(planning and budgeting process). session will provide participants an introduction to the planning...
TRANSCRIPT
Successful Financial Management
(Planning and Budgeting Process)
Session will provide participants an introduction to the planning and budgeting process. At the end of the session, participants will understand a typical institutional planning process, the role of budgeting in the overall planning process, and how to manage your unit’s budget.
Planning ProcessWhy Do We Need to Plan?
European Vacation
Purpose of Planning
• To assist the entity in designing and then achieving its mission, goals and objectives.
• To identify and allocate the resources needed to achieve our goals, and to help us avoid risks.
Benefits of a Well-Structured Planning Process
• Clearer direction and purpose
• Increased accountability (taking ownership of actions & outcomes)
• Tool to measure success
• Ability to deal with change and unknowns
Strategic Planning
• Clearly defining the mission and vision statement for the organization
• Identifies where we are going and how we will get there
• Strategic plans are long term, flexible, and involve many levels of the organization.
Types of Organizational Planning
Operational Planning
• Operational plans are short term and narrow in scope, dealing with the operational activities of the organization.
• Annual operating budgets are derived during the operational planning phase.
Budgeting ProcessWhat is Budgeting?
"A budget is just a method of worrying before you spend money, as well as
afterward."— Unknown
What is Budgeting?
• The continuous cycle of planning and evaluation used by an entity in order to achieve the stated goals and objectives of the organization.
• The process of allocating a finite amount of resources to the prioritized needs of the organization.
• A tool we use to control spending decisions.
Why is Budgeting Important to the Entity?
• A comprehensive planning process is vital due to the scope and diversity of operations conducted in higher education.
• Budgeting improves decision making by delegating spending authority and providing accountability.
• Budgeting allows management to monitor where the organization is by tracking and evaluating spending decisions.
Who is Involved in the Budgeting Process?
Board of Directors
Budget Committee
Budget Director, Budget Office
Vice Presidents, Deans
Directors, Managers, Other Unit Leaders
Capital Budget
•Requests for large assets which create major demands on an entity’s cash flow•Buildings, renovations, automobiles, software systems, furniture•Purpose to allocate funds, control risks in decision making, and set priorities
Operating Budget
•Revenues and expenses for the various cost centers within the organization•Budgeted amounts divided into major categories such as revenues, salaries, benefits, and non-salary expenses.•Encompasses supporting information such as staffing and head counts
Cash Budgets
•An estimation of the cash inflows and outflows for a specific period of time. •Used to assess whether the entity has sufficient cash to fulfill regular operations•Identifies whether too much cash is being left in unproductive capacities
Types of Budgets
Planning
Communication
Budgeting Process
PlanningCommunication
Establish Program
Objectives
Develop Detailed Budget
Budgeting Process
PlanningCommunication
Establish Program
Objectives
Develop Detailed Budget
Compilation and Revision
Budget Committee Review and
Approval
Budgeting Process
PlanningCommunication
Establish Program
Objectives
Develop Detailed Budget
Compilation and Revision
Budget Committee Review and
Approval
Board Approval
Implementation and
Management
Budgeting Process
Not establishing program objectives
prior to building the budget
Preparing a budget that is based
solely on prior year numbers
Over-estimating revenues or
under-estimating expenditures
Spreading expenditures
evenly over the fiscal year
Not planning for one–time
expenses
Not budgeting for reserves
(auxiliary operations)
Ignoring a well-prepared
budget
Common Budgeting Mistakes
“It is always better to know where your money is
supposed to go rather than asking where it
went.” — Unknown
Financial Reporting and Monitoring
The budget is done…What do we do next?
Financial Reporting
The process of providing information to assist users in comparing planned revenue and expenses to actual revenue and expenses.
Financial Monitoring
Review and analysis of the financial statements to determine whether resources were used in accordance with the adopted budget and whether the unit was effective in obtaining the stated goals and objectives.
Responsible Financial Management
• Be knowledgeable of your budget. If you don’t build your own budget, make sure you understand what assumptions were used.
• Use a budget worksheet or the available financial statements to monitor your revenues and expenditures
• Identify potential risks to your budget as early as possible. Keep your supervisors informed.
Responsible Financial Management
You are a steward of the university’s resources, so handle your unit’s budget as if it were your own checkbook.
Disclaimer: This is not our travel policy!
Recession Humor
Due to the current financial situation, changes will be made to the Business Travel standards and Procedures Manual. Effective Monday, the following revised procedures apply:
Lodging All employees are encouraged to stay with relatives and friends while on
business travel. If weather permits, public areas such as parks should be used as temporary lodging sites. Bus terminals, train stations, and office lobbies may provide shelter in periods of inclement weather.
Transportation Hitchhiking is the preferred mode of travel in lieu of commercial transport.
Luminescent safety vests will be issued to all employees prior to their departure on business trips. Bus transportation will be used only when work schedules require such travel. Airline tickets will be authorized in extreme circumstances and the lowest fares will be used. For example, if a meeting is scheduled in Seattle, but the lower fare can be obtained by traveling to Detroit, then travel to Detroit will be substituted for travel to Seattle.
Corporate Cost-Cutting Policy
Meals Expenditures for meals will be limited to an absolute minimum. It should be
noted that certain grocery and specialty chains such as Costco and Sams stores often provide free samples of promotional items. Entire meals can be obtained in this manner. Travelers should also be familiar with indigenous roots, berries, and other protein sources available at their destinations. If restaurants must be utilized, travelers should use "all you can eat" salad bars. This is especially effective for employees traveling together as one plate can be used to feed the entire group.
Miscellaneous All employees are encouraged to devise innovative techniques in effort to
save company dollars. One enterprising individual has already suggested that money could be raised during airport layover periods which could be used to defray travel expenses. In support of this idea, red caps will be issued to all employees prior to their departure so that they may earn tips by helping others with their luggage. Small plastic roses and ball point pens will also be available to employees so that sales may be made as time permits.
Corporate Cost-Cutting Policy (continued)
Fred Nesler, Creighton University Budget Director
Ron Rael, “Creating Great Budgets: A Review of Budget Basics” (an AICPA CPE Express Course)
NonProfits Assistance Fund: NAF Financial Foundations
Credits