Critical Skills for Creating Great Budgets: Maximizing Profits, People and Power

• Chapter 0 - The Three Ps of Great Budgets
  • Learning Objectives
  • Course Objectives
  • Atypical CPE
  • Workshop Roles
  • Introduction—Own Up to the War
    • The Endless War
    • Course Structure
    • Not a Solo Effort
    • Victory
    • The High Road™ Financial Manager
    • The Three Little Pigs
    • List of Common Budget Problems
• Chapter 1 - A Review of Budget Basics
  • Learning Objectives
  • Summary—What Is Budgeting Really About?
  • Increase Your Budgeting IQ
    • Budgeting Is Not Hard!
    • Your Firm’s Potential
    • Why We Budget
    • The High Road™ Budget
    • Four Critical Elements of Budgeting
    • Your Three Budgets
    • The Minimum Requirements
    • Key Steps in the Formalized Budgeting and Planning Process
    • How to Know If You Are Winning the Budget Wars
  • Increase Your Planning IQ
    • Option A
    • Planning 101
    • Contents of an Effective Planning Process
    • Payoffs from a Well-Structured Planning Process
    • Steps to Building a Planning Process
    • Ron Rael’s Integrated Planning Cycle© for High Road Organizations
  • In the End
  • Questions and Application Steps
• Chapter 2 - “P” #1: POWER to the Leaders
  • Learning Objectives
  • Summary—It Is NOT about the Numbers!
  • High Failure Rate
  • Why Companies Fail to Implement Their Business Strategies
  • We Lack Visionary Planning – Solution 1: Define and Clarify Your CFS and Global Strategies
    • Critical Success Factor Defined
    • Payoffs of Measuring Your Critical Success Factor
    • Global Strategies Defined
    • Types of an Organization’s Global Strategy
    • Charting the Four Types
    • How to Use This Chart
    • Global Strategies Change over Time
    • Criteria of a Key Performance Indicator
    • The Conversion Process
    • In Essence
  • Our Budget Does Not Measure What Is Important for Us – Solution 2: Measure Your Strategies
    • Strategy Defined
    • Mission Statement Defined
    • Mind Map Defined
    • How to Make Your Mission Measurable
    • How to Develop the Measurable Mission Statement
    • Measurable Mission Tool
    • In Essence
  • We Lack a Singular Corporate Focus – Solution 3: Obtain Consensus on Your Global Driving Force
    • How to Determine What Is Driving Your Business
    • Driving Forces of Today’s Business
    • Drivers Behind Your Firm’s Global Strategy
    • In Essence
  • We Lack Employee Buy-In – Solution 4: Clarify and Communicate Your Model
    • The Basic Model for Cash Generation
    • How to Implement This Solution
    • In Essence
  • We Have Leaders Who Refuse to Focus on One Thing – Solution 5: Decide Before You Decide
    • Prioritization Causes Fights and Hoarding
    • The Narrowing and Combining Process
    • Methods for Narrowing Down Choices
    • In Essence
  • We Lack Wise Prioritization – Solution 6: Do Prioritization Mapping
    • How to Prepare a Prioritization Map
    • In Essence
  • We Resist Change – Solution 7: Use a Force-Field Analysis to Make Progress
    • Impasse—Another Budget War Battle
    • In Essence
  • Our Leaders Overemphasize Profits – Solution 8: Manage with a Balanced Perspective
    • The Need for Balanced Feedback
    • How the Balanced Scorecard Works
    • How to Use the Balanced Scorecard in Preparing Your Budget
    • How to Use the Balanced Scorecard in Your Budget Feedback Reports
    • Integration of Individual Scorecards
    • Balanced Scorecard Nuts and Bolts
    • CFO’s Goals of the Balanced Scorecard
    • Payoffs of Using the Balanced Scorecard Approach
    • Why the Balanced Scorecard Is Effective
    • Minimum Requirements for a Scorecard
    • Incentives in the Scorecard Approach
    • It Is Actually Done!
    • Overall Process for Implementing the Balanced Scorecard
    • Additional Scorecard Perspectives
    • In Essence
  • Our Managers Say They Want More Control – Solution 9: Budget What They Control
    • Control – Another Budget War Battle
    • Budget Controllability
    • The Answer Is So Simple
    • Solutions to These Controllability Issues
    • Controllable Budget View
    • Controllable Budget Report View
    • Arguments for Using Allocations in Budgets
    • In Essence
  • We Can’t Change Fast Enough – Solution 10: Budgeting for Shorter Periods
    • Putting the Change Factor into Your Budget
    • The Need to Budget More Often
    • The Solution
    • The Process for Shorter Budgets
    • In Essence
  • We Lack Sophisticated Budgeting Tools – Solution 11: Get Some Better Tools
    • Budgeting Technology Resources
    • Budget Software Basics
    • In Essence
    • Power to the Leaders Summary
  • In the End
  • Questions and Application Steps
• Chapter 3 - “P” #2: Digging for More PROFITS
  • Learning Objectives
  • Summary—Discovering Gold
  • Traditional Budgeting’s Shortcomings
  • We Incur Expenses without a Business Purpose – Solution 12: Prepare a Mission-Based Budget
    • Digging for Profits with a Mission-Based Budget
    • Step 1
    • Step 2
    • Step 3
    • Step 4
    • In Essence
  • We Overspend on Insurance Coverage – Solution 13: Budget for Risks
    • Digging for Profits by Reducing Risk
    • Operating Costs and Risks Undertaken
    • In Essence
  • We Have Inadequate or Incomplete Revenue Forecasts – Solution 14: Forecast Revenues Better. 3-18 Digging for Profits with Realistic and Achievable Revenue Forecasts
    • The Role Cannot Be Delegated
    • The Most Fundamental Way to Forecast Revenues
    • Why Developing the Revenues Budget Is So Challenging
    • Putting Reality in Your Revenues Forecast
    • Decision-Making Tools for Revenue Planning
    • In Essence
  • We Lack a Reliable Business Model – Solution 15: Use a Break-Even Budget
    • Digging for Minimum Revenues
    • In Essence
  • We Are Unable to Cut Expenses Fast Enough – Solution 16: Track Fixed and Variable Costs
    • Digging for Profits by Having More Variable Costs
    • In Essence
  • We Can’t Match Spending with Changes in Our Revenues – Solution 17: Use a Truly Flexible Budget
    • Change Happens!
    • Digging for Profits with the Truly Flexible Budget
    • In Essence
  • Our Expenses Are Growing Faster than Our Revenues – Solution 18: Find Your Cost Drivers
    • Digging for Profits by Lowering Your Operating Costs
    • Regression Analysis and Cost Drivers
    • In Essence
  • We Lack Adequate Capital Resources – Solution 19: Build a Time Sensitive and Prioritized Capital Budget
    • Digging for Profits with Your Capital Investments
    • Purpose of the Capital Budget
    • Capital Items Justification Form
    • Methods for Prioritizing Capital Expenditures
    • A Capital Budget Prioritization Worksheet
    • A Capital Budget Prioritization Worksheet
    • Budget Manager’s Role in the Capital Budget
    • In Essence
  • In the End
  • Questions and Application Steps
• Chapter 4 - “P” #3: PEOPLE Do the Unexpected
  • Learning Objectives
  • Summary—The Human Element
  • Passing the Buck, or “This Is Accounting’s Budget” – Solution 20: Get Every Employee Engaged in the Budget Process
    • Budget Responsibility Statement
    • In Essence
  • Our Employees Are Wasting Money – Solution 21: Enhance Employee’s Ownership
    • Your OPM Problem
    • Symptoms of Your OPM Problem in the Budget Process
    • Solutions to Your OPM Problem
    • In Essence
  • Our Budget Managers Refuse to Be Accountable – Solution 22: Build in Accountability
    • “My Employees Are Not Being Accountable!”
    • The Lack of Accountability Is Everywhere, Not Just in Your Budget
    • Where Accountability Fits In
    • Path of Least Resistance Principle and Accountability
    • Why Accountability Works to Make Everyone Successful
    • How Leaders Improve Accountability
    • Best Practice Tools for Strengthening Accountability
  • 10½ Rules of Accountability
  • Accountability Principles 2 through 16
    • Why Accountability Is Part of the High Road
    • In Essence
  • Our Employees Are Not Using Good Judgment – Solution 23: Build in Budget Empowerment
    • Solving Your OPM Problem, Part 2
    • The Two-Sided Coin
    • Ways to Ensure that Employees Are Empowered
    • In Essence
  • Our People Always Find Ways Around the Budget – Solution 24: Dummy Proof the Budget
    • The Cat Will Play…
    • In Essence
  • Our Managers Keep Asking for More Resources – Solution 25: Measure the ROI of Expenditures
    • 4-38 Return on All Investments
    • In Essence
  • Our Employees Are Not Working on What They Should – Solution 26: Use Performance Metrics
    • Build Your Great Budget around Your Key Metrics
    • Effective and Reliable Metrics
    • Metrics—Objective vs. Subjective
    • CFO’s Responsibility in Measuring Performance
    • Cultural Resistance to Implementing a Performance Measuring System
    • How to Make Performance Measures Work
    • In Essence
  • We Put Profits Ahead of People – Solution 27: Find and Use Softer Metrics
    • Performance Measures for the Softer Side
    • In Essence
  • Lack of Execution of Our Goals – Solution 28: Use Budgeted Action Plans
    • Ensuring That Employees Are Doing the Right Things for the Right Reasons
    • Formalized Action Plan
    • Budgeted Action Plans
    • In Essence
  • Lack of Accountability to Our Budget – Solution 29: Require Action Plan Reporting and Updates
    • Action Plan Reporting and Accountability
    • Financial Impacts
    • In Essence
  • Our Budget Managers Play Games – Solution 30: Put an End to the Budget Games
    • Profit Leaks Arise Again and Again
    • Why Do Employees Play Games with the Budget?
    • In Essence
  • Our Employees Are Not Enrolled in the Budget – Solution 31: Sell the Budget
    • Why You Need to Sell the Budget
    • In Essence
  • Everyone Rejects New Ideas – Solution 32: Incorporate Lessons Learned
    • Collect the Ideas That Prevent Profit Leaks
    • The Tool for Fostering a Lessons-Learned Attitude
    • In Essence
  • I Don’t Know Where to Start – Solution 33: Have a Game Plan
    • Why the Budget Is Your Focal Point
    • Game Plan to Transform to a Culture of Planning
    • In Essence
  • Our Budget Process Never Gets Better – Solution 34: Adopt the Plus/Delta Tool
    • Continuous Improvement in the Budget and Planning Processes
  • I Can’t Get Employees Off Their Butts – Solution 34½: Turn Your Investment Into Action
    • The Personal Commitment
  • In the End
  • Questions and Application Steps
• Chapter 5 - Case Study and Resources
  • Learning Objectives
  • Book Resources
  • In the End
• Chapter 6 - Latest Developments

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Chapter 0 - The Three Ps of Great Budgets

Welcome to a workshop about high-level skills in budgeting!
You will find many solutions in return for your participation!

Learning Objectives

This innovative, leading-edge course (one in a series of three) will enable you to do a better job of budgeting and planning. If you follow my guidance and use the tools, you will be able to build a great budget.

Budgeting is both an art and a science. In this workshop that covers both sides, you will learn how to apply leading-edge tools and methods to make your planning process more strategic and your budget process more flexible. Your budget should not lead to “budget wars” over precious and scarce resources. You will experience how to build a set of decision-making processes early on and how to use them to make smart resource allocation choices that benefit your entire organization. We will also explore ways to have your planning and budgeting processes work to increase the potential for higher earnings.

This hands-on workshop provides you with the opportunity to design a more effective planning process that results in a realistic and honest budget. You must have at least two years’ experience preparing budgets and conducting planning to fully appreciate this course.

“To achieve success in anything, you need two ingredients: a target to aim for, and a way to measure your progress towards it.” Ron Rael, author of 13½ Strategies for Winning the Budget Wars

Course Objectives

As a result of participating in this workshop, you will

• Move your current method of budgeting and planning to a more sophisticated level.

• Solve many high-level budget problems.

• Have multiple ways to increase accountability to the budget and plan.

• Describe the overall planning and budgeting processes and put them in context.

• Use the Integrated Planning Cycle to define what your firm needs to do to survive and thrive.

• Develop your revenues budget faster and based more on reality.

• Justify the costs of a department, team, or job function by finding your cost drivers.

• Know how to establish priorities for spending on capital needs.

• Make your budget dummy proof.

• Develop a process for calculating the return on investment (ROI) for expenses and headcount increases.

• Measure people’s activities to build a performance-based budget.

What Is In This Session for You?

We accountants spend a majority of our time dealing with the cost side of the business. There are many tools that will enable you to reduce this time while producing better, more accurate estimates and forecasts. For the revenue side of the business, you will be able to predict revenues with greater accuracy and accountability. By participating and committing to use the tools, you will enable the leadership team to do more thoughtful, priority-focused planning.

Atypical CPE

This course will be very different from the type of CPE you are used to taking. It is not a lecture session—it is an opportunity for application. The primary focus of this workshop will be in four areas:

1. How the budget fits into the overall Integrated Planning Process.

2. Common budgeting problems and identify the tool to solve each one.

3. Adding 35 Best Practice tools to your toolkit, which will enable you to develop an honest, realistic, and flexible budget.

4. Focusing on how you can be the agent of change and get others to care about the value that a great budget can bring to your employer.

This is both a technical and leadership course.

The technical element of this course comes from the tools and applying them. The leadership element is inherent in the necessity for someone (you) to lead this effort. To be a High Road™ Leader, you need to be able to become an agent for positive change. Implementing a budget process that fosters both empowerment and accountability will demonstrate that you are a high road leader.

This format will definitely be challenging to you and your peers. However, by the end of this workshop, you must select those tools that you need specifically for your organization. The final step will be up to you. In order to retain this knowledge so that you can apply it in your firm, you will need to get started revamping your budget and planning processes immediately.

Workshop Roles

• Discussion Leader—To disseminate and explain the strategy, tools, and ideas

• Participants (you)—To contribute ideas, learn, discuss, and apply the information.

Thank you for being present today!

Notes:

13½ Strategies for Winning the Budget Wars is a copyright of Ron Rael.

The Integrated Planning Cycle for High Road Organizations is a copyright of Ron Rael.

High Road and Budget Wars are trademarks of Ron Rael.

Raelco is a fictional account of real companies. The names have been changed to protect the innocent and avoid shaming the guilty.

Introduction—Own Up to the War

budget cuts, n:

1. Give and give and give some more. Then do the same dance again next year.

2. Death by a paper overload.

The Endless War

Budgeting is often a war that no one wins.

That is the bad news!

The good news is that a budget was never meant to cause battles, power struggles, and hurt feelings.

You actually can build a realistic and honest budget that

• Creates a visionary plan.

• Shares resources equitably.

• Is a tool for smart decision-making.

This innovative, leading-edge course (one in a series of three) will enable you to do a better job of budgeting and planning. I guarantee that if you follow my guidance and use the tools, you will be able to build a great budget.

Course Structure

Being an experienced CEO, CFO, Controller, and Budget Manager, I know that you want to do a good job of budgeting. However, currently your budget creates battles in an ongoing war when it should be fostering cooperation and resource sharing.

To assist you, I structured this course into solutions and tools that solve specific budget problems. It is the accumulation of these universal problems that lead to a flawed budget and allows the Budget Wars™ to continue unabated.

Not a Solo Effort

Preparing and administering a budget is not something you do by yourself because preparing a budget is a group effort. Therefore, these 35 solutions are ones that you need to understand deeply so that you can teach others how to use them.

We will further break the budget process into its four critical elements so that you can diagnose where your budget process is weak and needs improvement.

Victory

In any war, each side wants to be the victor so they can strut around playing the hero. In real life, those people who prevent wars from taking place are the true heroes. You can be one of them. By taking to heart the principles and tools in this course, you will be that hero—the person who administers the budget that is a pact of cooperation rather than a take-no-prisoners war.

The High Road™ Financial Manager

As Controller, CFO, or Budget Manager, you have the opportunity to show others that you are committed to the high road. This commitment is demonstrated when you

• Work for agreement instead of compromise or divisiveness.

• Focus on what is best for all instead of specific individuals.

• Be of service to others.

• Resist pressure tactics.

• Act ethically.

• Believe in transparency.

• Work to foster cooperation and interdependence.

• Assess the training that people need and provide it.

• Hold yourself accountable.

• Hold others accountable.

• Be courageous despite opposition or disapproval.

• Use the budget as a tool to make the business successful.

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