Financial Policy
Prepared By: ABMN Finance Department
Table of Contents
A.
Policies and procedures when providing financial advice to clients ............. 3
1.
General responsibilities ..................................................................................... 3
2.
Competence and technical ability ...................................................................... 3
B.
Policies and procedures when preparing and creating financial reports ...... 5
1.
Recording information ...................................................................................... 5
2.
Accounting policies........................................................................................... 6
3.
Reporting requirements .................................................................................... 7
C.
Policies and procedures when preparing budgets ........................................ 10
1.
Assumptions and Parameters .......................................................................... 10
2.
Scenario testing and risk analysis .................................................................... 10
3.
Monthly reporting .......................................................................................... 11
D.
Policies and procedures when processing financial transactions ............... 12
1.
Authorities..................................................................................................... 12
2.
Cash management ......................................................................................... 12
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A.
Policies and procedures when providing financial
advice to clients
These policies and procedures are in place to ensure we prepare and provide appropriate financial advice
to clients.
1. General responsibilities
Ethical responsibilities
At ABMN we must provide advice that is technically accurate as well as ensuring all of our actions
are ethically responsible.
Key ethical requirements that we expect all employees to comply with are based on Code of
Ethics for Professional Accountants (APES 110) and the Code of Professional Conduct found in
the Tax Agent Services Act (2009). Our ethical requirements for all employees include:

Honesty and Integrity

Independence and Objectivity

Confidentiality

Competence

Due care and diligence
There may be times when our clients make requests of us that are not aligned with our ethical
requirements. There may also be situations where employees may stand to gain personal benefit
as a result of having access to certain clients. Regardless of these situations, we must at all
times maintain our ethical requirements.
General advice versus personal advice
It is imperative that employees are aware of the difference between general financial advice and
personal (tailored) financial advice.
General advice is typically factual information on how a product/services works, what the costs
are and how to apply. It does not consider who the client is or whether the product/service is
appropriate for them.
Personal (tailored) advice relates to the making of recommendations to clients based on the
personal circumstances of the client, having regard for their current financial position and their
goals and objectives. Personal advice needs to be accompanied by a statement of advice (SOA)
and a financial services guide (FSG), as well as a product disclosure statement (PDS), if relevant.
For the purposes of our ABMN Financial Services business line, employees are limited to only
providing general financial advice.
2. Competence and technical ability
Ensuring work performed is accurate
At times, employees may be approached to perform work that they are not fully trained in, and
that is beyond their ability. It is essential that all employees are aware of their competence level
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and do not attempt work they are not technically capable of performing. In these situations, the
policy is:
i.
Speak to your manager and inform them about the task you are attempting
ii.
Obtain technical support and guidance from internal experts, if available
iii.
If internal technical support is not available, gain advice from an external provider
iv.
Ensure all work completed and submitted is approved and signed-off by someone who
has demonstrated technical competence in the area.
Data compilation and reconciliations
Employees are expected to use organisational templates whenever they compile or reconcile
client data. All templates with client data need to be saved into the client folder in our content
management system. Several policies are in place here to ensure accurate compilation and
reconciliations:
i.
Reconciliations should be conducted to ensure data is accurate and properly entered
ii.
Client data should be reviewed by second person to verify the accuracy of the data inputs
and to detect any discrepancies
Analysing data and making recommendations
When analysing client data and providing recommendations we need to ensure that we apply
consistent approaches for all clients. To make sure this occurs, we have analytics procedures and
supporting templates, which are to be followed and completed. This will allow for:

Faster processing of work, by following a designated pattern

Easier reconciliation of work

Faster reviews and approvals
The main steps to be followed include:
i.
Collecting client data, verifying this data, and entering it into our templates
ii.
Performing a numerical review – to identify obvious issues, errors or opportunities
iii.
Conduct vertical and horizontal analysis
iv.
v.
a.
Calculate all relevant percentages
b.
Compare results against previous periods, benchmarks or KPIs
c.
Highlight issues or opportunities
Calculate key ratios to analyse:
a.
Profitability
b.
Stability and Solvency
c.
Liquidity and Cash flows
d.
Efficiency
Identify any variances and areas for investigation
a.
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Operational and external environment review
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B.
Policies and procedures when preparing and
creating financial reports
These policies and procedures are in place to ensure we prepare and create financial reports in
accordance with accounting standards and other relevant requirements.
1. Recording information
Events should only be recorded if they can be substantiated by reference to source documents
and receipts. Transactions are only entered into the accounting system if they reflect a valid
event backed up by these source materials.
(a)
Types of events:
Examples of the various types of events include:
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(b)
Receipts from customers
Payments to suppliers, employees and regulators
Purchase or manufacture of inventory
Accrued revenues and expenses
Prepaid revenues and expenses
Bad or doubtful debt recognition
Purchase or sale of capital equipment
Depreciation, impairment or revaluation of assets
Drawdown and repayment of loans, including interest payments
Issue or buyback of equity capital, including dividend payments
Types of source documents and receipts:
Examples of the various types of source documents and receipts include:
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
(c)
Tax invoice
Receipt
Confirmation
Diary
Statement
Contract
Coding and classifying:
All events must be assessed to determine the form and substance of the transaction to be
entered into the accounting system. Consideration must be made to whether the event meets
the definition of a particular accounting element and can be measured reliably.
Primary classification:

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Asset
Liability
Equity
Revenue
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
Expense
Secondary classification:

Current or Non-current (for assets/liabilities)
Tertiary classification:

Particular class, account or sub-account
(d)
Approval and controls:
All transactions entered into the accounting system must be approved by another team member,
who checks the entry against the source documentation. Specific fields for checking include:

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Date
Debit account(s) and amount(s)
Credit account(s) and amount(s)
Tax code
Job code
Narration
2. Accounting policies
Financial reports are prepared in accordance with the requirements of the Corporations Act 2001
and all applicable Accounting Standards.
(a)
Basis of preparation of the financial report
Financial reports should be prepared under the historical cost convention, as modified by
revaluations to fair value for certain classes of assets as described in the accounting policies.
(b)
Going concern
Unless determined otherwise, financial reports should be prepared on a going concern basis.
(c)
Revenue
Revenue from sale of goods should be recognised when the significant risks and rewards of
ownership of the goods have passed to the buyer and the costs incurred or to be incurred in
respect of the transaction can be measured reliably. Risks and rewards of ownership are
considered passed to the buyer at the time of delivery of the goods to the customer.
All revenue should be stated net of the amount of goods and services tax (GST).
(d)
Income tax
Current income tax expense or revenue should reflect the tax payable on the current period’s
taxable income based on the applicable income tax rate adjusted by changes in deferred tax
assets and liabilities.
(e)
Cash and cash equivalents
Cash and cash equivalents should include cash on hand and at banks, short-term deposits with
an original maturity of three months or less held at call with financial institutions, and bank
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overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance
sheet.
(f)
Inventories
Inventories should be measured at the lower of cost and net realisable value.
(g)
Plant and equipment
Each class of plant and equipment should be carried at cost or fair value less, where applicable,
any accumulated depreciation and any accumulated impairment loss.
(h)
Depreciation
The depreciable amount of all fixed assets should be depreciated over their estimated useful lives
commencing from the time the asset is held ready for use.
Class of fixed asset
(i)
Depreciation rate
Depreciation Basis
Vehicles
25%
Straight line
General equipment
20%
Straight line
Office furniture
20%
Straight line
Computer equipment
33%
Straight line
Provisions
Provisions should be recognised when the company has a legal or constructive obligation, as a
result of past events, for which it is probable that an out flow of economic benefits will result and
that outflow can be reliably measured.
(j)
Bad and doubtful debts
A provision for doubtful debts should be raised when it is probable that an accounts receivable
amount will not be received from a customer.
A bad debt should be raised when an accounts receivable amount is certain not to be received
from a customer, such as through the bankruptcy or liquidation of that customer.
3. Reporting requirements
Financial reports should be compiled and published in accordance with the requirements of the
Corporations Act 2001 and any applicable Accounting Standards.
(a)
Conversion
Information entered into the accounting system should be reviewed as part of the end of period
reporting process. The balances of each account should form part of the Trial Balance for the
period. Adjusting entries should be made as appropriate to take into account balance day
adjustments, such as depreciation, accruals, prepayments and bad debts. The Adjusted Trial
Balance should then be used to compile the financial reports.
(b)
Consolidation
Where more than one division’s or entity’s financial reports need to be combined to disclose the
overall consolidated position:
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i)
ii)
Any inter-divisional or inter-entity transactions between the divisions/entities should be
removed from the account balances
The accounts in each Adjusted Trial Balance should then be added together
(c)
Compilation
The following components of the financial reports should be compiled:
i)
ii)
iii)
iv)
Income Statement for the period
Balance Sheet as at the end of the period
Cash Flow Statement for the period
Notes to the financial statements for the period
Comparative information on the prior period should be provided where appropriate.
(d)
Format
The format for each report should follow general guidance provided in Accounting Standards.
Income Statement:
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Revenues
(Cost of Sales)
Gross Profit
Expenses
Earnings Before Interest and Tax
Interest
Profit Before Tax
Tax
Net Profit After Tax
Balance Sheet:

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
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Assets
Current Assets
Current Assets
Liabilities
Current Assets
Non-Current Assets
Equity
Cash Flow Statement:
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(e)
Operating Cash Flows
Investing Cash Flows
Financing Cash Flows
Cash Balance at Start
Cash Balance at End
Approval
The financial reports should be approved by the Chief Executive Officer and the Financial
Controller prior to publication.
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The Chairman of the Board and the Chair of the Finance Committee should sign the Directors’
Declaration made in accordance with a resolution of the Board of Directors that:
i)
ii)
(f)
The financial statements and notes are in accordance with the Corporations Act 2001
and:
a. comply with relevant Accounting Standards and
b. give a true and fair view of the financial position as at the end of the period and
performance for the period
In the directors’ opinion there are reasonable grounds to believe that the company will be
able to pay its debts as and when they become due and payable.
Publication
The financial reports should be published within 60 days after the end of the relevant financial
period and, in any case, before the publication date required by the Corporations Act 2001.
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C.
Policies and procedures when preparing budgets
1. Assumptions and Parameters
To ensure that accurate and useful budgets are created, we need to make sure that appropriate
assumptions and parameters are included in the foundations. If our forecasts and estimates are
based on unreasonable assumptions or fail to acknowledge set parameters, we will create
unreliable budgets that cannot be met.
(a)
Assumptions
Assumptions will be required for areas including:
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(b)
Total size of the market or industry we are operating within
Our estimated market share
Our estimated potential market share if all our strategies are successfully implemented
Competitor responses to our actions
Parameters
Parameters will include:
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Our physical capacity limits in providing products and services to our members
Alignment with pricing of equivalent products in the marketplace
Current cost structures that are in place
2. Scenario testing and risk analysis
To ensure that our budgets and forecasts provide value to the organisation in guiding our actions
we need to prepare analysis for a range of different scenarios and risks. Key scenarios to be
considered are:
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Best case scenario – if every part of the strategy is implemented effectively
Expected scenario – the most likely outcome based on past experience
Worst case scenario – what will happen if everything goes wrong
We should prepare forecasts and estimates on our sales, operational expenses, and other
relevant items after considering what particular events may go wrong. Other scenarios may also
be prepared that are reflect different risks and situations, so that the potential outcome can be
considered, and strategies prepared in case these outcomes occur.
(a)
Financial risk management strategies
Once we have established the expected severity of a worst case scenario and consider the
financial and operational outcomes if this occurs, we can prepare specific action items to deal
with these issues. Strategies will include:
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

Prevention or elimination of the risk – attempting to fix the problem before it causes
significant harm
Mitigation of the risk – attempting to minimise the problem or outcomes of the issue
Responding to the risk – putting in place specific actions and tasks that address the
problems caused by a particular item occurring.
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For example, if a worst case scenario causes the organisation to have cash flow or funding
issues, a prevention strategy with attempt to prevent this funding problem from occurring. This
may be through better advertising, marketing, operational plans or project management. If this
does not occur, we can allocate extra resources to help minimise the once they are starting to
show. But, if our cash flows do experience a significant decline, a responsive strategy will be one
that makes sure we have already organized access to alternative sources of cash funding to
support the organisation through this difficult time. It may be too late to try and access this
funding after the event unfolds, so this needs to be set up in advance.
Internal controls also need to be designed and implemented to manage and control financial
risks. These include:
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Separation of important duties to protect assets and avoid mistakes
Independent verification of important documents and activities
Physical protection (such as locks, fire proofing) for valuable physical assets
Effective document management (ensuring key data is recorded and captured)
3. Monthly reporting
Monthly reported is required as part of ensuring the organisation is meeting its objectives, and to
highlight any risks or problems that may arise. A key component of monthly reporting will be a
report on the key performance indicators, and also variance analysis of key budget items.
(a)
KPI reporting
A monthly report that indicates the actual performance results achieved for important measures
will be prepared and distributed. This will include information about performance in earlier
periods, and also the KPI target, for comparison purposes. KPIs will be reported on in important
areas such as:
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(b)
Financial performance
Customer satisfaction and performance
Employee engagement and activity
Efficiency and quality
Variance reporting
Each month a report that compares the actual results to the budget will be prepared. This will be
performed for all revenues, expenses and relevant cash flows and should highlight:
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Sales Price variances
Sales volume variances
Cost variances related to efficiency
Cost variances related to volume
Where items are material or significant, the variances between the actual and budgeted item
should also be clearly highlighted. Potential causes of the variance should be suggested, and if
serious enough, these should be flagged for further investigation.
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D.
Policies and procedures when processing financial
transactions
1. Authorities
(a)
Signatories
The following personnel are authorised to sign cheques and approve electronic payments.

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Chief Executive
Finance Manager
Senior Accountant
Accountant
Cheques and electronic banking transactions require two signatories.
(b)
Cash handling
The following personnel are authorised to handle and deposit cash:
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Chief Executive
Finance Manager
Senior Accountant
Accountant
Assistant Accountant
Junior Accountant
Any staff member responsible for handling or depositing cash must not also be responsible for processing
transactions or reconciling those transactions in the accounting system.
(c)
Other approvals
The Board must approve unscheduled or unbudgeted commitments or payments in excess of $100,000.
This includes multiple payments associated with the same output that, in total, are in excess of $100,000.
The Chairman of the Board will approve the CEO's expenses.
The CEO will approve the President's and/or Board's expenses.
The Senior Accountant must sign off on all daily bank reconciliations and the Finance Manager must sign
off on all accounts on a monthly basis.
2. Cash management
(a)
Objectives
There are three primary objectives of cash management for the business:
1. Safety
Safety of principal (cash preservation) is the foremost objective of the investment program.
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2. Liquidity
The investment portfolio shall remain sufficiently liquid to meet all operating requirements
that may be reasonably anticipated.
3. Interest rate
The investment portfolio shall be managed with the objective of a competitive rate of
return given the constraints of the safety and liquidity objectives.
(b)
Cash disbursements and cash handling
Only authorised persons are permitted to handle cash or make cash disbursements.
Cash disbursements must be made in accordance with the above authorities.
A petty cash receipt must be generated for all petty cash transactions. Petty cash
reimbursements cannot exceed $50.00 per transaction. The petty cash float should be regularly
reset to an amount of $300.00.
All physical cash receipts and payments must be documented appropriately in the cash book,
with appropriate deposit and withdrawal slips. The individual receiving/paying cash must not be
the individual that reconciles the cash takings to relevant invoices/receipts/statements. The
independent verification/reconciliation process must also ensure accurate data entry into the
accounting system (date, amount, accounts and narration).
Physical cash holdings (outside the petty cash holdings) should be banked on a daily basis.
Appropriate safety and security should be in place as follows:

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
The person taking the cash holdings to the bank must notify another staff member of the
trip to the bank, which must occur during normal business hours.
If the cash holdings are greater than $5,000, a second staff member must accompany
the staff member to the bank.
Any cash holdings that are not deposited with the bank must be locked in the fireproof
safe overnight.
Invoices should be paid by the due date, and discounts taken up where appropriate. Prior to
invoices being paid to suppliers, confirmation is to be received that goods or services have been
received and are in accordance with any contract or purchase order.
(c)
Bank reconciliations
Bank reconciliations must be conducted daily for the main operating account, and on a monthly
basis for all other accounts. Supporting documentation must be retained for use during the bank
reconciliation to verify counterparty details, dates and amounts.
The bank reconciliation must be signed off by the Senior Accountant, and the Senior Accountant
must sight the original bank statement or view the current cash position via internet banking.
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