Title: George Dfouni's business budget development practice in New York
1George Dfouni Best ways of improving business
budget development in New York.
2Developing a business budget is an exercise that
each one accountant undertakes on an annual basis
and which forms an integral part of any
successful business planning. George Dfouni, a
professional budget developer discusses the whole
process below.
3Presentation Outline
- An Overview of Budgeting
- The Master Budget and Selected Budget Formats
4I. An Overview of Budgeting
- The Stages of Budgeting
- Developing the Budget
5A. The Stages of Budgeting
- Planning
- Control
61. Planning
- The budget process forces managers to consider
carefully their goals and objectives and to
specify means of achieving them.
72. Control
- Budgets provide a means of evaluating
performance. Potential causes of significant
deviations from budgets include - Budget was poorly conceived.
- Conditions have changed since the budget was
prepared. - Managers have done a particularly good or poor
job.
8B. Developing the Budget
- The Budget Committee
- The Budget Time Period
- Zero Base Budgeting
91. The Budget Committee
- Various budgets are approved by a budget
committee that is composed of senior managers
such as the president, CFO, VP of operations, and
the controller. Budgets may be developed with
either a top-down or bottom-up approach.
102. The Budget Time Period
- Budgets may cover a variety of time periods
including a month, quarter, year, or even longer.
Generally, longer budget periods provide less
detail.
113. Zero Base Budgeting
- Budgets are often adjusted up or down on the
basis of a previous period adjusted for current
conditions. Zero base budgeting requires that
all budget amounts be currently justified even if
they were supported in prior budgets. Due to the
cost of the process, this zero base budgeting is
often not used in business.
12II. The Master Budget and Budget Formats
- A Formal Summary of Company Plans
- Selected Budget Formats
The master budget coordinates the organizations
activities.
13A. A Formal Summary of Company Plans
- It sets specific targets for sales, production,
selling and admin., and capital acquisitions. - It culminates a budgeted income statement,
balance sheet, and cash receipt and disbursement
summary.
14III. Selected Budget Formats
- Sales Budget
- Production Budget
- Direct Materials Budget
- Direct Labor Budget
- Overhead Budget
- Cash Receipts and Disbursements Budget
15A. Sales Budget
Projected sales
x Selling price per unit
Budgeted sales revenue
16B. Production Budget
Budgeted sales in units
Desired ending inventory of finished goods
Total needs
- Beginning inventory of finished goods
Units to be produced
17C. Direct Materials Budget
Units to be produced
x Cost of parts per unit
Cost of parts needed for production
Desired ending inventory of parts
Total needed
- Beginning inventory of parts
Cost of purchases
18D. Direct Labor Budget
Direct labor hours per unit
x Labor rate per hour
Direct labor cost per unit
x Units to be produced
Total direct labor cost
19E. Overhead Budget
Units to be produced
x Variable costs per unit
Total variable overhead
Budgeted fixed overhead
Total budgeted overhead
- Noncash expenses
Cash disbursements for overhead
20F. Cash Receipts and Disbursements Budget
Cash receipts
- Cash disbursements
Excess (deficiency) of cash
available over disbursements
Beginning cash balance
Ending cash balance
21IV. Static v. Flexible Budget
- Static Budget
- Static Budget Illustration
- Flexible Budget
- Flexible Budget Illustration
22A. Static Budget
Why are we so off from budget?
- A budget designed for only one level of activity.
Differences from the budget can be misleading
when an organization actually operates at a
different level of activity.
23C. Flexible Budget
- A budget designed to cover a range of activity.
Can be used to compare actual costs incurred to
budgeted costs around that level of activity.
24Summary
- Planning and control stages of budget
- Budget committees, time periods, zero based
budgeting - Formal plan culminating in projected financial
statements - Budget formats
- Static and flexible budgets
25Success in business budgeting is well achieved in
companies that have good corporate governance
structures and according to George Dfouni, every
organization should hire a budget developer for
the betterment of their work.
26THANK YOU