An effective budget is probably the most valuable tool in a company’s arsenal for setting and meeting an annual profit target. In this course we discuss how to plan and carry out an effective budgeting process, and then how to use it to manage actual results and produce the bottom line goal envisioned by the budget.
We start by defining the tools that the planning department should develop on the front end – the launch directive and the data collection tools. Then we move on to cover best practices for building the budget in each key area – revenues, expenses, cash flow, capital expenditures and the balance sheet. The course then provides proven tools for monthly budget management – addressing problem areas, changing course and accountability.
Learning Objectives
- Explore how to design a budget launch package that will answer most users’ questions in advance and prevent the endless phone inquiries and late or incomplete submittals caused by user confusion.
- Recognize how to explain for users the best mix of tools and techniques that are most likely to produce credible budgets that can be supported in analysis and achieved in bottom line results.
- Identify the most common flaws in budget submittals by recognizing their causes.
- Recognize why every budget must go beyond simply a P&L projection.
- Discover the 5 things you should NOT do if you want your budget to be taken seriously.
- Discover how to manage ongoing budget variance analysis in a way that demands accountability and enhances the likelihood that the budget goals will be achieved.
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Prerequisites
Prerequisites: A solid understanding of the interrelationship of the basic financial statements to one another and a moderate knowledge of Microsoft Excel.
Advance Preparation: None
Given the primacy of the income statement, do folks ever just redo that if something happens to invalidate the budget during the year?
Assuming your word "just" means "only", keep in mind that accounting requires a debit and a credit. If P&L changes are simply moving money from one expense item to another, there may be no need to impact cash flow or balance sheet. If however there is an additional expense planned, or an additional capital expenditure, then the budget change must necessarily impact cash flow and the balance sheet as well. Otherwise the integrated budget model will not balance and the cash flow and balance sheet will not reflect what is actually planned after the change.
Thanks, Gene; a helpful clarification. I should have made clear my reference to "invalidate the budget" only referred to the revenue and cost budget items in the CoA that are rolled up into the income statement.
My answer is the same, Alan, but perhaps not clearly enough stated. If you still need some clarification, give me a call and we can talk about it.
Will do; thanks for the offer.