Budgeting Essentials: Planning, Forecasting, Scenario Analysis, and Reporting

Introduction:

In today’s dynamic business environment, robust financial management, budgeting, and forecasting are vital for success. Effective planning starts with realistic forecasting, which guides the creation of a practical and adaptable budget. Strategic planning involves long-term goals and objectives, while budgeting focuses on short-term actionable plans. Quantifying these plans ensures that strategic objectives are achievable.

Objectives:

By the end of this Budgeting Essentials: Planning, Forecasting, Scenario Analysis, and Reporting course, participants will be able to:

• Develop strategic thinking and apply the strategic management process to create missions and objectives.
• Understand the integration of financial planning, budgeting, and forecasting with the strategic management process.
• Analyze cost behavior and perform cost/volume/profit (CVP) analysis to develop an operating budget.
• Utilize Excel models for forecasting, financial growth planning, and enhancing budget accuracy.
• Implement budgetary control techniques, such as flexed budgets, variance analysis, and performance improvement strategies.
• Calculate a company’s cost of capital and use discounted cash flow (DCF) methods for capital budgeting and risk analysis.
• Gain insights into effective forecasting and budgeting for improved strategic management decisions.
• Apply strategic management principles to enhance decision-making and management effectiveness.
• Develop operational plans, project budgets, and cash flow management techniques.
• Forecast sales revenues and cash flows to support both short-term and long-term management.

Training Methodology:

• Case Studies
• Group Discussions
• Interactive Workshops
• Simulation Exercises
• Excel Modeling
• Role Playing

Course Outline:

Unit 1: Planning for Success

• What are planning strategies?
• The planning cycle
• Mission and strategic analysis
• Strategic choice and implementation
• Corporate objectives and value
• Agency problem and corporate governance
• Planning requirements and working capital
• Plan outline and fund generation
• Financial planning for growth and financial modeling
• Key performance indicators (KPIs)
• Balanced scorecard

Unit 2: The Forecasting Process

• Establishing forecasting aims
• Analyzing data and statistical tools
• Quantitative analysis and forecasting techniques
• Univariate models: time series, moving averages, exponential smoothing, trend progression
• Causal analysis models: regression analysis

Unit 3: Projecting Revenues – The Sales Budget

• Sales forecasting and prediction
• Short-term trends and revenue assumptions
• Adding value to products and services
• Pricing strategies and cost estimation

Unit 4: The Nature and Behavior of Costs

• Cost behavior, allocation, and classification
• Fixed, variable, and marginal costs
• Capitalized and expensed costs
• Valuation of inventory and product costing
• Full costing and cost accounting
• C/V/P Analysis

Unit 5: The Budgeting Process

• Aims of budgeting
• Budgeting as planning and control
• Sales and cost budgets
• Budget drafting and inclusion of headcount and depreciation
• Meeting budgeting requirements

Unit 6: Budgetary Control

• Standard costs and budget variance
• Error factors and target execution

Unit 7: Projecting Expenses

• Activity-Based Costing (ABC) and Activity-Based Budgeting (ABB)
• Cost drivers and cost hierarchy
• Transition from traditional to ABB

Unit 8: The Time Value of Money

• Concept of time and its impact on money value
• Future values and compound interest
• Present values and discounted cash flow (DCF)

Unit 9: Evaluating Capital Project Proposals

• Categories of capital projects
• Evaluation methods: ARR, pay-back period, NPV, IRR, DPP
• Capital budgeting methods and capital rationing
• Profitability Index (PI) and revised IRR (MIRR)

Unit 10: Putting the Pieces Together

• Long-term and short-term funding
• Sources of finance
• Capital cost models and Weighted Average Cost of Capital (WACC)
• Risk and capital costs
• Capital Asset Pricing Model (CAPM) and beta factor
• Optimal capital structure

Unit 11: Budget Re-Projection – Evaluating Risk and Uncertainty

• Risk and uncertainty decision rules
• Scenario analysis and simulation models
• Sensitivity analysis and NPV break-even