Budgeting, Forecasting and the Planning Process

Budgeting, Forecasting & the Planning Process

OBJECTIVES

• Understand the relationship between planning, forecasting, & budgeting
• Use Excel© to develop various forecasting models
• Use Excel© to build various budget models
• Test forecasting & budgeting models using Excel©
• Use the forecasting/budgeting cycle to improve the budget accuracy

WHO SHOULD ATTEND?

• Financial professionals, finance controllers treasurers and inventory professionals
• Senior professionals with a direct responsibility for financial management and control
• Accountants, sale and purchase professionals and professionals responsible for relationship with banks
• Any professional, at a medium and senior level, who is a part of the financial decision making team
• New interns and trainees with finance related responsibilities
• Department heads, process owners, administrative personnel associated with budget management, financial and technical professionals, sales and marketing professionals, project professionals, and anyone who needs to understand how to develop cost projections for their department, projects

COURSE OUTLINE

DAY 1

Planning for success

• What are planning strategies?
• Work with the planning cycle:
• Capacity Options
• Demand Options
• Mixing Options to Develop a Plan
• Planning requirements
• Best overall unit for measuring sales and outputs
• Forecast of demand for intermediate planning period in these units
• Method for determining costs
• Model that combines forecasts and costs so that planning decisions can be made
• Plan outline
• Setting goals & objectives
• Determining steps to achieve goals
• Setting start & completion dates
• Assigning responsibility
• Development of the Key Performance Indicator Matrix

DAY 2

The Forecasting Process

• Determine the purpose or objective of the forecast
• Select the relevant theoretical model (identify influences, classify as internal or external, and identify possible constraints)
• Collect data
• Analyze data (Data analysis often determines model choice.)
• Estimate the original model
• Evaluate the model and revise
• Present initial forecast to decision makers
• Make the final revision
• Distribute the forecast
• Establish monitoring procedures

DAY 3

The Budgeting Process

• The principles of Activity-Based Budgeting
• The role of assumptions in the budget model
• Projecting Headcount
• Projecting the cost of Employee Benefits
• Accounting for Depreciation in the Budget Model
• Fixed, Variable and Mixed Expenses
• Discretionary Expenses

Projecting Revenues – The Sales Budget

• Projecting Revenues
• Using Excel® to project optimum product mix
• Projecting sales volume
• Projecting new product introduction and speed to market
• Developing the bases for cost projections using revenue assumptions

The Nature and Behavior of Costs

• The behavior of costs
• Fixed Costs
• Variable Costs
• Mixed Costs
• Non-Cash Expenses
• Cost / Volume / Profit Analysis

Projecting Expenses

• Projecting costs in unique cost categories including ; travel, outside services, and communication costs
• Using Activity-Based Budgeting to project expenses
• Applying the Key Performance Indicator Matrix to the Budget Development Model
• Identification of activities critical to objective achievement
• Determining resources requirements

DAY 4

The Time Value of Money

• The impact time has on the value of money
• Understand the various interest calculations
• Using WACC and ROIC as benchmarks
• Use Excel®, to determine Present Value, Future Value, Net Present Value, Internal Rate of Return, Modified Internal Rate of Return
• Using MIRR and a basis for capital project evaluation

Evaluating Capital Project Proposals

• Identify the various types of capital projects
• Discuss the capital project evaluation process
• Determining the initial and subsequent capital project cash flows
• Development of the “Hurdle Rate” for capital projects
• Discuss the use of “Terminal Value” in evaluating capital projects
• Use Excel® to evaluate capital projects by applying NPV, IRR, MIRR, and Discounted Payback models

DAY 5

Putting the Pieces Together – The Budget

• Developing the corporate cash budget
• Developing the pro-forma financial statements
• Placing economic measures on operational objectives

Developing Budget Re-Projection and Best Case / Worst Case Scenario Models

• Planning for contingencies
• Developing various scenarios
• Using the Scenario tool in Excel® to explore the variable sets of assumptions while tracking the impact to the base model.