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
Doug Neeper
(925) 451-4541
www.dougneeper.com
2
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.
Doug Neeper
(925) 451-4541
www.dougneeper.com
3
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?
Doug Neeper
(925) 451-4541
www.dougneeper.com
4
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?
Doug Neeper
(925) 451-4541
www.dougneeper.com
5
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?
Doug Neeper
(925) 451-4541
www.dougneeper.com
6
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?
Doug Neeper
(925) 451-4541
www.dougneeper.com
7
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
Doug Neeper
(925) 451-4541
www.dougneeper.com
8
Sample budget calendar– Weeks 1 & 2
Week#
Day
Date
Primary Goal
1
Monday
Tuesday
Wednesday
Thursday
Friday
09/03
09/04
09/05
09/06
09/07
Labor Day (Holiday)
FP&A group review calendar
Begin budget meetings (details to follow)
Calendar key dates with Executives
Calendar key dates with Board
2
Monday
Tuesday
Wednesday
Thursday
Friday
Friday
09/10
09/11
09/12
09/13
09/14
09/14
Begin work on budget guidelines
Begin draft budget presentation
Begin accounting system work
Begin budget system work
Begin corporate planning model work
Begin financial reporting system work
Doug Neeper
(925) 451-4541
www.dougneeper.com
8
Sample budget calendar– Weeks 3 & 4
Week#
Day
Date
Primary Goal
3
Monday
Friday
Friday
Friday
09/17
09/21
09/21
09/21
FP&A group review guidelines
End budget meetings
Begin work on budget 'templates'
Begin work with HR regarding headcount
4
Monday
Monday
Tuesday
Wednesday
Thursday
Friday
Friday
09/24
09/24
09/25
09/26
09/27
09/28
09/28
Finalize budget guidelines & calendar
FP&A group review budget presentation
Prepare budget package for CFO
Review budget package with CFO
Share budget package with key persons
FP&A group stress test budget system
FP&A group stress test budget templates
Doug Neeper
(925) 451-4541
www.dougneeper.com
9
Sample budget calendar– Weeks 5 & 6
Week#
Day
Date
Primary Goal
5
Monday
Tuesday
Wednesday
Thursday
Friday
10/01
10/02
10/03
10/04
10/05
Distribute budget guidelines & calendar
Test accounting system upload/download
Test budget system upload/download
Test reporting system upload/download
Socialize budget 'templates'
6
Monday
Tuesday
Thursday
Friday
10/08
10/09
10/11
10/12
Design key financial statement reports
Design key performance indicator report
FP&A group stress test budget process
Incorporate feedback re 'templates'
Doug Neeper
(925) 451-4541
www.dougneeper.com
10
Sample budget calendar– Week 7
Week#
Day
Date
7
Monday
Tuesday
Wednesday
Friday
Friday
Friday
Friday
Friday
Friday
10/15
10/16
10/17
10/19
10/19
10/19
10/19
10/19
10/19
Doug Neeper
Primary Goal
Begin budget training
End accounting system work
Finish work with HR regarding headcount
End budget training
Incorporate HR changes into 'template'
Finalize budget 'template'
Distribute final budget 'template'
End work on budget programs
End work on reporting system
(925) 451-4541
www.dougneeper.com
11
Sample budget calendar– Weeks 8 & 9
Week#
Day
Date
Primary Goal
8
Monday
Tuesday
Wednesday
10/22
10/23
10/24
Start budget submissions process
Provide support re budget template
Start modeling 2013 in CPM
9
Monday
Tuesday
10/29
10/30
FP&A group offsite
Provide support re budget template
Doug Neeper
(925) 451-4541
www.dougneeper.com
12
Sample budget calendar–Weeks 10 & 11
Week#
Day
Date
Primary Goal
10
Monday
Tuesday
Friday
11/05
11/06
11/09
Follow-up work on budget system
Provide support re budget template
Finish modeling 2013 in CPM
11
Monday
Wednesday
Thursday
Thursday
Friday
11/12
11/14
11/15
11/15
11/16
Initial budget submissions due
First budget rollup
First draft budget package
FP&A group review first draft
Review first draft budget with CFO
Doug Neeper
(925) 451-4541
www.dougneeper.com
13
Sample budget calendar- Weeks 12 & 13
Week#
Day
Date
Primary Goal
12
Monday
Tuesday
Wednesday
Thursday
Friday
11/19
11/20
11/21
11/22
11/23
Revisions to first draft budget package
Finalize second draft budget package
Second draft presented to CEO/CFO
Thanksgiving (Holiday)
Day after Thanksgiving (Holiday)
13
Monday
Tuesday
Wednesday
11/26
11/27
11/28
Feedback to organizations re budgets
Redistribute budget templates
Begin second round budget templates
Doug Neeper
(925) 451-4541
www.dougneeper.com
14
Sample budget calendar- Weeks 14 & 15
Week#
Day
Date
Primary Goal
14
Monday
Friday
12/03
12/07
Provide support for budget resubmissions
Revised budget submission due
15
Monday
Tuesday
Tuesday
Wednesday
Thursday
Thursday
Friday
12/10
12/11
12/11
12/12
12/13
12/13
12/14
Consolidate budget resubmissions
Revise budget package
FP&A group review budget package
Review revised budget with CFO
Review revised budget with CEO/CFO
Send budget to entire management team
Budget presentation to mgmt. team
Doug Neeper
(925) 451-4541
www.dougneeper.com
15
Sample budget calendar- Weeks 16 & 17
Week#
Day
Date
Primary Goal
16
Monday
Tuesday
Wednesday
Thursday
Friday
12/17
12/18
12/19
12/20
12/21
Revise budget presentation
Review budget with CEO/CFO
FedEx budget package to Board
Dry-run Board presentation
Initial Board budget presentation
17
Monday
Tuesday
Wednesday
Thursday
Friday
Friday
12/24
12/25
12/26
12/27
12/28
12/28
Revise budget templates as appropriate
Christmas (holiday)
Day after Christmas (holiday)
Budget feedback to organizations
Redistribute budget templates
Begin final work on budget templates
Doug Neeper
(925) 451-4541
www.dougneeper.com
16
Sample budget calendar- Weeks 18 & 19
Week#
Day
Date
Primary Goal
18
Monday
Tuesday
Wednesday
Friday
12/31
01/01
01/02
01/04
Provide budget template support
New Years Day (holiday)
Revise budget presentation
Provide budget resubmission support
19
Monday
Wednesday
Friday
01/07
01/09
01/11
Finalize budget presentation package
Budget templates due
Consolidate budget resubmissions
Doug Neeper
(925) 451-4541
www.dougneeper.com
17
Sample budget calendar- Weeks 20 & 21
Week#
Day
Date
Primary Goal
20
Monday
Monday
Tuesday
Wednesday
Thursday
Friday
01/14
01/14
01/15
01/16
01/17
01/18
Finalize budget presentation
FP&A group review budget presentation
Final Budget presented to CEO/CFO
FedEx presentation to Board
Dry-run Board presentation
Final Board budget presentation
21
Monday
Tuesday
Wednesday
Thursday
Friday
01/21
01/22
01/23
01/24
01/25
Upload budget to accounting system
Upload budget to reporting system
Test reports in accounting system
Test reports in reporting system
FP&A review of 2013 process & BBQ
Doug Neeper
(925) 451-4541
www.dougneeper.com
18
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
Doug Neeper
(925) 451-4541
www.dougneeper.com
19
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
Doug Neeper
(925) 451-4541
www.dougneeper.com
20
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.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Status
Timing
Key contacts
Expense & capital costs, drivers
Revenue projections, contracts
Roll out plans
Operating locations and offices
Key challenges
Projects in queue, or on the horizon
What's good / bad about processes
Doug Neeper
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
How are investments choices made
Past valuations
Organizational structure, changes
Funding sources / use of funds
Corporate planning calendar
Corporate planning contacts
Corporate structure
Current headcount and hiring plans
Key performance measures
Feedback regarding budget meeting
(925) 451-4541
www.dougneeper.com
21
Content budget training meeting
FP&A group will conduct training session on how to use the budget template.
Training will include:
1.
2.
3.
4.
5.
Overall timeline
Template
Budget program
Draft Board package
I-800-CALL-FP&A
Doug Neeper
(925) 451-4541
www.dougneeper.com
22
Personal Goals in the budget process
Better understand systems and processes
Better understand industry / company
Better understanding of funding sources / uses of funds
Doug Neeper
(925) 451-4541
www.dougneeper.com
23
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.
Doug Neeper
(925) 451-4541
www.dougneeper.com
24
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).
Doug Neeper
(925) 451-4541
www.dougneeper.com
25
Budget - Ready for another season?
Doug Neeper
(925) 451-4541
www.dougneeper.com
26