The Budget Process - DRAFT

Transcription

1 Doug Neeper (925) The Budget Process - DRAFT August 2012

2 Overview This document outlines a process to follow in producing an annual budget. It lists questions which should be asked and answered during the budget process. It outlines a typical budget calendar. The calendar could appear to be daunting; I've beat these timelines at Calpine, NextG and Solar Millennium; we started mid September and finished mid December (90 days). At AT&T Broadband we started in September and finished mid January (120 days) tying this calendar. Doug Neeper (925)

3 Budget Truisms There are certain 'universal' truths inherent in a budget process: Whoever submits a budget needs to 'do' the budget The budget process drives consensus regarding the future Budgets will not be achieved; they're a target, a direction Forecast is a budget at more frequent intervals, includes actuals Gradual change will succeed, cataclysmic change will fail Excel can and should be replaced by mechanized planning tools FYI - ideas in this whitepaper are a starting point not an end point Doug Neeper (925)

4 Methodology I've tried to group questions in a logical fashion. As you're going through the budget process remember to keep the budget truisms in mind as you incorporate answers to questions into your budget process. Doug Neeper (925)

5 Procedural questions Is there an existing budget process? What purpose(s) does the budget process serve? Is management happy with the current process? Who is the audience for the budget (management, directors, creditors, etc.)? What type of budget presentations will have to be made? What's the level of tolerance for variances to budget? What will be done with actual / budget variance information? Who are the key players in the budget process? What are the deliverables inherent in the budget? How will headcount be address in the budgeting process? What objectives / strategies need to be worked into the budget? What's the executive calendar over the next year? What's the board of directors calendar over the next year? Doug Neeper (925)

6 System questions What accounting system is being used? Will the accounting system need to be changed to accommodate the budget? What budget tool is being used to manipulate budget? What reporting system is being used? What interfaces exist between accounting, budget & reporting systems? Do the interfaces between accounting, budget and reporting work? Will there be a need for a high level corporate planning model? Does the corporate planning model already exist? Does the company have an investment valuation process? Is the investment valuation process tied in with the budget process? How? Is there a 'tracking system' to gauge relative success of investments? Doug Neeper (925)

7 Structural questions Will the company budget, or budget & forecast? At what intervals will the company forecast? Which financial statements / statistics / KPIs will be budgeted / forecasted? What reports will need to be produced? What frequency? What period does the budget cover (1 year, 2 years, 5 years, etc?) What time periods are budgeted (i.e., weekly, monthly, quarterly, annual)? What is the company's structure (subsidiary, division, departments, etc.)? What is the company's chart of accounts? What are examples of the company's current financial statements? Will the budget be at the chart of accounts level or higher? Does the chart of accounts need to be altered to facilitate budget? Will the budget process involve allocations? How will allocations be determined? Doug Neeper (925)

8 Process questions Does the company have / need budget guidelines? Will there be a need for multiple versions of the budget? Will actuals be compared to budget? In what level of detail? What reports? What is the overall deadline for getting the annual budget done? How will the budget submissions be collected? How will the budget submissions be fed back to budget entities? Doug Neeper (925)

9 Sample budget calendar Key Dates Week# Day Date Primary Goal 8 Monday 10/22 Start budget submissions process 12 Wednesday 11/21 Second draft presented to CEO/CFO 16 Friday 12/21 Initial Board budget presentation 20 Tuesday 01/15 Final Budget presented to CEO/CFO 20 Friday 01/18 Final Board budget presentation Doug Neeper (925)

10 Sample budget calendar Weeks 1 & 2 Week# Day Date Primary Goal 1 Monday 09/03 Labor Day (Holiday) Tuesday 09/04 FP&A group review calendar Wednesday 09/05 Begin budget meetings (details to follow) Thursday 09/06 Calendar key dates with Executives Friday 09/07 Calendar key dates with Board 2 Monday 09/10 Begin work on budget guidelines Tuesday 09/11 Begin draft budget presentation Wednesday 09/12 Begin accounting system work Thursday 09/13 Begin budget system work Friday 09/14 Begin corporate planning model work Friday 09/14 Begin financial reporting system work Doug Neeper (925)

11 Sample budget calendar Weeks 3 & 4 Week# Day Date Primary Goal 3 Monday 09/17 FP&A group review guidelines Friday 09/21 End budget meetings Friday 09/21 Begin work on budget 'templates' Friday 09/21 Begin work with HR regarding headcount 4 Monday 09/24 Finalize budget guidelines & calendar Monday 09/24 FP&A group review budget presentation Tuesday 09/25 Prepare budget package for CFO Wednesday 09/26 Review budget package with CFO Thursday 09/27 Share budget package with key persons Friday 09/28 FP&A group stress test budget system Friday 09/28 FP&A group stress test budget templates Doug Neeper (925)

12 Sample budget calendar Weeks 5 & 6 Week# Day Date Primary Goal 5 Monday 10/01 Distribute budget guidelines & calendar Tuesday 10/02 Test accounting system upload/download Wednesday 10/03 Test budget system upload/download Thursday 10/04 Test reporting system upload/download Friday 10/05 Socialize budget 'templates' 6 Monday 10/08 Design key financial statement reports Tuesday 10/09 Design key performance indicator report Thursday 10/11 FP&A group stress test budget process Friday 10/12 Incorporate feedback re 'templates' Doug Neeper (925)

13 Sample budget calendar Week 7 Week# Day Date Primary Goal 7 Monday 10/15 Begin budget training Tuesday 10/16 End accounting system work Wednesday 10/17 Finish work with HR regarding headcount Friday 10/19 End budget training Friday 10/19 Incorporate HR changes into 'template' Friday 10/19 Finalize budget 'template' Friday 10/19 Distribute final budget 'template' Friday 10/19 End work on budget programs Friday 10/19 End work on reporting system Doug Neeper (925)

14 Sample budget calendar Weeks 8 & 9 Week# Day Date Primary Goal 8 Monday 10/22 Start budget submissions process Tuesday 10/23 Provide support re budget template Wednesday 10/24 Start modeling 2013 in CPM 9 Monday 10/29 FP&A group offsite Tuesday 10/30 Provide support re budget template Doug Neeper (925)

15 Sample budget calendar Weeks 10 & 11 Week# Day Date Primary Goal 10 Monday 11/05 Follow-up work on budget system Tuesday 11/06 Provide support re budget template Friday 11/09 Finish modeling 2013 in CPM 11 Monday 11/12 Initial budget submissions due Wednesday 11/14 First budget rollup Thursday 11/15 First draft budget package Thursday 11/15 FP&A group review first draft Friday 11/16 Review first draft budget with CFO Doug Neeper (925)

16 Sample budget calendar- Weeks 12 & 13 Week# Day Date Primary Goal 12 Monday 11/19 Revisions to first draft budget package Tuesday 11/20 Finalize second draft budget package Wednesday 11/21 Second draft presented to CEO/CFO Thursday 11/22 Thanksgiving (Holiday) Friday 11/23 Day after Thanksgiving (Holiday) 13 Monday 11/26 Feedback to organizations re budgets Tuesday 11/27 Redistribute budget templates Wednesday 11/28 Begin second round budget templates Doug Neeper (925)

17 Sample budget calendar- Weeks 14 & 15 Week# Day Date Primary Goal 14 Monday 12/03 Provide support for budget resubmissions Friday 12/07 Revised budget submission due 15 Monday 12/10 Consolidate budget resubmissions Tuesday 12/11 Revise budget package Tuesday 12/11 FP&A group review budget package Wednesday 12/12 Review revised budget with CFO Thursday 12/13 Review revised budget with CEO/CFO Thursday 12/13 Send budget to entire management team Friday 12/14 Budget presentation to mgmt. team Doug Neeper (925)

18 Sample budget calendar- Weeks 16 & 17 Week# Day Date Primary Goal 16 Monday 12/17 Revise budget presentation Tuesday 12/18 Review budget with CEO/CFO Wednesday 12/19 FedEx budget package to Board Thursday 12/20 Dry-run Board presentation Friday 12/21 Initial Board budget presentation 17 Monday 12/24 Revise budget templates as appropriate Tuesday 12/25 Christmas (holiday) Wednesday 12/26 Day after Christmas (holiday) Thursday 12/27 Budget feedback to organizations Friday 12/28 Redistribute budget templates Friday 12/28 Begin final work on budget templates Doug Neeper (925)

19 Sample budget calendar- Weeks 18 & 19 Week# Day Date Primary Goal 18 Monday 12/31 Provide budget template support Tuesday 01/01 New Years Day (holiday) Wednesday 01/02 Revise budget presentation Friday 01/04 Provide budget resubmission support 19 Monday 01/07 Finalize budget presentation package Wednesday 01/09 Budget templates due Friday 01/11 Consolidate budget resubmissions Doug Neeper (925)

20 Sample budget calendar- Weeks 20 & 21 Week# Day Date Primary Goal 20 Monday 01/14 Finalize budget presentation Monday 01/14 FP&A group review budget presentation Tuesday 01/15 Final Budget presented to CEO/CFO Wednesday 01/16 FedEx presentation to Board Thursday 01/17 Dry-run Board presentation Friday 01/18 Final Board budget presentation 21 Monday 01/21 Upload budget to accounting system Tuesday 01/22 Upload budget to reporting system Wednesday 01/23 Test reports in accounting system Thursday 01/24 Test reports in reporting system Friday 01/25 FP&A review of 2013 process & BBQ Doug Neeper (925)

21 Budget outputs Corporate planning model Project Tracking system Financial statements (P&L, BS, CF) budget vs. actuals Dashboards / KPIs Investment portfolio Headcount plan / budget Budget presentation Doug Neeper (925)

22 Budget definitions Budget "template" - vehicle through which budget is collected / submitted Budget package - guidelines, calendar and draft presentation Budget program - Excel, Cognos, Essbase, Planning, webkpi, Netsuite Reporting package - Crystal report, Business Objects, FRx, Netsuite Accounting system - Oracle, SAP, PeopleSoft, Epicor, MAS, QB, Netsuite Budget system - templates; budget package; budget, acct. or rept. programs Doug Neeper (925)

23 Content for budget meetings FP&A team will meet in the first couple of weeks of the 2013 budget process with all of the key stakeholders. Discussion items to include: 1. Status 11. How are investments choices made 2. Timing 12. Past valuations 3. Key contacts 13. Organizational structure, changes 4. Expense & capital costs, drivers 14. Funding sources / use of funds 5. Revenue projections, contracts 15. Corporate planning calendar 6. Roll out plans 16. Corporate planning contacts 7. Operating locations and offices 17. Corporate structure 8. Key challenges 18. Current headcount and hiring plans 9. Projects in queue, or on the horizon 19. Key performance measures 10. What's good / bad about processes 20. Feedback regarding budget meeting Doug Neeper (925)

24 Content budget training meeting FP&A group will conduct training session on how to use the budget template. Training will include: 1. Overall timeline 2. Template 3. Budget program 4. Draft Board package 5. I-800-CALL-FP&A Doug Neeper (925)

25 Personal Goals in the budget process Better understand systems and processes Better understand industry / company Better understanding of funding sources / uses of funds Doug Neeper (925)

26 Budget program philosophy I'm on the fence regarding replacing excel with another budget program. Yes I understand Excel based budgets are difficult to manage and error prone, time intensive to manage. The allure of a mechanized budget programs is they do away with all these flaws. To my way of thinking, Excel is a 'universal language' while programming in Essbase or Adaptive Planning or Netsuite (just to name a couple of Excel alternatives) is a specialized language. Everyone knows excel, few know Netsuite. Consequently you may be trading one set of problems for another. The choice of budget program, which is best, boils down to who you have managing the process. Doug Neeper (925)

27 Bio Managed budget process at AT&T Broadband (SF Bay Area regional head quarters); Managed budget process at Calpine, NextG Networks and Solar Millennium. Managed the business case process at SBC; creator of planning models for AT&T Broadband, SPL Worldgroup, NextG Networks and Solar Millennium LLC. MBA from UCLA (Finance) and BA from UCSD (Economics). Doug Neeper (925)

28 Budget - Ready for another season? Doug Neeper (925)