February 2021
Nick Craggs highlights some areas you need to focus on to tackle
this level 4 exam.
February 2021 sees the introduction of AAT’s new scenario for the level 4 Professional Synoptic (PDSY) exam.
For those who have not studied PDSY before, in this exam you will be able to read about the company the exam is going to be based on (the scenario) before the actual exam.
The new scenario is based on a company called Veggie Delights Limited and is a bit of change from the previous scenarios. Previous scenarios were based on a manufacturing type business, whereas Veggie Delights is a service-based business. Veggie Delights is a chain of organic restaurants who have grown rapidly and recently started offering online ordering and takeaway.
Before we dive into Veggie Delights, let’s remind ourselves about the purpose of the PDSY exam. It will test students on certain topics from the budgeting, decision & control and financial statements units. It also has its own material known as accounting systems an controls; this is the main emphasis of the PDSY exam.
You will be asked to look at Veggie Delight’s current accounting systems and controls, assess them, find areas of weakness, and make suggestions for improvement.
This is a very different exam from any of the other exams at level 4. It is three hours, but there are only 100 marks available. Budgeting, for example, is two-anda-half hours but there are 160 marks available, so you must work much harder for your marks in PDSY.
That’s the background, so let’s looks at Veggie Delights and some of the things in the scenario that could cause an issue in the exam. Remember that the exam for each synoptic window is different; however, there are key themes throughout Veggie Delights.
The first one, which I think is very important, is that the company is 15 years old but there has been a dramatic rise in sales and profits over the past four years. The accounting systems for a larger business are very different to the systems for a smaller business. Has Veggie Delights’ systems grown with the business? No is probably the answer, as there wouldn’t be any weaknesses to spot in the exam! The company hasn’t changed fundamentally in what it sells; it is still a restaurant, so the dramatic rise in sales must be from more transactions. Are the current systems able to manage a lot more transactions than they previously had? The company is looking to expand at an even faster rate than it previously had. It opened five restaurants in the past three years, and it is looking to open another four in just the next year alone.
The other big area to focus on in the scenario is the new online ordering service. The controls for ordering online will be completely different to the traditional controls when ordering in the restaurant. Are these good enough?
The answer to this is clearly no. The fact that the website is down 15% of the time indicates that the systems are not robust. Are orders being missed, are orders not being taken, or are orders having to be taken over the phone when the website is down? The cost of the website has also spiralled out of control and so far the company has spent nearly double what they budgeted for. Does this indicate that corners have been cut?
That is where Veggie Delights currently is, but from the scenario what are the key challenges it will face in the future? Previously, Veggie Delights has been very profitable; however, it is now facing more competition, just when it has seen a rise in overheads. Will future profits be able to finance the ambitious future growth plans?
There is also a plan to operate an organic farm, a very drastic change from running restaurants. This will require completely different accounting systems and will require experience that Veggie Delights doesn’t have at the moment. This could very well become an expensive operation and would it add any value to Veggie Delights? They are currently using local organic produce as it is, so will this save money or allow them to charge more?
There is also a danger that future profits will be squeezed by Veggie Delights’ plans. There has already been a 5% reduction in customers visiting the restaurants which offer online orders. There is a danger that all the other restaurants will also see a reduction in customers.
At the other end, Veggie Delights are bringing in a lot of sustainable initiatives, which are commendable but will come with a cost. The company is going to introduce a basic rate of pay, above national minimum wage, and this will increase costs. This leads nicely into a cost benefit analysis type question; will the rise in wages bring in benefits that outweigh the extra costs?
These are my thoughts taken from the scenario, and in the exam you will be given some extra information that you will need to take into account. Some of the above may come up in the exam, and some may not, in any particular sitting.
• Nick Craggs is an award-winning tutor and AAT distance learning director at First Intuition.
