BSBSMB406A: Manage small business finances

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.
Employability Skills: This unit contains Employability Skills
Application: 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.
Competency Field: Management and Leadership – Small and Micro Business

Element	Performance Criteria
Elements define the essential outcomes of a unit of competency.	The Performance Criteria specify the level of performance required to demonstrate achievement of the Element. Terms in bold italics are elaborated in the Range Statement.
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 describes the essential skills and knowledge and their level required for this unit.

Essential knowledge:

The candidate must be able to demonstrate essential knowledge required to effectively perform task skills; task management skills; contingency management skills and job/role environment skills as outlined in elements and performance criteria of this unit
These include knowledge of:

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.

Essential 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.

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. Add any 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.

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 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

Evidence Guide

The evidence guide provides advice on assessment and must be read in conjunction with the Performance Criteria, Required Skills and Knowledge, the Range Statement and the Assessment Guidelines for this Training Package.