Effective Budgeting and Cost Control

Program Objectives:

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

  • Demonstrate how the budget relates to the key financial statements: balance sheet, income statement, and cash flow.
  • Prepare a budget consistent with the organization’s strategic plan.
  • Use appropriate estimation techniques in the development of revenue and expense budgets.
  • Identify all the appropriate costs to be included in a capital expenditure proposal.
  • Apply cost control tools, analyze management variance reports and take proper corrective action.

Who should attend:

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

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

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

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