Manage small business finances

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.


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.

Elements and 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

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:


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 Required

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


taxation returns including goods and services tax

Specialist services may include:


business brokers/business consultants

government agencies

industry/trade associations

lawyers and providers of legal advice


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



regulatory bodies

trade or industry associations

Financial backers may include:

financiers/banks/lending institutions

leasing and hire purchase financiers

providers of venture capital


Credit policies may include:


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

Employability Skills

This unit contains employability skills.

Licensing Information

Not applicable.