

23. Ambition in Action www.sit.nsw.edu.au /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

24. Ambition in Action www.sit.nsw.edu.au Sources of finance /Where does money come from? /For a business there are many possible sources of finance.

25. Ambition in Action www.sit.nsw.edu.au 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.

26. Ambition in Action www.sit.nsw.edu.au Liquidity

27. Ambition in Action www.sit.nsw.edu.au Liquidity /Why is it important to know if there might be a cash deficit in any particular month?

28. Ambition in Action www.sit.nsw.edu.au Liquidity

29. Ambition in Action www.sit.nsw.edu.au Budgeting and Control /Operational Budgets

30. Ambition in Action www.sit.nsw.edu.au 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.

31. Ambition in Action www.sit.nsw.edu.au 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.

32. Ambition in Action www.sit.nsw.edu.au 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.

33. Ambition in Action www.sit.nsw.edu.au Operating budgets /Budget Models in TAFE are: /Annual Budget /Authorised Budget

34. Ambition in Action www.sit.nsw.edu.au 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.

35. Ambition in Action www.sit.nsw.edu.au Types of Operating budgets /The research and development budget. /The sales budget. /The purchasing budget.

36. Ambition in Action www.sit.nsw.edu.au Operating budgets /The human resources budget. /The finance and administration budget. /The budgeted income statement.

37. Ambition in Action www.sit.nsw.edu.au Operating budgets /In large organisations like TAFE, these budgets would most probably be prepared on a departmental basis.

38. Ambition in Action www.sit.nsw.edu.au 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.

39. Ambition in Action www.sit.nsw.edu.au The sales budget /The sales budget would include estimates of: /sales volume /prices /selling expenses /marketing expenses

40. Ambition in Action www.sit.nsw.edu.au 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.

41. Ambition in Action www.sit.nsw.edu.au A basic sales budget

42. Ambition in Action www.sit.nsw.edu.au 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.

43. Ambition in Action www.sit.nsw.edu.au The purchasing budget /The purchasing budget includes all types of purchases within the business. Most expenses here would be classified as administration expenses.

44. Ambition in Action www.sit.nsw.edu.au The purchasing budget /What is a purchasing agreement ?

45. Ambition in Action www.sit.nsw.edu.au The administration and finance budget /The administration and finance budget deals with the provision of administration and funds for the whole business respectively.

46. Ambition in Action www.sit.nsw.edu.au 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.

47. Ambition in Action www.sit.nsw.edu.au 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.

48. Ambition in Action www.sit.nsw.edu.au The budgeted income statement /It organises all factors such as prices, volumes, revenues, costs and various expenses to provide the expected profit figure.

49. Ambition in Action www.sit.nsw.edu.au 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.

50. Ambition in Action www.sit.nsw.edu.au 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.

51. Ambition in Action www.sit.nsw.edu.au 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.

52. Ambition in Action www.sit.nsw.edu.au Monitoring progress /A profit and loss statement and a balance sheet are the records from which these measurements are made.

53. Ambition in Action www.sit.nsw.edu.au Questions ??????????????????

54. Ambition in Action www.sit.nsw.edu.au Feedback???????????