Contents

About the author

Acknowledgements

Introduction

Part 1 Preparing your budgets

1 What is the budget for?

Introduction

The role of budgets – why do we have them?

1 Meeting the organisation’s objectives

2 Planning

3 Monitoring and controlling

4 Co-ordinating

5 Evaluating performance

6 Improving performance

7 Motivating managers

8 Management contract

9 Communicating

10 Providing a basis for authorising expenditure and delegating responsibility

11 Identifying scarce resources

12 Allocating resources

13 Demonstrating and delivering good corporate governance

Linking budgets to strategy and policy

Budgets for special purposes

Planning periods

2 What is a forecast and how does it differ from a budget?

What is the difference between a budget and a forecast?

Benefits of forecasting ‘beyond the wall’

Forecasts, projects and contracts

Forecasting tools and techniques

Sales forecasting

Quantitative forecasting using Microsoft Excel

Useful Excel tools

Forecast frequency and automation

Measuring and improving forecast accuracy

Forecast financial statements

New product sales forecasting

Other factors to consider in sales forecasts

3 Essential background financial skills for budgeting

Cheaper is not always better: cost and value in budgeting

Accruals, cash and commitment accounting and budgeting

Understanding profit and loss account figures

Review of accruals accounting

Direct and indirect methods of producing cash flow accounting

The balance sheet

The master budget

Costs

Value analysis and value engineering

Activity based costing (ABC)

The breakeven model

Cost structure

Capital expenditure planning

4 How should the budget be built?

Introduction

Building budgets

Incremental budgeting

Zero based budgeting

Activity based budgeting

Should budgets be top-down or bottom-up?

Fixed v flexible budgets

External comparison driven budgets

VFM, outcome orientated and evidence based budgets

The power of evidence in protecting budgets

Good budgeting practice and ideas for constructing a budget

Setting budgets for contingencies

The challenge process

Building budgets and performance measurement

The budget game

Presenting budgets

5 How should cash be budgeted and controlled?

Planning systems and cash flow forecasting

Managing working capital – cash and risk

Managing trade debtors (accounts receivable)

Managing stock (inventory)

Managing trade creditors (accounts payable)

Cash flow in a business

6 How should capital expenditure be budgeted for?

What is capital expenditure?

The payback rule

NPV and DCF

Capital rationing: profitability index

Strategic fit and ‘roadmaps’

Sensitivity analysis

Risk

Post-investment appraisal

Long-term cash flow planning

Asset rep

Financial Times Essential Guide to Budgeting and Forecasting, The: How to Deliver Accurate Numbers, 1st edition

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