2015 Budget Information Session

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Prepared by Olalekan, lekincool@yahoo.com .ng

 Our Mission & Vision Statements and Our Core Values

Our Vision is:

Our Mission is:
State Vision Statement here.
State Vision Statement here

Why do we exist?
Our Core Values
List out Core Values here
How do we achieve our mission?

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Our Strategic Objectives

XYZ
1) Grow Revenue by 30%
Company
Strategic
Objectives 2) Achieve a Net Profit Margin of 15%

3)

4) ..

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 Business Goals & Annual Budget

Business Goals are steps an organization takes to implement its strategic plan
Accountability for achieving goals
Business Plan
The goals need to be funded by the budget - the budget provides the financial resources
to achieve goals.

Annual budget is formal operating plan expressed in financial terms. i.e. estimation of the
revenue and expenses over a specified future period of time (a year) and is compiled and
re-evaluated on a periodic basis
It incorporates all the operating and the financial decisions of an organization.
Budget Departmental budgets are the basis for the organizations annual budget.
The annual budget provides a single map explaining how the organization intends to earn
Streamline profits and positive cash flow for the coming period.
the It helps different departments of the organization to coordinate their activities so that
expenditure together they can meet the overall goals and objectives of the organization in the
process budgeted period.

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 Types of Budget

Incremental budgeting involves taking last years figure and
adding a bit on for inflation or whatever, or even taking a bit
off, due to perhaps, downsizing.
Zero-based budgeting (ZBB) is a method of budgeting in
which all expenses must be justified for each new period.
Surplus budget means profits are anticipated.
Balanced budget means that revenues are expected to equal
expenses.
Deficit budget means expenses will exceed revenues.

Factors to Consider
Industry Trends and other trends
Data
Overall economic outlook of the market
(inflation, interest rate, etc.)
Consumer confidence
Policies
Technology
Regulation

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 Benefits of Annual Budget
It sharpens employees
It sharpens employees understanding of It helps organization to avoid surprises and
understanding of organizational
organizational goals maintain fiscal control
goals Importance
Set Targets
It helpsIttohelps
maketochoices
make choices for
for optimum It show shareholders how their funds are Communicate priorities
optimum
utilization utilization of resources
of resources utilized Control spending
Eliminate turf wars
Safeguards
Safeguards the organization
the organization againstagainst Provides a profit margin
Financial Discipline - control over finances
misappropriation
misappropriation of fundsof funds

Performance Measurement Cost Governance

It gives business managers the real picture

It facilitates discussion of the

financial realities of the organization

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 Parts of Annual Budget

1 Operating Budget
2
CAPEX Budget
This includes expenditure on AMR
(addition, modification and
replacement) schemes
3 Cash Budget

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 Component of Annual Budget

Revenue It is based on historical financial performance, as well as projected income growth. The projected growth may be tied to
Projections organizational goals and planned initiatives that will initiate business growth.

Variable
Cost Costs which vary with change in volume or scale of activities (e.g. supply costs, overtime costs). They fluctuate from month to
Projections month, supply costs, overtime costs, etc. These are expenses that can and should be budgeted and controlled.

Fixed Cost
Projections These are costs which do not vary with change in the volume or scale of activities.

Annual
Goal Each initiative should have projected costs associated with the goals. Projections of costs should be identified, laid out and
Expenses incorporated into the budget of the departmental that is responsible for completing the goal.

Capital of
Developm This includes expenditure on AMR.
ent Costs

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 Budget Review & Variance

Monitoring performance against

goals Efficient use of Scale of activities
resources
Review budget on monthly basis

Review budget variances and

assess issues associated with Causes of Adequacy of
Variance funding
variance
Economy
Three primary causes
of budget variance:
Extra Budgetary approval for
errors, changing significant out of budget
business conditions expense Changes in prices
and unmet
Competition
expectations.
Half year adjustments to reflect
reality

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 Annual Budget Cycle & Step
Budget Cycle Steps
Organize a budget briefing session with all Head of
1
Departments/Management team - Assumptions
Budget
Formulation
2 Circulate a budget template to be used by departments to submit their
forecast for 2017

3 Collate the forecast figures

Budget Budget
Oversight Approval 4 Organize a budget defence session to analyse and adjust the Draft Budget

Revise the budget numbers to reflect outcome of the budget defence

5
session

Budget Submit final budget for Executive Committee/Board of Directors

Implementation 6 comments and approval

7 Implement budget

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 Session to Analyse and Adjust the Draft Budget

Essential
Desirable
Justify Expenses Contain Expenses Make Compromise
Dispensable

Key Considerations

What are the activities or programs that will do the most to advance our goals?
What are the items that aren't essential to the running of the organization?
Will customers satisfaction be impaired?
What else will be needed (minimum resources) to run XYZ Company and its activities - space, supplies,
equipment, phone and utilities, insurance, transportation, etc.?

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 Projection and Assumptions

2015 2014 2013 2012 2011 2010 2015 Projection

Revenue Growth Xx Xx Xx Xx Xx Xx Revenue Xx
Gross Margin Xx Xx Xx Xx Xx Xx COGS Xx
Salaries Xx Xx Xx Xx Xx Xx
Xx Xx Xx Xx Xx Xx Operating Expenses
Rent & Service Charge Personnel Xx
Other Expenses Xx Xx Xx Xx Xx Xx Rent Xx
EBITDA Xx Xx Xx Xx Xx Xx Marketing Xx
Finance Cost Xx Xx Xx Xx Xx Xx IT and security Xx
Depreciation Xx Xx Xx Xx Xx Xx Professional fees Xx
Net Profit Xx Xx Xx Xx Xx Xx Repairs and maintenance Xx
Xx

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 Conclusion

The success of the budgeting process depends

on the cooperation of all departments and all
employees.

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The Consolidation of Profitability

2015 Budget .ng