Setting and Controlling Budgets

Introduction

Setting & Controlling Budgets well is fundamental to every successful business. This seminar shows how Strategy is linked to Budgeting, how Forecasting is linked to Budgeting, how actual performance can be measured to help us Control the budget variances, which leads to more accurate budgets in the future.

We will further help delegates understand the jargon and methodology around financial planning, forecasting, budgeting and analysis to enable their organisation to move forward.

Seminar 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 organisation 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

Competencies Emphasised

• Strategic planning for Setting Budgets
• The International Business Environment
• Financial Planning - Elements of Costing and Cost Strategies
• Creating Shareholder Value [WACC and EVA using CAPM and ß]
• The Time Value of Money [Maths of Finance Tables and IRR]
• Evaluating Capital Project Proposals [NPV with sensitivity of Terminal Value]
• Evaluating the Leasing Option
• Analyzing the Annual Report [Ratio Analysis including Du Pont and Failure Prediction]
• Cash Flow Analysis and Cash Planning [Free cash flow]
• Comprehensive Case Exercise

Personal Impact

Each person on the seminar will develop an improved understanding of the relationship between the two primary goals of a budget: Planning & Control. They will further enhance their knowledge of the many applications of Excel® and their confidence in using this package.

Organisational Impact

The focus of the seminar is to allow delegates to work through the challenges they face in their organizations so that they can return and implement the improvements they have learned.

They will emerge with a thorough understanding of the objectives of budgeting and how to both set them & control them for the company’s benefit which is essential for companies to succeed in a competitive environment. In addition, the use of Excel® as a tool to assist in resolving issues, will greatly enhance their skills in using this powerful software package.

Training Methodology

The seminar is based on a combination of interactive activities - group and individual exercises, case studies, and discussions.

The environment will be a supportive one in which individuals with varying degrees of experience will be encouraged to share the approaches they currently use as well as try out new ones that they encounter on the seminar. The seminar Tutor will be on hand to answer any questions a delegate may have and to act as a facilitator for building and applying new approaches.

We aim for this to be an enjoyable as well as a learning experience and feel that the mix of style and learning techniques will prove valuable to those that attend.

Seminar 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 behaviour 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

Forecasting case study

Day 3

Budgeting - The Corporate Budgeting Process

• Understanding the benefit of budgeting to an organisation
• 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

Budgeting case study

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
• What next?