Effective Budgeting and Cost Control

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