Advanced Financial Planning & Budgeting

Advanced Financial Planning & Budgeting

OBJECTIVES

• Understand the cutting edge methods used to optimize the results of the financial planning and budgeting process
• Create the best budget for maximum performance
• Gain confidence in using advanced models to improve the accuracy of your financial forecasts, plans and budgets
• Understand what companies should be looking for when buying or building a new budgeting solution
• Confidently select the right budgeting solution from the wide range of choices
• Successfully implement a new budgeting solution
• Create and evaluate reports that give the needed information
• Understand Risk Assessment and management in the process and what to do about it

WHO SHOULD ATTEND?

• Chief Financial Officers who want to use the most advanced budgeting tools
• Account Personnel and Business Consultants
• Accountants responsible for budget preparation and management reporting
• Treasurers who need to go beyond the traditional budgeting tools
• Controllers who want to go beyond budgeting limitations
• Any senior who wants to improve the accuracy of their financial plans and budget

COURSE OUTLINE

Day 1 – Introduction to Financial Planning and Growth

• What is Financial Planning?
• Overall approach to advanced financial planning
• Financial Planning Models: A First Look
• The Percentage of Sales Approach
• Calculating External Financing Needed (EFN)
• Determining Growth rates o Internal Growth Rate (IGR) o Sustainable Growth Rate (SGR)
• Some Caveats Regarding Financial Planning Models
• Meeting global shareholder and stakeholder objectives
• Role of Key Performance Indicators
• Performance measures – leading and lagging
• KPIs – leading and lagging

Segment Reporting, Profit Analysis and Decentralization

• Differentiate between cost centers, profit centers, and investment centers, and explain how performance is measured in each
• Prepare a segmented income statement using the contribution format, and explain the difference between traceable fixed costs and common fixed costs
• Compute the return on investment (ROI)
• Show how changes in sales, expenses, and assets affect an organization’s ROI
• Compute residual income and understand the strengths and weaknesses of this method of measuring performance
• Understanding core processes, activities, and competences for financial planning
• Identifying customer perspectives in financial planning
• Identifying internal perspectives in financial planning
• Identifying learning and innovation perspectives in financial planning
• Assessing leading indicators in each perspective in financial planning
• Building cause and effect connections for financial planning (sensitivity)

Day 2 – Assumptions Creating Problems and Internal Organization Reports

• Variance reports and what is important
• Comparing forecasts to actual results
• Timeliness of the evaluation
• Implementing, communicating, and cascading variance analysis
• Checking for alignment to the strategy using variance analysis
• Checking for alignment of the operational drivers using variance analysis
• Variance Analysis applied: does the line of sight work?
• What personal objectives enter the variance analysis process?
• Auditing the Variance Analysis process
• Information systems/technology as support tools for Variance Analysis

Risk Analysis in Financial Planning

• Scenarios analysis uses and limitations – demonstrated
• Sensitivity analysis uses and limitations – demonstrated
• Simulation analysis uses and limitations – demonstrated
• Measuring the un-measurable = quantifying the qualitative
• Defining metrics that work in your organization including WACC allocations to business units
• Avoiding easy metrics that do not support the strategy
• Changing metrics when their cause and effect link is not valid
• Allocating resources to support strategic intent
• Recognizing that the financial planning is a communications system for organizational change

Day 3 – Risk Management: An Introduction to Financial Engineering

• Hedging and Price Volatility
• Managing Financial Risk
• Hedging with Forward Contracts
• Hedging with Futures Contracts
• Hedging with Swap Contracts
• Hedging with Options Contracts
• Management reporting of risks
• Finding approaches to present ambiguous information in an informed way

Introduction to Budgeting

• Budgeting Today: Overview and Trends
• Budgeting Processes and Approaches
• Budgeting Methods
• Popular Budgeting Reports and Ratios
• What typically goes wrong with budgets
• The real differences between budgets, forecasts, and estimates
• Improving the accuracy of your budgets

Day – 4 Budgeting Software: Technology Trends and Functionality

• Technology Trends
• Functionality Offered by Modern Budgeting Software
• What Will Future Budgeting Software Offer?
• Budgeting Software Buyer’s Guide
• Software Evaluation Template: Factors to Consider
• The New Alternative of Outsourcing
• Systems Implementation: Project Planning
• Detailed Implementation

Tools & Models

• Spreadsheets as tools
• Using Excel as a Budgeting Tool
• What is a “Model”
• How to build budget models
• Working through model development
• What are the current models used and why?
• Examples of Web-based models available

Day 5 – Flexible versus Fixed Budgets

• Flexible budgeting and overhead analysis
• The advantages of the flexible budget approach over the static budget approach
• Prepare a performance report for both variable and fixed overhead costs using the flexible budget approach
• Use the flexible budget to prepare a variable overhead performance report containing only a spending variance
• Use the flexible budget to prepare a variable overhead performance report containing both a spending and an efficiency variance
• Explain the significance of the denominator activity figure in determining the standard cost of a unity of product
• Apply overhead cost to units of product in a standard cost system
• Compute and interpret the fixed overhead budget and volume variances

Capital Budgeting: The real test

• The practice of capital budgeting
• Pro forma financial statements
• Determining incremental cash flows
• Evaluation of cash flow estimates
• Working capital changes and its impact
• Net Present Value (NPV)
• Internal Rate of Return (IRR)
• Modified Internal Rate of Return (MIRR)
• Profitability Index (PI)