Financial Planning & Budgeting
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)