Forecasting and budgeting with Carl Weldon CEO, BAHA and Debra Adams, arena4finance

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Forecasting and budgetingwith Carl Weldon CEO,
BAHAand Debra Adams, arena4finance
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Budgeting and forecasting some thoughts

• Companies can take at least six months to prepare
  a budget and the other six months ignoring it.
• Budget preparation average of 110 days start to
  finish (1995 Price Waterhouse study)
• Managers view budgeting as an exercise in
  negotiation and trading of targets..
• In a changing business environment what is the
  point of budgeting and planning?
• The value is in the process ?

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The trouble with Budgets is

• Seen as a Finance dictatorship with little
  local relevance
• Dependent on support (IT Human)
• Detailed
• Unpredictable - iterations, direction

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Planning your journey

• Would you start out on a long journey to a new
  destination without a route map?

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First some key questions!

• Why are we in business?
• What are we trying to achieve ?
• Who is interested in how our business performs?

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How much profit should we make?

• As much as possible?
• More than last year?
• To meet or make more than budget?
• Depends on the sales?
• What about cash flow?

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The Plan
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Whos in the loop?

• Shareholders
• Suppliers
• Community

• Employees
• Managers
• Government

Performance
Customers ?
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Steps in the planning process

• Determine overall objectives
• ?
• Sales and marketing plan
• ?
• Determine rooms revenue
• ?
• Food and beverage revenue / Other revenue
• Cost of sales/Margins
• ?
• Payroll
• ?
• Other departmental expenses - variables
• ?
• Administration and other areas
• ?
• Fixed / Property costs
• ?
• Capital expenditure budget - effects
• ?

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Lets get serious!

• Predicting revenue
• Selling price
• Volume (New / Repeat customers)
• Sales mix
• Capacity management
• Understanding the cost base
• Direct / Indirect costs
• Fixed and variable costs
• Use of Technology - spreadsheets

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Predicting Revenue

• Factors which drive performance
• Make a list of the trends, economic
• factors and competitive influences that
• you think will effect your business over the
• next twelve months.
• Note your assumptions clearly

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How will these factors effect your business?

• Labour markets
• Competition
• Economy
• Suppliers

• Government
• Demographics
• Socio-cultural
• Technology

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Understanding the cost structure

• Direct and indirect costs
• product or department orientated costs vary
  with sales
• Overhead costs
• Variable costs and fixed costs
• attempts to reflect how cost changes with volumes
  of business

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Understanding how we performed

• There are many potential causes for
• variances between actual and planned
• economic, social, legal and political changes
• changes in competition
• changes in supply conditions
• changes in operating systems
• inefficiencies

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Asking the right questions

• What are we trying to do?
• What is stopping us from doing it?
• What can we do about it?
• Do you know more about your business than when
  you started ?