Introduction

A good plan should begin with a good forecast, which in turn, may lead to a good budget. A strategy is the long-term plan of what the company is going to do to achieve its policy. The budget is the short-term plan of how strategies may be achieved. It is a quantification of the activities the company must develop to achieve its short-term plans. This leading-edge course explains the planning and budgeting process from beginning to end. It looks at budget development, and how alternative decisions affect the ‘bottom line’ in terms of both profit and cash flow. It also looks at variances in actual performance against the plan and what these budget variances are saying and how they should be used to control financial performance. Excel® is the toolbox of choice for financial model development and will be used within this course to develop forecasts, and long- and short-term plans. 

Seminar Objectives

The objectives of this seminar are to enable delegates to:

• Understand the relationship between financial planning, forecasting, and budgeting
• Use various Excel© forecasting models
• Use Excel© to build planning and budget models
• Use forecasting and budgeting techniques to improve budget accuracy

Who Should Attend?

Forecasting and budgeting are essential skills that should be acquired at the appropriate level by all the professionals in an organisation, in particular:

• Financial professionals, finance controllers, treasurers and inventory professionals
• Senior professionals with a direct responsibility for financial management and control
• Accountants, sales and purchasing professionals and those responsible for relationship with banks
• Any professional, at junior or 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

Personal Impact

Delegates will develop an understanding of:

• The use of Excel© tools to develop strategic financial models, forecasts, and budgets
• The relationship between the strategy, the forecast, and the budget
• How to further develop your professional skills
• How to make more informed and therefore better decisions
• How to make improved budgeting decisions which will increase your effectiveness within your organisation
• How to be better placed to liaise effectively with other professionals on forecasting, planning, and budgeting issues

Competencies Emphasised

• Development of strategic thinking by managers
• Use of the strategic management process to develop missions and objectives
• Strategic analysis
• Financial planning for growth and financial modelling using Excel©
• Forecasting using Excel©
• Development of long- and short term sales forecasts using Excel©
• Revenue determination and sales pricing
• Determination of an optimal product mix
• An understanding of cost behaviour and the use of alternative costing systems
• Cost/volume/profit (CVP) analysis
• Integrating the strategic management process with the budgeting cycle
• Appreciation of the purposes of budgeting and understanding various budgeting models
• Development and preparation of an operating budget
• Budgetary control: development of product standards, flexed budgets, and variance analysis
• Use of the results of variance analysis to improve operational performance
• Use of activity based costing and application of activity based budgeting techniques
• Discounted cash flow techniques
• Evaluation of capital project investment and capital budgeting
• Financing the budget, the sources of finance and the costs of capital
• Optimal capital structures
• Risk and uncertainty analysis, sensitivity, simulation, and scenario analysis

Training Methodology

The seminar will be conducted along workshop principles with formal presentations, case studies and interactive worked examples. Relevant examples and case studies will be provided to illustrate the application of each of the topics covered. Each learning point will be reinforced with practical examples and exercises.

Difficult mathematical concepts are minimised wherever possible and handled in a visual way that is easy to understand with numerous illustrative examples.

Seminar Outline

Day 1

Planning For Success

• What are planning strategies?
• Work with the planning cycle
• Mission
• Strategic analysis
• Strategic choice
• Strategic implementation
• Corporate objectives
• Corporate value and shareholder value
• The agency problem and corporate governance
• Planning requirements and working capital
• Plan outline
• Financial planning for growth
• Financial modelling
• Development of the key performance indicators (KPIs)
• The balanced scorecard

Day 2

The Forecasting Process

• Determine the purpose and objective of the forecast
• Analysing data
• Statistical analytical tools
• Quantitative analysis and forecasting
• Forecasting techniques
• Univariate analysis models: time series; moving averages; exponential smoothing; trend progression
• Causal analysis models – regression analysis

Projecting Revenues – The Sales Budget

• Projecting sales
• Long-term trend sales forecast
• Short-term trend sales forecast
• The basis of revenue assumptions
• Sales pricing
• Full cost pricing
• Marginal cost pricing
• Using Excel® to project optimum product mix

Day 3

The Nature And Behaviour of Costs

• Cost behaviour
• What is cost?
• What is an activity?
• Cost classification
• Fixed costs and stepped fixed costs
• Variable costs and semi-variable costs
• Notional costs
• Cost allocation
• Product costs and period costs
• Product costing for inventory valuations and profit ascertainment
• Absorption costing
• Cost / volume /profit (CVP) and ‘what-if’ analysis

The Budgeting Process

• Why do we budget? - the purposes of budgeting
• Planning and control
• Budgeting for sales and costs
• Stages in the budget process
• Budget preparation process
• Accounting for headcount and labour costs in the budget model
• Accounting for depreciation in the budget model
• Putting the budget together

Budgetary Control

• Standard costing
• The purposes of standard costing
• Flexed budgets
• Variance analysis
• The reasons for variances
• Planning and operating variances

Day 4

Projecting Expenses – Activity Based Costing (ABC) And Activity Based Budgeting (ABB)

• The activities that cause costs
• Processes and activities
• Under- and over-costing – product cost cross subsidisation
• Activity based costing (ABC)
• Refinement of the costing system
• ABC and cost management
• Design of ABC systems
• The cost hierarchy and cost drivers
• Advantages and disadvantages of ABC systems
• From traditional budgeting to activity based budgeting (ABB)
• The ABB process
• Motivation and the behavioural aspect of budgeting

The Time Value Of Money

• The impact time has on the value of money
• Future values and compound interest
• Present values
• Discounted cash flow (DCF)

Evaluating Capital Project Proposals

• Various types of capital projects
• Capital project evaluation
• Capital investment project appraisal
• Accounting rate of return (ARR)
• Payback method
• Net present value (NPV)
• Internal rate of return (IRR)
• Discounted payback method
• Choosing the right investment appraisal method
• Equivalent annual cost (EAC) method
• Modified internal rate of return (MIRR)
• Capital budgeting methods
• Capital rationing
• Profitability index (PI)

Day 5

Putting The Pieces Together – Financing The Budget

• Long- and short-term funding
• Sources of finance
• Capital cost models
• Cost of equity
• Cost of debt
• Weighted average cost of capital (WACC)
• Risk and the cost of capital
• Capital asset pricing model (CAPM) and the beta factor
• Optimal capital structure
• Capital structure models

Budget Re-projection – Evaluating Risk And Uncertainty

• Risk and uncertainty decision rules
• Worst and best case scenarios
• The value of perfect information (VOPI)
• Analysing risk: expected values; standard deviation
• Sensitivity analysis
• Simulation model
• Scenario analysis
• NPV break-even

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email info@oxford-management.com