Course details

Overview ?

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
Budget development
How alternative decisions affect the ‘bottom line’ in terms of both profit and cash flow
Comparison of variances in actual performance against the plan and what these budget variances are saying and how they should be used to control financial performance
The use of Excel® as the toolbox of choice for financial model development, used within this course to develop forecasts, and long- and short-term plans.

Objectives

The objectives of the seminar are to enable delegates to:

Develop strategic thinking, and use the strategic management process to develop missions and objectives and carry out strategic analysis and decision-making
Understand the relationship between financial planning, forecasting, and budgeting and integration of the strategic management process with the budgeting cycle
Understand cost behaviour, the use of alternative costing systems, and cost/volume/profit (CVP) analysis, and develop and prepare an operating budget and how it may be funded using the alternative sources of finance
Use various Excel© models to forecast sales pricing, optimal product mix, long- and short-term sales levels, and build financial growth planning models and traditional and activity based budget models, and improve budget accuracy
Use the techniques of budgetary control: development of product standards, flexed budgets, and variance analysis and use of the results of variance analysis to improve operational performance
Determine a company’s cost of capital and use the technique of discounted cash flow (DCF) for capital budgeting and evaluation of capital project investment, and risk analysis using the techniques of sensitivity, simulation, and scenario analysis.

Training Methodology

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

Organisational Impact

The organisation will gain through:

The development of managers being able to think strategically
Increased awareness of the importance of effective forecasting and budgeting
Strategic management techniques that will help managers make more informed and therefore better management decisions
Use of techniques that will support the company in its more effective planning and budgeting of its operations, capital investment projects, and cash flow
Use of techniques to forecast sales revenues and cash flows that will help the company in its day-to-day management, and development of long-term plans
The sharing of knowledge gained throughout other divisions and departments of the company.

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.

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.

SEMINAR OUTLINE

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

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

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

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)

Putting the Pieces Together - 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

Day 1

Day 2

Day 3

Day 4

Day 5

Training Methodology

Budgeting: Planning, Forecasting, What if Analysis & Reporting

Course details

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