Planning and budgeting are must-have skills for all professionals regardless of their function or managerial level. This course covers the concept of budgeting as a planning tool, a financial device and a control mechanism. In addition, it provides the necessary application of a long and short-term planning decisions.

Course Methodology

This course focuses on exercises, case studies, and individual and group presentations.

Course Objectives

By the end of the course, participants will be able to:

• Defend the importance of linking an organization's budget with its strategic plan
• Demonstrate how the budget relates to the key financial statements: balance sheet, income statement, and cash flow
• Prepare the key elements of an operating and capital budget and evaluate the different budgeting approaches used
• Apply cost control tools, analyze management variance reports and take proper corrective action
• Calculate different capital budgeting evaluation techniques as included in a capital expenditure proposal
• Utilize cost-volume-profit analysis in making budgeting decisions

Target Audience

All managers, supervisors and analysts who prepare or use management budgets.

Target Competencies

• Interpreting Financial statements
• Planning and budgeting
• Cost control
• Capital budgeting
• Applying cost-volume-profit analysis
• Utilize breakeven analysis

Key Course Outline

DAY 1

• Planning and the functions of management
  • The critical functions of management
  • Aligning the budget with the organization’s strategy
  • Road map to strategy
  • Budget as a planning tool
  • Control: the missing link
  • Planning pitfalls
• The key financial statements
  • The accounting system
  • The income statement
  • The balance sheet
  • The cash flow statement
• Budgeting: process and approaches
  • The advantages of budgeting
  • The budget process
  • Rolling budgets
  • The master budget
  • Operating and capital budgets
  • The budgeted financial statements
  • Approaches to budgeting:
    • Incremental budgeting
    • Zero based budgeting
    • Flexible budgeting
    • Kaizen budgeting and continuous improvement
    • Activity based budgeting
  • Tools of forecasting
  • Direct and indirect costs
  • Characteristics of an effective budget
  • Problems in budgeting

DAY 2

• Cost control
  • Budget as a control tool
  • The control process
  • Characteristics of an effective control system
  • Responsibility reporting
  • Variance analysis: identifying the components of variance
  • Variance analysis: taking the corrective action
• Capital expenditure budgeting and analysis
  • Time value of money
  • Simple versus compound interest
  • Identifying and analyzing cash flows
  • The discount rate: using cost of capital
  • Net Present Value (NPV)
  • Internal Rate of Return (IRR)
  • Profitability Index (PI)
  • Pay-Back Period (PBP)
  • Accounting Rate of Return (ARR)
  • Approval for Expenditure (AFE)
  • Sensitivity and risk analysis
• Cost-Volume-Profit analysis (CVP)
  • Identifying the fixed costs and variable costs
  • Computing breakeven point in units
  • Computing breakeven point in sales
  • Assumptions of CVP analysis

Using CVP in budgeting decisions