Unit of competency details

Unit descriptor 

This unit describes the performance outcomes, skills and knowledge required to implement, monitor and review strategies for the ongoing management of a small business's finances. It also includes day to day financial management of the small business.

Specific legal requirements apply to the management of a small business.

Application of the unit 

This work is undertaken by individuals who operate a small business.

The unit is suitable for existing micro and small businesses or a department in a larger organisation.

Prerequisite units 

Employability skills 

This unit contains employability skills.

Elements describe the essential outcomes of a unit of competency.

Performance criteria describe the performance needed to demonstrate achievement of the element. Where bold italicised text is used, further information is detailed in the required skills and knowledge section and the range statement. Assessment of performance is to be consistent with the evidence guide.

ELEMENT 

PERFORMANCE CRITERIA 

1. Implement financial plan

1.1. Identify financial information  requirements and obtain specialist services , as required, to profitably operate and extend the business in accordance with the business plan

1.2. Produce financial budgets/projections, including cash flow  estimates, as required for each forward period, and distribute to relevant people  in accordance with legal requirements

1.3. Negotiate, secure and manage business capital to best enable implementation of the business plan and to meet the requirements of financial backers 

1.4. Develop and maintain strategies to enable adequate financial provision for taxation in accordance with legal requirements

1.5. Develop, monitor and maintain client credit policies , including contingencies for debtors in default, to maximise cash flow

1.6. Select key performance indicators to enable ongoing monitoring of financial performance

1.7. Record and communicate financial procedures to relevant people to facilitate implementation of the business plan

2. Monitor financial performance

2.1. Regularly monitor and report on financial performance targets and analyse data to establish the extent to which the financial plan  has been met

2.2. Monitor marketing and operational strategies for their effects on the financial plan

2.3. Calculate and evaluate financial ratios  according to own/industry benchmarks

2.4. Assess financial plan to determine whether variations or alternative plans are needed, and change as required

REQUIRED SKILLS AND KNOWLEDGE 

This section describes the skills and knowledge required for this unit.

Required skills 

• analytical skills to interpret financial data
• communication skills to negotiate capital and to report on performance
• literacy skills to interpret legal requirements and financial reports
• numeracy skills to calculate costs, prices, profit and other financial information.

Required knowledge 

The following knowledge must be assessed as part of this unit:

• benchmarking
• financial decision making relevant to the business
• financial indicators
• purpose of financial reports
• preparation and interpretation of budget/actual reports
• principles for preparation of balance sheets and their interpretation
• principles for preparation of profit and loss statements and their interpretation
• stock records/stock control relevant to the business.

EVIDENCE GUIDE 

The Evidence Guide provides advice on assessment and must be read in conjunction with the performance criteria, required skills and knowledge, range statement and the Assessment Guidelines for the Training Package.

Overview of assessment 

Critical aspects for assessment and evidence required to demonstrate competency in this unit 

Evidence of the following is essential:

• development, implementation and review of strategies for the ongoing management of finance
• maintenance of day-to-day financial management of the business as well as implementation of broad financial strategies
• knowledge of purpose of financial reports.

Context of and specific resources for assessment 

Assessment must ensure:

• access to relevant documentation
• candidate's individual circumstances and work in the context of establishing or running a small business, are the basis for assessment.

Method of assessment 

A range of assessment methods should be used to assess practical skills and knowledge. The following examples are appropriate for this unit:

• portfolio of evidence including financial reports
• preparation and review of financial ratios
• review of cash flow projections
• analysis of development, monitoring and maintenance of client credit policies
• oral or written questioning to assess knowledge of principles for preparation of balance sheets and their interpretation.

Guidance information for assessment 

Holistic assessment with other units relevant to the industry sector, workplace and job role is recommended, for example:

• BSBSMB402A Plan small business finances
• BSBSMB405A Monitor and manage small business operations.

RANGE STATEMENT 

The range statement relates to the unit of competency as a whole. It allows for different work environments and situations that may affect performance. Bold italicised wording, if used in the performance criteria, is detailed below. Essential operating conditions that may be present with training and assessment (depending on the work situation, needs of the candidate, accessibility of the item, and local industry and regional contexts) may also be included.

Financial plan  may include:

• analysis of sales by product/service, identifying where they were sold and to whom
• cash flow estimates for each forward period
• current financial state of the enterprise (or owner/operator)
• estimates of profit and loss projections for each forward period
• financial performance to date (if applicable)
• likely return on investment
• monthly, quarterly or annual returns
• non-recurrent assets calculations
• profit, turnover, capital and equity targets
• projected profit targets, pricing strategies, margins
• projections of likely financial results (budgeting)
• projections, which may vary depending on the importance of such information and the stage in the life of the business
• resources required to implement the proposed marketing and production strategies (staff, materials, plant and equipment)
• review of financial inputs required (sources and forms of finance)
• risks and measures to manage or minimise risks
• working, fixed, debt and equity capital
• working in conjunction with external consultants e.g. investment analysts, accountants, financiers

Financial information  may include:

• accrual of staff leave/entitlements
• asset management strategies which may include:

• owning, leasing, sharing, syndicating
• maintaining and deploying assets

• asset registers
• balance sheets
• bookkeeping/accounting/stock/job costing records
• business activity statements
• business capital
• cash book
• cash flow forecasts
• financial budgets
• financial indicators, which may be short-, medium- and/or long-term
• payroll records, superannuation entitlements
• profit and loss statements
• ratios for profitability, liquidity/efficiency/financial structure
• risk management
• statements/forecasts
• taxation returns including goods and services tax

Specialist services  may include:

• accountants
• business brokers/business consultants
• government agencies
• industry/trade associations
• lawyers and providers of legal advice
• mentors
• online gateways
• providers of training in accounting software

Cash flow  may include:

• anticipated payments
• anticipated receipts
• customer credit policy/debt recovery
• taxation provisions

Relevant people  may include:

• family members
• financial backers
• franchise agency
• owner/operator
• partners
• regulatory bodies
• trade or industry associations

Financial backers  may include:

• financiers/banks/lending institutions
• leasing and hire purchase financiers
• providers of venture capital
• shareholders/partners/owners/family/friends

Credit policies  may include:

• collateral
• credit limits
• credit references
• debt collection
• payment options
• proof of Indigenous identity
• trading terms

Financial ratios  may include:

• current ratio
• days debtors outstanding
• days stock on hand
• expense percentages
• gross profit percentage
• liquid ratio
• net profit percentage
• proprietary/debt ratio
• return on investment/return on total assets
• staff productivity measures
• stock turn rates

Unit sector 

Competency field 

Management and Leadership - Small and Micro Business

Co-requisite units