Budgeting & Forecasting Modelling

Course Background This 2-day course is designed to develop and reinforce participants’ understanding and practical aspects of preparing budgets and forecasts in an organisation. Core principles for budgeting; Techniques for budgeting; Drivers of costs and revenues Behaviours within organisations which influence budget-setting, and management responses to budgets Developing budgets into ongoing forecast updates The principal aim of the course is to improve participants' knowledge and ability to prepare budgets, and use these skills to support the budgeting process in their organisations. Methodology To ensure that the training programme is interactive, the methodology will consist of: Formal presentations by the instructor Interaction between participants and instructor Exercises designed to put into practice the topics covered in the formal presentations
Day 1 Session 1 - Introduction & Course Objectives Brief review of course objectives Introduction of learning methods Session 2 – Basics of Budgeting Why do organisations prepare budgets? Relationship between strategy and budgeting Different types of budgets – P&L, capex, headcount, project, cashflow Session 3 – Philosophies and Approaches to Budgeting Top-down approach Bottom-up approach Reconciling the two results Stretch targets – revenue & cost budgets Projecting current performance Zero-base budgeting Use of contingency Role of rewards and bonuses in target-setting Revising unacceptable plan results Exercise – prepare a simple budget from a number of different perspective, and discuss differences between the resulting plans. Session 4 – Budget Drivers Activity-based cost drivers Volume changes: fixed vs. variable costs Absorption of overheads into unit costs Cost allocation techniques for indirect and corporate overheads Revenue drivers: customer and market segmentation Controllable and non-controllable factors Exercise – for a given case study, identify drivers for a number of costs and create a budget for them. Day 2 Session 5 – Moving from Budget to Forecast Dealing with the time lag between budget preparation and start of plan period Splitting an annual budget down into months or quarters Revising assumptions and drivers Rolling forecasts in response to actual results Exercise – for a given budget prepared 3 months previously, update in light of new assumptions and drivers Session 6 – Actual Performance vs. Budget Introduction to variance analysis Impact of variances on remainder of plan period Re-forecasting: changes to forecast and re-calendarising Flexible budgets and target adjustments Responding to poor results in forecasts Exercise – for a given budget and actual results, prepare asimple variance analysis and suggest how each variance might impact the remainder of the budget period Session 7 – Budgeting Behaviours Target-setting Incentives, rewards and bonuses Dysfunctional behavior Exercise – for a given budget and bonus scheme, analysepotential dysfunctional behavior and how this might be mitigated. Session 8 – Wrap-Up and Questions Overall review Key points to re-iterate Final questions and issues to discuss