Budget Preparation Skills

Budget Preparation Skills

OBJECTIVES

• Determine full costs of outputs for the goods and services provided
• Conduct a Cost Volume Analysis (CVA), applying it to multiple cost drivers to make recommendations for program management
• Apply Variance Analysis as a management tool to analyze performance-based budgets and determine where you stand in achieving your performance goals
• The purpose of budgets
• Motivation
• Targets
• Benchmarking
• Control
• Responsibility
• Types of budget
• Fixed
• Flexible
• Rolling
• Zero based
• Stages of preparation
• Cash budgets – cash flow forecasts
• Master budgets – P & L and Balance Sheet
• Initial steps in constructing a spreadsheet model
• Relevant costs
• Overheads
• Allocation
• Appointment
• Basic contribution analysis
• Break even analysis
• Marginal revenue and marginal cost

WHO SHOULD ATTEND?

• The staff person who will be responsible for entering data into the budget system or training others how to enter information.
• Those who want to gain control of the firm’s financial standing and obtain a firm grasp on the numbers side of their job.
• Financial Professional, Professional R&D, Sales/Marketing Professional, General Accounting Professional, Business Unit Professional.

COURSE OUTLINE 

DAY 1

Budgeting and the Management Process

• What is a budget
• Why create budgets
• Strategy – direction and vision
• Implementing strategy – the operational planning process
• Budgets – the financial expression of the operating plan
• The purpose of budgets – control
• The human side of budgeting

DAY 2

The Framework for Budgeting

• Elements of the budget framework
• The financial statements
• Advantages and limitations of budgets
• Reporting – the key to control

Developing the Revenue Budget

• Operating versus non-operating revenue
• Revenue recognition versus sales
• Sales forecasting
• Profitable growth and the cost of capital
• Pricing considerations

DAY 3

Budgeting Costs and Expenses

• Cost, profit, volume relationships
• Cost of service provided
• Operating expenses – selling, G/A, R/D
• Directly variable expenses
• Fixed expenses
• The allocation problem
• Assignable and non-assignable expenses
• EBIT, EBITDA

DAY 4

Accountability for Results

• The business unit statement
• Variance analysis
• Priorities
• Long term versus short-term results
• Contingency plans
• How not to cut a budget

DAY 5

Building the Balance Sheet

• Key financial ratios
• The capital budget –
• NPV
• IRR
• PI
• The cost of capital and the hurdle rate

Cash Flow

• Budgeting cash requirements
• Developing a cash flow forecast
• The three sources of cash
• Free cash flow
• The completed budget