Video 1 - Results Analysis

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En provenance du cours de Fundação Instituto de Administração

Budgeting essentials and development

23 notes

Fundação Instituto de Administração

Budgeting essentials and development

23 notes

The Budgeting Essentials and Development course focus on an integrative and practical view of concepts, methods, and techniques to develop a budget. After finishing this course, learners will be able to: - Develop the budget with a broad view of the corporate functions; - Integrate the strategic guidelines into the discussions of budgeting process; - Structure the budget planning and development in a logical sequence - Coordinate the project of budget planning with the different areas of the company - Actively promote assumptions discussions to improve the process of developing the budget - Apply financial concepts to support the budget planning process - Design a budget monitoring and control model to support the performance management - Evaluate the performance of the company by managing the results and the budget In this course, learners will have a deeper understanding of the budgeting process, its challenges, common issues, and approaches to mitigate the problems and improve the learning curve of budget planning. It is integrative by emphasizing the transition between the corporate strategy and the budget. It is practical by following a structured process of going through a framework that illustrates and demonstrates how to analyze, develop and control the budget.

À partir de la leçon

MODULE 5 - Budget control

This module focuses on the “control” side of the budget. We understand how to apply concepts, and will be guided on how to monitor and measure results, analyze and evaluate the potential gaps between actual and estimated outcomes.

Video 1 - Results Analysis4:08

Video 2 - Goals achievement and performance management7:17

Rencontrer les enseignants

Alberto Sansiviero Jr.
MBA
FIA Futures Studies Program
Samantha Mazzero
MSc, MBA, BS Math
FIA Profuturo – Futures Studies Program
Nelson Yoshida
Ph.D., MBA, B.Eng.
FIA Profuturo – Futures Studies Program
Roberto Dumas Damas
M.Sc., CFA
FIA Profuturo - Futures Studies Program
Fernando Fleury
Ph.D.
FIA Profuturo - Futures Studies Program

Hello, and welcome back.

In this lesson, we will discuss a little more on result analysis.

We have already discussed variations in previous lessons,

but let's take a while to go a little further on this subject.

As we have already seen,

once you create your budget,

you should compare it to actual results to measure performance.

There are a number of different reporting formats designed to provide

management with the information required to address unfavorable of budget variances.

We will look at several variance calculations,

but I would like to point out that it doesn't mean that you should

create a reporting structure that contains all sorts of variances identified.

Based on my experience,

I would suggest focusing your efforts on analyzing and

understanding a limited number of variances at a time, and the reasons for that.

Your conclusions should then be expressed on an easy to read kind of report,

in which the causes of the variances are clearly indicated,

so that management can immediately act upon them.

You should rotate your focus on

different parts of the financial statements in following periods,

looking for new opportunities,

and bringing them up for discussion.

Let's have a quick look at a financial statement comparing budget and actual results.

This income statement report shows monthly actual results compared to budget results.

This report reveals the presence of variance but not the reason for the variance.

Therefore, you need to find out the best way to present relevant information,

and a good way to start is to look at

more detailed information on specific departments of your company.

Let's analyze a detailed report of the marketing department.

This report presents detailed information

on each expense line of the marketing department,

and once again, compares actual results to budget.

When you look at the list of expenses,

you might take a while to find out what are the most relevant items,

but you could prepare a variation of

this report in order to highlight the most relevant information.

When you rank your list from the largest value items at the top,

to the lowest value items at the bottom,

the items in which variances are likely to be the largest will be at the top,

where anyone could easily see them.

You could choose an alternative format presenting

a historical trend line of revenues and or expenses.

This will be especially useful if your budget presents inaccurate figures.

Trend line reports are based on the assumption that

values should not vary too much from month to month,

or from period to period.

Hence, this format is very useful to expense analysis.

No matter which report format you decide to use,

it's rarely sufficient to simply look at financial information.

Larger variances will require some sort of explanation,

and you should be ready to provide them.

Variance discussion reports could help you provide

explanations about the larger variances identified.

You should highlight the amount of each expense or

revenue item that required explanation,

describe the situation, and the recommendation.

In addition to the reports already presented,

you should also consider preparing revenues reporting in which,

you should analyze the selling price variances and sales volumes variances,

in order to find out the causes of those variances.

On the other hand,

it's really important to analyze and report the cost of goods sold,

purchase price, labor rate,

labor efficiency, and overhead variances among others.

Well, that's all for now.

On the following video,

we'll discuss goals achievement and performance management. Stay tuned.

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