The Budget Process - DRAFT · The Budget Process - DRAFT August 2012 ... 12 Wednesday 11/21 Second draft presented to CEO/CFO ... Sample budget calendar– Weeks 5 & 6 …

The Budget Process - DRAFT

August 2012

Doug Neeper (925) 451-4541 www.dougneeper.com

Overview

This document outlines a process to follow in producing an annual

budget. It lists questions which should be asked and answered

during the budget process. It outlines a typical budget calendar.

The calendar could appear to be daunting; I've beat these timelines

at Calpine, NextG and Solar Millennium; we started mid September

and finished mid December (90 days).

At AT&T Broadband we started in September and

finished mid January (120 days) tying this calendar.

Doug Neeper (925) 451-4541 www.dougneeper.com 1

Budget Truisms

There are certain 'universal' truths inherent in a budget process:

Whoever submits a budget needs to 'do' the budget

The budget process drives consensus regarding the future

Budgets will not be achieved; they're a target, a direction

Forecast is a budget at more frequent intervals, includes actuals

Gradual change will succeed, cataclysmic change will fail

Excel can and should be replaced by mechanized planning tools

FYI - ideas in this whitepaper are a starting point not an end point


Methodology


I've tried to group questions in a logical fashion.

As you're going through the budget process remember to keep the

budget truisms in mind as you incorporate answers to questions into

your budget process.

Procedural questions

Is there an existing budget process?

What purpose(s) does the budget process serve?

Is management happy with the current process?

Who is the audience for the budget (management, directors, creditors, etc.)?

What type of budget presentations will have to be made?

What's the level of tolerance for variances to budget?

What will be done with actual / budget variance information?

Who are the key players in the budget process?

What are the deliverables inherent in the budget?

How will headcount be address in the budgeting process?

What objectives / strategies need to be worked into the budget?

What's the executive calendar over the next year?

What's the board of directors calendar over the next year?


System questions

What accounting system is being used?

Will the accounting system need to be changed to accommodate the budget?

What budget tool is being used to manipulate budget?

What reporting system is being used?

What interfaces exist between accounting, budget & reporting systems?

Do the interfaces between accounting, budget and reporting work?

Will there be a need for a high level corporate planning model?

Does the corporate planning model already exist?

Does the company have an investment valuation process?

Is the investment valuation process tied in with the budget process? How?

Is there a 'tracking system' to gauge relative success of investments?


Structural questions

Will the company budget, or budget & forecast?

At what intervals will the company forecast?

Which financial statements / statistics / KPIs will be budgeted / forecasted?

What reports will need to be produced? What frequency?

What period does the budget cover (1 year, 2 years, 5 years, etc?)

What time periods are budgeted (i.e., weekly, monthly, quarterly, annual)?

What is the company's structure (subsidiary, division, departments, etc.)?

What is the company's chart of accounts?

What are examples of the company's current financial statements?

Will the budget be at the chart of accounts level or higher?

Does the chart of accounts need to be altered to facilitate budget?

Will the budget process involve allocations?

How will allocations be determined?


Process questions

Does the company have / need budget guidelines?

Will there be a need for multiple versions of the budget?

Will actuals be compared to budget? In what level of detail? What reports?

What is the overall deadline for getting the annual budget done?

How will the budget submissions be collected?

How will the budget submissions be fed back to budget entities?


Sample budget calendar– Key Dates

Week# Day Date Primary Goal

8 Monday 10/22 Start budget submissions process

12 Wednesday 11/21 Second draft presented to CEO/CFO

16 Friday 12/21 Initial Board budget presentation

20 Tuesday 01/15 Final Budget presented to CEO/CFO

20 Friday 01/18 Final Board budget presentation


Sample budget calendar– Weeks 1 & 2


1 Monday 09/03 Labor Day (Holiday)

Tuesday 09/04 FP&A group review calendar

Wednesday 09/05 Begin budget meetings (details to follow)

Thursday 09/06 Calendar key dates with Executives

Friday 09/07 Calendar key dates with Board

2 Monday 09/10 Begin work on budget guidelines

Tuesday 09/11 Begin draft budget presentation

Wednesday 09/12 Begin accounting system work

Thursday 09/13 Begin budget system work

Friday 09/14 Begin corporate planning model work

Friday 09/14 Begin financial reporting system work




3 Monday 09/17 FP&A group review guidelines

Friday 09/21 End budget meetings

Friday 09/21 Begin work on budget 'templates'

Friday 09/21 Begin work with HR regarding headcount

4 Monday 09/24 Finalize budget guidelines & calendar

Monday 09/24 FP&A group review budget presentation

Tuesday 09/25 Prepare budget package for CFO

Wednesday 09/26 Review budget package with CFO

Thursday 09/27 Share budget package with key persons

Friday 09/28 FP&A group stress test budget system

Friday 09/28 FP&A group stress test budget templates




5 Monday 10/01 Distribute budget guidelines & calendar

Tuesday 10/02 Test accounting system upload/download

Wednesday 10/03 Test budget system upload/download

Thursday 10/04 Test reporting system upload/download

Friday 10/05 Socialize budget 'templates'

6 Monday 10/08 Design key financial statement reports

Tuesday 10/09 Design key performance indicator report

Thursday 10/11 FP&A group stress test budget process

Friday 10/12 Incorporate feedback re 'templates'


Sample budget calendar– Week 7


7 Monday 10/15 Begin budget training

Tuesday 10/16 End accounting system work

Wednesday 10/17 Finish work with HR regarding headcount

Friday 10/19 End budget training

Friday 10/19 Incorporate HR changes into 'template'

Friday 10/19 Finalize budget 'template'

Friday 10/19 Distribute final budget 'template'

Friday 10/19 End work on budget programs

Friday 10/19 End work on reporting system




8 Monday 10/22 Start budget submissions process

Tuesday 10/23 Provide support re budget template

Wednesday 10/24 Start modeling 2013 in CPM

9 Monday 10/29 FP&A group offsite



Sample budget calendar–Weeks 10 & 11


10 Monday 11/05 Follow-up work on budget system


Friday 11/09 Finish modeling 2013 in CPM

11 Monday 11/12 Initial budget submissions due

Wednesday 11/14 First budget rollup

Thursday 11/15 First draft budget package

Thursday 11/15 FP&A group review first draft

Friday 11/16 Review first draft budget with CFO


Sample budget calendar- Weeks 12 & 13


12 Monday 11/19 Revisions to first draft budget package

Tuesday 11/20 Finalize second draft budget package

Wednesday 11/21 Second draft presented to CEO/CFO

Thursday 11/22 Thanksgiving (Holiday)

Friday 11/23 Day after Thanksgiving (Holiday)

13 Monday 11/26 Feedback to organizations re budgets

Tuesday 11/27 Redistribute budget templates

Wednesday 11/28 Begin second round budget templates




14 Monday 12/03 Provide support for budget resubmissions

Friday 12/07 Revised budget submission due

15 Monday 12/10 Consolidate budget resubmissions

Tuesday 12/11 Revise budget package

Tuesday 12/11 FP&A group review budget package

Wednesday 12/12 Review revised budget with CFO

Thursday 12/13 Review revised budget with CEO/CFO

Thursday 12/13 Send budget to entire management team

Friday 12/14 Budget presentation to mgmt. team




16 Monday 12/17 Revise budget presentation

Tuesday 12/18 Review budget with CEO/CFO

Wednesday 12/19 FedEx budget package to Board

Thursday 12/20 Dry-run Board presentation

Friday 12/21 Initial Board budget presentation

17 Monday 12/24 Revise budget templates as appropriate

Tuesday 12/25 Christmas (holiday)

Wednesday 12/26 Day after Christmas (holiday)

Thursday 12/27 Budget feedback to organizations

Friday 12/28 Redistribute budget templates

Friday 12/28 Begin final work on budget templates




18 Monday 12/31 Provide budget template support

Tuesday 01/01 New Years Day (holiday)

Wednesday 01/02 Revise budget presentation

Friday 01/04 Provide budget resubmission support

19 Monday 01/07 Finalize budget presentation package

Wednesday 01/09 Budget templates due

Friday 01/11 Consolidate budget resubmissions




20 Monday 01/14 Finalize budget presentation

Monday 01/14 FP&A group review budget presentation

Tuesday 01/15 Final Budget presented to CEO/CFO

Wednesday 01/16 FedEx presentation to Board

Thursday 01/17 Dry-run Board presentation

Friday 01/18 Final Board budget presentation

21 Monday 01/21 Upload budget to accounting system

Tuesday 01/22 Upload budget to reporting system

Wednesday 01/23 Test reports in accounting system

Thursday 01/24 Test reports in reporting system

Friday 01/25 FP&A review of 2013 process & BBQ


Budget outputs

Corporate planning model

Project Tracking system

Financial statements (P&L, BS, CF) budget vs. actuals

Dashboards / KPIs

Investment portfolio

Headcount plan / budget

Budget presentation


Budget definitions

Budget "template" - vehicle through which budget is collected / submitted

Budget package - guidelines, calendar and draft presentation

Budget program - Excel, Cognos, Essbase, Planning, webKPI, Netsuite

Reporting package - Crystal report, Business Objects, FRx, Netsuite

Accounting system - Oracle, SAP, PeopleSoft, Epicor, MAS, QB, Netsuite

Budget system - templates; budget package; budget, acct. or rept. programs


Content for budget meetings

FP&A team will meet in the first couple of weeks of the 2013 budget

process with all of the key stakeholders. Discussion items to include:

1. Status 11. How are investments choices made

2. Timing 12. Past valuations

3. Key contacts 13. Organizational structure, changes

4. Expense & capital costs, drivers 14. Funding sources / use of funds

5. Revenue projections, contracts 15. Corporate planning calendar

6. Roll out plans 16. Corporate planning contacts

7. Operating locations and offices 17. Corporate structure

8. Key challenges 18. Current headcount and hiring plans

9. Projects in queue, or on the horizon 19. Key performance measures

10. What's good / bad about processes 20. Feedback regarding budget meeting


Content budget training meeting

FP&A group will conduct training session on how to use the budget template.

Training will include:

1. Overall timeline

2. Template

3. Budget program

4. Draft Board package

5. I-800-CALL-FP&A


Personal Goals in the budget process

Better understand systems and processes

Better understand industry / company

Better understanding of funding sources / uses of funds


Budget program philosophy

I'm on the fence regarding replacing excel with another budget program. Yes I

understand Excel based budgets are difficult to manage and error prone, time

intensive to manage.

The allure of a mechanized budget programs is they do away with all these flaws. To

my way of thinking, Excel is a 'universal language' while programming in Essbase or

Adaptive Planning or Netsuite (just to name a couple of Excel alternatives) is a

specialized language. Everyone knows excel, few know Netsuite. Consequently you

may be trading one set of problems for another.

The choice of budget program, which is best, boils down to who you have

managing the process.


Bio

Managed budget process at AT&T Broadband (SF Bay Area regional head quarters);

Managed budget process at Calpine, NextG Networks and Solar Millennium.

Managed the business case process at SBC; creator of planning models for AT&T

Broadband, SPL Worldgroup, NextG Networks and Solar Millennium LLC.

MBA from UCLA (Finance) and BA from UCSD (Economics).


Budget - Ready for another season?


Documents

The Budget Process - DRAFT · The Budget Process - DRAFT August 2012 ... 12 Wednesday 11/21 Second draft presented to CEO/CFO ... Sample budget calendar– Weeks 5 & 6 …