Budget Control and Financial Planning

Introduction

Financial analysis, planning, and controlling budgets is targeted towards finding meaningful answers to the significant questions relating to the financial management of companies and determining whether or not the results are fully quantifiable. This program presents the key financial tools and explains the broader context of how and where they are applied to obtain meaningful answers. It provides a conceptual backdrop both to the financial/economic dimensions of systematic business management and to understand the nature of financial statements, analyzing data, planning, and controlling. The setting and appropriate control of budgets are techniques fundamental to every successful business. It is important to appreciate the links between strategy and budgeting and forecasting and budgeting and how actual performance can be measured to help companies control variances from the budget. This all leads to more accurate budgets and improved business performance in the future. This program will further help delegates to understand the jargon and methodology of financial planning, forecasting, budgeting, and analysis to enable them to contribute more effectively to their organizations further.

Objectives

The program provides delegates with the tools required to find better answers to questions such as:

• What is the exact nature and scope of the issue to be analyzed?
• Which specific variables, relationships, and trends are likely to be helpful in analyzing the issue?
• Are there possible ways to obtain a quick ballpark estimate of the likely result, and how precise an answer is necessary in relation to the importance of the issue itself?
• How reliable are the available data, and how is this uncertainty likely to affect the range of results?
• Should cash flow or accounting profit be used to evaluate the financial implications of a decision?
• What limitations are inherent in the tools to be applied and how will these affect the range of results obtained?
• How important are qualitative judgments in the context of the issue and what is the ranking of their significance?
• How do we interpret the financial impact of strategic decisions?
• How should we forecast and plan at a business level?
• How do we distinguish between different cost systems?
• How do we manage corporate budgeting, variance analyses, and the monitoring of business performance?
• How do costs behave and how does activity-based costing analysis help with an understanding of the problems of overhead allocation, decision-making, and pricing strategies?

Competencies Emphasized

• This program aims to enable participants to develop the following competencies:
• Obtaining the relevant information, given the context of the situation
• Choosing the most appropriate tools for financial management and budgeting
• Knowing the strengths and limitations of the available tools
• Understanding the fundamental importance of the creation of shareholder value
• Appreciating the importance of cash flow
• Viewing all analysis, planning, and control decisions in the context of their impact on shareholder value
• Gaining an appreciation of the international business environment

Training Methodology

This is an interactive course. There will be open question and answer sessions, regular group exercises and activities, videos, case studies, and presentations on best practices. Participants will have the opportunity to share with the facilitator and other participants on what works well and not so well for them, as well as work on issues from their own organizations. The online course is conducted online using MS-Teams/ClickMeeting.

Who Should Attend?

This program is a must for Chief Financial Officers, Financial Planners, Financial Controllers, Finance Professionals, and Executives, Accountants, Treasurers, Corporate Planning and Business Development Professionals, Sales and Marketing Professionals. Business professionals with direct or indirect financial responsibilities and personnel who manage departments with budgetary plans and who are responsible for the cost and strategic analysis will also find this program highly useful in their career advancement. All participants will be able to offer their input, based on their individual experiences, and will find that the program provides a forum that gives an opportunity to consider new ideas and methods and for upgrade and enhance their understanding of corporate finance and budgeting best practices.

Course Outline

Day 1: The Challenge of Financial/Economic Decision-making

• The Practice of Financial/Economic Analysis
• The Value Creating Company
• A Dynamic Perspective of Business
• The Nature of Financial Statements
• The Context of Financial Analysis

Assessment of Business Performance

• Ratio Analysis and Performance
• Management Point of View
• Owners Point of View
• Lenders Point of View
• Ratios as a System
• Integration of Financial Performance Analysis
• Some Special Issues

Day 2: Projection of Financial Requirements

• Pro Forma Financial Statements
• Cash Budgets
• Operating Budgets
• Interrelationship of Financial Projections
• Financial Modeling
• Sensitivity Analysis
• Dynamics and Growth of the Business System
• Leverage
• Financial Growth Plans

Analysis of Investment Decisions

• Cash Flows and the Time Value of Money
• Components of Analysis
• Methods of Analysis
• Applying Time-Adjusted Measures
• Strategic Perspective
• Decisional Framework
• Refinements of Investment Analysis
• Dealing with Risk and Changing Circumstances
• Cost of Capital and Business Decisions
• Weighted Cost of Capital
• Cost of Capital and Return Standards

Valuation and Business Performance

• Definitions of Value
• Value to the Investor
• Business Valuation
• Managing for Shareholder Value
• Shareholder Value Creation in Perspective
• Evolution of Value-Based Methodologies
• Creating Value in Restructuring and Combinations

Day 3: 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 external 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-Based Costing ABC
• Absorption and marginal costing
• Break-even analysis: cost volume profit analysis

Day 4: Forecasting and Preparing the Business Estimates

• The purpose of forecasts for the business
• Limiting factor analysis
• Using the three main financial statements for forecasting
  • Forecasting Methods
• The most useful forecasting techniques
  • Quantitative approaches
  • Qualitative approaches
• Forecasting methods demonstrated
• How to predict sale revenues: different approaches

Forecasting Case Study

Budgeting - The Corporate Budgeting Process

• Understanding the benefit of budgeting to an organization
• Budgets' forms and purposes; the master budget
• Preparing, coordinating, and monitoring a budget
• Alternatives to traditional budgeting, including beyond budgeting, zero-base budgeting, and activity-based budgeting
• 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 5: Tracking Expenditure for Performance

• Fixed and flexible budgets: more meaningful metrics and control
• Reconciling actual with budgeted expenditure
• Critical variances
  • Material: Price v Quantity
  • Mix v Yield
  • Labor: Rate v Efficiency
• Identifying cost-saving opportunities
• Looking for volume discounts
• Phasing expenditure to help cash flow

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?

Capital Budgeting

• Capital budgeting overview
• Payback
• Accounting Rate of Return
• Net Present Value
• Profitability Index
• Internal Rate of Return
• Modified Internal Rate of return
• Project abandonment
• Capital rationing: an introduction