Budgeting and Budgetary Control

CFOs finance business partners, management accountants, financial / cost controllers, planning and analysis specialists, internal auditors, accountants.

Budgeting is an effective tool for planning, resource allocation, motivation and control.

Key questions:

Why do organisations need to prepare budgets?

Who is responsible for budgeting process?

What types of budgets are used by organisations?

How are budgets prepared and presented to stakeholders?

How to create useful and informative budget templates?

What is budgetary control? How to calculate and interpret variances?

What are the approaches of budgeting? What are the benefits of Beyond Budgeting?

Learning objectives:

Understand the purposes of forecasts, plans and budgets.

Discuss behavioural issues of budgeting in responsibility centres.

Prepare master budgets. Apply basic modelling and budgeting techniques.

Present budgets to stakeholders. Analyse the outcomes of different budget scenarios.

Evaluate performance using budgets.

Discuss the technologies available for improving budgeting.

Purposes of budgeting

• ·       Forecasting, planning and budgeting.
• ·       Difficulties in budgeting for global companies.

Responsibility accounting

• ·       Cost, revenue, profit and investment centres.
• ·       Typical measures used to assess their performance.

Setting financial goals

• ·       Financial key performance indicators (KPIs).
• ·       Decomposition of budgeted goals. Goal trees.

Budgeting process

• ·       Stages of budget preparation.
• ·       Budget templates.
• ·       Budget calculation formulas.
• ·       Budget models based on the KPI decomposition.

Budget review

• ·       Budget justifications. Communicating assumptions. Budget committee.
• ·       Scenario planning. Sensitivity / “what if” analysis. Stress testing.

Budget performance

• ·       Fixed and flexible budgets.
• ·       Variance analysis.
• ·       Controllable and non-controllable variances.
• ·       Waterfall chart.

Approaches and methods of budgeting

• ·       Participation in budgeting: imposed/top-down, participative/bottom-up budgets.
• ·       Incremental budgeting versus zero-based budgeting (ZBB).
• ·       Periodic versus rolling budgets.

Alternative approaches to budgeting

• ·       Beyond budgeting.
• ·       Activity based budgeting (ABB).