Growth Management Consultants

Task 2: Finance Report

Introduction
Growth Management Consultants is consultancy firm which is providing leadership and
management training to companies. Company started its operations in 2010 and now
diversifying its operations. This financial report is performance analysis of the company for the
Year 2016/2017 on the basis of profit & loss as well as cash flow. From the result of the analysis
and forecasting techniques, budget forecasting of the next year will be prepared.

Activity 1 : Financial Performance Report

2016/17 Performance
Year 2016/2017 was a satisfactory year for the company as company earns a net profit of
$652,077. Company earned net sales of $1,335,600 which included a major portion of
Consulting Fee amounting $1,175,600. Other contributions in sales are Executive Search Services
($120,000), Workshops ($38,000) and Publications ($2,000). As company is consultancy firm so
it is fall under service category which has no direct cost of goods sold.

Company incurred total expenses of &683,523 from which major portion is Salaries & Wages
(including PAYG) amounting $504,000. Other key expenses are Superannuation ($60,000), Rent
($43,000), Travel & Accommodation ($24,000) and Contract Writer E-book ($10,000). Company
earns net profit of $652,077.

Based upon the information, a vertical analysis is done for the company.

PROFIT & LOSS 2016 - 2017 Vertical Analysis

Income

Consulting fees $1,175,600 88.02%

Workshops $38,000 2.85%

Publications $2,000 0.15%

Executive Search Service $120,000 8.98%

 Gross profit/net sales $1,335,600 100.00%

Expenses

Accounting fees $6,823 0.51%

Advertising & marketing $5,000 0.37%

Computer Software $4,600 0.34%

Insurance $7,500 0.56%

Lease/loan payments $1,500 0.11%

Motor vehicle expenses $2,500 0.19%

Office Cleaning $5,500 0.41%

Office supplies $2,100 0.16%

Rent & rates $43,000 3.22%

Repairs & maintenance $1,200 0.09%

Salaries/wages (including PAYG) $504,000 37.74%

Superannuation $60,000 4.49%

Telephone $3,400 0.25%

Utilities $2,400 0.18%

Travel and accommodation (for

workshops) $24,000 1.80%

Contract writer e-book $10,000 0.75%

Total expenses $683,523 51.18%

NET PROFIT (Net Income) $652,077 48.82%

Important figures in the vertical analysis are highlighted in bold. It shows that Net Profit is
48.82% of the net sales which is a positive trend. Company’s Publication revenue is below par
and consist only 0.15% of total revenue so it needs serious attention where company could able
to sell Publications. Major expense, which is Salaries & Wages, is 37.74% which is because it is a
consultancy firm and key expense is salaries in service providing firms (Yaniv, 2014).
As world is becoming digital day by day, there is need to go digital and online conferences. If
company stick to current policy it will lose portion of its business. Major reason of low
Publication revenue is not adopting the changing business trend of digital publication. There is
overall global recession too so companies are cutting their expenses; it is another reason that
company is not getting adequate revenue from training workshops.

Strategic Goals and Priorities

Adapting the changes of digital world, Growth Management Consultants is focusing on E-book
sales to increase its revenue. Company’s financial strategy for next year and after is to explore
new areas to increase its business share in the market. Key focus is on E-book sales and increase
revenue by 10% annually. Company sets a target to sale E-books worth of $10,000 in coming
fiscal year. It is holding annual conference in February 2018 where company is projecting
revenue of $75,000 while cost would be around $51,000. Similarly the estimated cost of the E-
book will be around $14,200. Second E-book will be written in December 2018. Company is also
projecting $120,000 of Executive Search Services, with 10% annual increase (Edward, 2017).

Cash Flow Statements Analysis

Cash Flow Statement for the year 2016/17 gives monthly in-coming and out-
going of the cash which shows that some items have activities throughout the
year and some items have periodical activities. Income side of the cash flow
statement describes that Consulting Fees and Executive Search are regular
income items where cash flow is coming every month. However, income from
Workshops is coming in four month when workshop conducted (Edward, 2017).
Analyzing cash outflow in expense side, it is observed that there are fix amount
of salaries, superannuation, rent and cleaning paid in every month. Accounting
Fees is paid once which is annual software contract. Travel and Accommodation
expenses cash outflow occur in four months which is related to Workshops.

Financial Software
If a company chooses good financial software, it will solve the half of company’s
financial data problems. Financial software provides quick review of financial
data and also give highlights of business performance. Finance office can record
and analyze all accounting and financial data through efficient use of financial
software.

MYOB: MYOB is popular accounting software for small businesses in Australia.

It has more than one million users and software provides efficient and simple
transactions to record day to day business activities. Major advantage of MYOB
is its cloud computing facility so that users can use it anywhere and on any
device without worrying about sitting in local servers to perform business
transactions. Professionals use it while traveling or sitting at home which result in
quick process of financial data. Another advantage of MYOB is auto-fill entries
whereas in manual accounting, accountants had to perform every transaction
 which takes lot of time. MYOB is cost effective software, there is no huge upfront
cost as companies have to pay monthly fee (Lu, 2012).

Major disadvantage of MYOB is data security because of its online feature.

Online world is subject to hacking and stolen of data. Another disadvantage for
companies is that it needs trained people to use this software or training should
be provided to its users. Other disadvantages could be that everyone should
have internet connection to operate the software and people cannot use it while
offline.

Review and Analysis of Three Financial Software Packages (Lu, 2012):

Software Review Analysis Advantages Disadvantages

QuickBooks Most popular financial Easy to use and Lack of specific

software for small understand. Flexibility features related to
businesses. It provides of exporting data. businesses and
accounting tools and Cost effective price. industry. Inventory
inventory management. Report generation is codes are not
QuickBooks is logical easy. Inventory generated. Lack of
choice for company’s management. direct support. Limited
starting financial tools. to accounting record
only.

Peachtree Created by Sage It provides audit trail Major disadvantage is

Software, it is popular in which makes it more complicated setup.
USA and Middle East. It useful than Configuration is
automated transactions alternatives. Easy to required before using.
and accuracy of data. It use. Report Complex and
provides details for audit generation is easy. unnecessary features.
purpose. Customer satisfaction Even you need few
feedback features but you have
to purchase all.

FreshBooks Developed to attract Provides unlimited It lacks enterprise level

basic and small users. It access to data, capacity, data export to
attracts users by accepts payment other software is
providing streamlined online, stopless difficult, bugs and
solutions. Current it has reporting, perfect for glitches issue,
around 5 million users. intuitive accounting, expensive as compare
innovative tools. to its features.
Checklist: Develop Budget Forecast (Activity 2)
Checklist: Communicate Budget at Meeting (Student
has to communicate the budget in verbal meeting
with assessor)

Activity 2 : Budget Forecast

Budgeted Forecast

2016 -
PROFIT & LOSS 2017 Budget 2017-18 Notes
Income
Consulting fees $1,175,600 $1,293,160 10% increase
$38,000 750*100
Workshops $75,000 budgeted
Publications $2,000
Executive Search Service $120,000 $132,000 10% increase
E-Book $10,000 Budgeted Sale
Gross profit/net sales $1,335,600 $1,510,160

Expenses
Accounting fees $6,823 $7,164 5% increae
Advertising & marketing $5,000 $5,250 5% increae
Computer Software $4,600 $4,830 5% increae
Insurance $7,500 $7,875 5% increae
Lease/loan payments $1,500 $1,575 5% increae
Motor vehicle expenses $2,500 $2,625 5% increae
Office Cleaning $5,500 $5,775 5% increae
Office supplies $2,100 $2,205 5% increae
Rent & rates $43,000 $45,150 5% increae
Repairs & maintenance $1,200 $1,260 5% increae
Salaries/wages (including PAYG) $504,000 $529,200 5% increae
Superannuation $60,000 $63,000 5% increae
Telephone $3,400 $3,570 5% increae
Utilities $2,400 $2,520 5% increae
 Travel and accommodation (for
workshops) $24,000 $25,200 5% increae
Contract writer e-book $10,000 $10,500 5% increae

Total expenses $683,523 $717,699

NET PROFIT (Net Income) $652,077 $792,461

On the basis of budgeted forecast, Growth Management is expected to earn

$792,461 in following financial year that is because revenue is increase relatively
higher than expenses increased.

Checklist: Financial Policy (Activity 3)

Checklist: Financial Compliance Requirement & Tax
Liability (Activity 3)
Activity 3 : Financial & Tax Compliance

Financial Compliance Requirement & Tax Liability

It is important for the Growth Management to comply to the financial and tax
requirements of the state and country in order to avoid any legal dispute.
Following financial and tax compliance are required to met by the company:

GST Reporting Requirement: As company’s turnover is less than $20 million, it is

reporting GST on quarterly basis. Company has to report total sales, export sales
(if any), capital and non capital purchases, GST on sales and GST on purchases.
PAYG Withholdings Obligations: Company has to withhold some payments from
its payees so that they can meet tax liabilities like employees or other small
companies. For this purpose company have to be registered for PAYG
PAYG Income Tax Installment: It is recommended to pay installments for income
tax on regular basis in order to meet yearend tax liability. Financial burden will be
released as company does not have to pay big amount in the end.
Payroll Tax Obligation: It is obligatory that payroll tax of employees and workers
to be deducted from their payment on periodical basis as per the law of state
where company is operating.
Checklist: Effective Communication Skills (It is based
on effective communication of student during the
meeting with assessor)