Setting and Controlling Budgets

Setting and Controlling Budgets

OBJECTIVES

• Plan and forecast at a business level.
• Distinguish between different cost systems.
• Develop an understanding of the corporate budgeting process.
• Read, understand and interpret master budgets.
• Prepare and monitor business performance and Identify cost savings.
• Appreciate the importance of reducing unnecessary costs and working towards increased corporate efficiency.
• Understand costs behavior more accurately
• Identify & manage key financial indicators for the business
• Be able to interpret the financial impact of strategic directions
• Understand the problems of overheads allocation and how Activity Based Analysis may aid decision-making and pricing strategies
• Understand capital budgeting
• Be able to perform and interpret variance analysis

WHO SHOULD ATTEND?

• Financial Planning and Control Staff involved in the performance of a business unit, division or an organization as whole
• Professionals with direct or indirect financial responsibilities
• Personnel who manage departments with budgetary plans, and who are responsible for cost and strategic analysis
• Professionals from all sectors of industry, but particularly those involved in manufacturing, production, engineering or sales
• Professionals who would benefit from having an opportunity to consider new ideas and methods in budgeting

 COURSE OUTLINE 

DAY 1

Strategic planning for Setting Budgets

• Understanding what strategic planning is and why it is important
• Clarify the difference between vision, mission statement, goals and objectives
• The outside environment: the need to understand the economic cycle
• SWOT and PESTEL analysis
• Tying the strategic plan to the budget

Financial Planning – Elements of Costing and Cost Strategies

• The nature and behavior of costs, fixed, variable, semi-variable, direct and indirect costs
• Standard and actual costing – the difference
• Understanding overheads
• Calculating the variances at a detailed level to give real meaning to them
• Activity base costing ABC
• Full cost pricing and managerial costing

DAY 2

Forecasting & Preparing the Business Estimates

• The purpose of forecasts for the business
• The limiting factors
• How to predict sale revenues – different approaches
• Percentage of sales forecasting
• Using the three financial statements for forecasting
• Break-even analysis

Forecasting methods

• The most useful forecasting techniques
  • Quantitative approaches
  • Qualitative approaches
• Forecasting methods demonstrated

DAY 3

Budgeting – The Corporate Budgeting Process

• Understanding the benefit of budgeting to an organization
• Budgets’ forms and purposes; the master budget
• The different types of budgets – fixed, flexible, zero based, & ABB
• Preparing, coordinating and monitoring a budget
• Should we budget for customer satisfaction?

Presenting a Business Budget

• Giving clear information
• Presenting the main variables
• Negotiating agreement
• Putting it clearly onto paper
• The budgets and performance measurement as tools for communications
• Budgets and issues of motivation

DAY 4

Tracking Expenditure for Performance

• Reconciling actual with budgeted expenditure
• Critical variances
  • Material: Price vs. Quantity
  • Mix vs. Yield
  • Labour: Rate vs. Efficiency
• Identifying cost saving opportunities
• Looking for volume discounts
• Phasing expenditure to help cash flow

Capital Budgeting

• Capital budgeting overview
• Net Present Value
• Internal Rate of Return
• Modified Internal Rate of return
• Profitability Index

Capital Budgeting case study

DAY 5

Controlling the budget variances

• Interpreting the variance analysis report
• What is critical & what is not
• Creating accountability
• Action planning – the essential next steps