Accounting and Finance

Effective Budgeting and Cost Control

Why Attend

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 tools required to making long-term 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
  • Utilizing breakeven analysis
Effective Budgeting and Cost Control

Course Outline

  • Planning and the functions of management
    • The critical functions of management
    • Aligning the budget with the strategy of the organization
    • 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
  • 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
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