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Handbook of Budgeting, 6th Edition

Book Description

No other management tool provides the operational direction that a well-planned budget can. Now in a new edition, this book provides updated coverage on issues such as budgeting for exempt organizations and nonprofits in light of the IRS' newly issued Form 990; what manufacturing CFOs' budgeting needs are; current technology solutions; and updated information on value-based budgets. Controllers, budget directors, and CFOs will benefit from this practical "how-to" book's coverage, from the initial planning process to forecasting to specific industry budgets.

Table of Contents

  1. Cover
  2. Title Page
  3. Copyright
  4. Series
  5. Foreword
  6. Preface
    1. THE NEED TO IMPROVE YOUR BUDGETING PROCESSES
    2. THE FORECAST ON BUDGETING
  7. Part One: Introduction to the Budgeting Process
    1. Chapter One: Integrating the Balanced Scorecard for Improved Planning and Performance Management
      1. OVERVIEW
      2. ELEMENTS OF A BALANCED SCORECARD
      3. USE OF STRATEGY MAPS
      4. SCORECARD CASCADING
      5. BRINGING IT ALL TOGETHER
      6. INTEGRATING THE SCORECARD WITH PLANNING AND PERFORMANCE
      7. BALANCED SCORECARD AND ANNUAL PLANNING
      8. CONTINUOUS STRATEGIC MANAGEMENT WITH THE SCORECARD
      9. SUMMARY
    2. Chapter Two: Strategic Balanced Scorecard–Based Budgeting and Performance Management
      1. INTRODUCTION: WHY MOST COMPANIES FAIL TO IMPLEMENT THEIR STRATEGIES
      2. WHY A FEW COMPANIES PRODUCE EXCEPTIONAL RESULTS
      3. MEASURE YOUR STRATEGY WITH BALANCED SCORECARD
      4. BALANCED SCORECARD–BASED BUDGETS
      5. PERFORMANCE MANAGEMENT
      6. SUMMARY
    3. Chapter Three: Budgeting and the Strategic Planning Process
      1. DEFINITION OF STRATEGIC PLANNING
      2. PLANNING CYCLE
      3. STRATEGIC PLANNING PROCESS: A DYNAMIC CYCLE
      4. SITUATION ANALYSIS
      5. BUSINESS DIRECTION/CONCEPT
      6. ALTERNATIVE APPROACHES
      7. OPERATIONAL PLAN
      8. MEASUREMENT
      9. FEEDBACK
      10. CONTINGENCY PLANNING
      11. PROBLEMS IN IMPLEMENTING FORMAL STRATEGIC PLANNING SYSTEMS
      12. SUMMARY
    4. Chapter Four: Budgeting and Forecasting: Process Tweak or Process Overhaul?
      1. INTRODUCTION
      2. SURVEY METHODOLOGY
      3. FINDINGS: BUDGETING PROCESS
      4. FINDINGS: FORECASTING PROCESS
      5. REPORT SUMMARY
      6. DEVELOPING A ROAD MAP FOR CHANGE
    5. Chapter Five: The Budget: An Integral Element of Internal Control
      1. INTRODUCTION
      2. THE CONTROL ENVIRONMENT
      3. PLANNING SYSTEMS
      4. REPORTING SYSTEMS
      5. SUMMARY
    6. Chapter Six: The Relationship between Strategic Planning and the Budgeting Process
      1. INTRODUCTION
      2. HOW TO PLAN
      3. THE AUDIENCE FOR WHOM THE PLAN IS DESIGNED
      4. STRATEGIC BUSINESS PLANNING AND ITS ROLE IN BUDGETING
      5. PLANNING DIFFERENCES AMONG SMALL, MEDIUM, AND LARGE ORGANIZATIONS
      6. COMPONENTS OF STRATEGIC PLANNING
      7. MANAGEMENT AND ORGANIZATION
      8. MARKET ANALYSIS
      9. FORMULATION OF MARKETING STRATEGIES
      10. OPERATIONS ANALYSIS
      11. SUMMARY
    7. Chapter Seven: The Essentials of Business Valuation
      1. INTRODUCTION
      2. UNDERSTANDING THE VALUATION ASSIGNMENT
      3. RESEARCH AND INFORMATION GATHERING
      4. ADJUSTING AND ANALYZING THE FINANCIAL STATEMENTS
      5. THREE APPROACHES TO VALUING A BUSINESS
      6. INCOME APPROACH
      7. MARKET APPROACH
      8. ASSET APPROACH
      9. MAKING ADJUSTMENTS TO VALUE
      10. REACHING THE VALUATION CONCLUSION
    8. Chapter Eight: Moving Beyond Budgeting: Integrating Continuous Planning and Adaptive Control
      1. INTRODUCTION
      2. ANNUAL BUDGETING TRAP
      3. WHY SOME ORGANIZATIONS ARE GOING BEYOND BUDGETING
      4. BEYOND BUDGETING: ENABLING A MORE ADAPTIVE PERFORMANCE MANAGEMENT PROCESS
      5. CLIMBING THE TWIN PEAKS OF BEYOND BUDGETING
      6. BEYOND BUDGETING: ENABLING RADICAL DECENTRALIZATION
    9. Chapter Nine: Moving Beyond Budgeting: An Update
      1. INTRODUCTION
      2. BEYOND BUDGETING ROUND TABLE (BBRT)
      3. GUARDIAN INDUSTRIES CORPORATION
  8. Part Two: Tools And Techniques
    1. Chapter Ten: Implementing Forecasting Best Practices
      1. INTRODUCTION
      2. BUDGETING VERSUS FORECASTING
      3. IMPLEMENTING FORECASTING BEST PRACTICES
      4. FORECASTING BEST PRACTICES: PROCESS
      5. FORECASTING BEST PRACTICES: ORGANIZATION
      6. FORECASTING BEST PRACTICES: TECHNOLOGY
      7. CONCLUSION
    2. Chapter Eleven: Calculations and Modeling in Budgeting Software
      1. INTRODUCTION
      2. WHY COMPANIES USE BUDGETING SOFTWARE
      3. CALCULATIONS IN ACCOUNTING SYSTEMS AND SPREADSHEETS
      4. BUDGETING SOFTWARE
      5. OLAP DATABASES
      6. MODELING AND BUDGETING
      7. PROCESSES
      8. MORE COMPLEX BUDGETING CALCULATIONS
      9. CONCLUSION
    3. Chapter Twelve: Cost-Accounting Systems: Integration with Manufacturing Budgeting
      1. INTRODUCTION
      2. DECISION FACTORS IN THE SELECTION PROCESS
      3. COST-ACCOUNTING SYSTEM OPTIONS
      4. COSTS ASSOCIATED WITH A PRODUCT
      5. LABOR COST
      6. VARIABLE COSTING AND BUDGETING
      7. FULL COSTING AND BUDGETING
      8. COST-ACCUMULATION PROCEDURES
      9. VALUATION: ACTUAL VERSUS STANDARD
      10. ACTUAL COSTING
      11. ACTUAL COSTING, BUDGETING, AND COST CONTROL
      12. STANDARD COSTING
      13. VARIANCE REPORTING
      14. VARIANCES AND BUDGETING
      15. MANUFACTURING OVERHEAD
      16. MANUFACTURING OVERHEAD, BUDGETING, AND COST CONTROL
    4. Chapter Thirteen: Break-Even and Contribution Analysis as a Tool in Budgeting
      1. INTRODUCTION
      2. BREAK-EVEN ANALYSIS
      3. PRICE/VOLUME CHART
      4. CONTRIBUTION ANALYSIS
      5. COST–VOLUME–PRICE AND THE BUDGETING PROCESS
    5. Chapter Fourteen: Profitability and the Cost of Capital
      1. INTRODUCTION
      2. A MARKET GAUGE FOR PERFORMANCE
      3. COPING WITH THE COST OF EQUITY
      4. BUILDING COMPANY-WIDE PROFIT GOALS
      5. BUILDING DIVISIONAL PROFIT GOALS
      6. INFORMATION PROBLEMS AND COST OF CAPITAL
      7. SUMMARY
    6. Chapter Fifteen: Budgeting Shareholder Value
      1. INTRODUCTION
      2. LONG-TERM VALUATION
      3. ECONOMIC VALUE ADDED
      4. COMPLEMENTARY MEASURES OF VALUATION
      5. BUDGETING SHAREHOLDER VALUE
      6. SUMMARY
    7. Chapter Sixteen: Applying the Budget System
      1. INTRODUCTION
      2. INITIAL BUDGET DEPARTMENT REVIEW OF DIVISIONAL BUDGET PACKAGES
      3. DIVISIONAL REVIEW MEETINGS
      4. BUDGET CONSOLIDATION AND ANALYSIS
      5. PRELIMINARY SENIOR MANAGEMENT REVIEW
      6. FINAL REVISION OF OPERATING GROUP PLANS
      7. SECOND BUDGET STAFF REVIEW OF OPERATING GROUP PLANS
      8. REVISED CONSOLIDATED BUDGET PREPARATIONS
      9. FINAL SENIOR MANAGEMENT BUDGET REVIEW SESSIONS
      10. OPERATING GROUPS’ MONTHLY SUBMISSIONS
      11. EFFECTIVE USE OF GRAPHICS
      12. SUMMARY
    8. Chapter Seventeen: Budgets and Performance Compensation
      1. INTRODUCTION
      2. MEASURES OF EXECUTIVE PERFORMANCE
      3. STRUCTURING REWARD OPPORTUNITIES
      4. PITFALLS OF LINKING INCENTIVES TO BUDGETS
      5. AN OPTIMAL APPROACH
      6. ADJUSTING OPERATING UNIT TARGETS
      7. BUDGETS AND LONG-TERM INCENTIVE PLANS
      8. SUMMARY
    9. Chapter Eighteen: Predictive Costing, Predictive Accounting
      1. INTERNET FORCES THE NEED FOR BETTER COST FORECASTING
      2. TRADITIONAL BUDGETING: AN UNRELIABLE COMPASS
      3. ACTIVITY-BASED COSTING AS A FOUNDATION FOR ACTIVITY-BASED PLANNING AND BUDGETING
      4. BUDGETING: USER DISCONTENT AND REBELLION
      5. WEARY ANNUAL BUDGET PARADE
      6. ABC/M AS A SOLUTION FOR ACTIVITY-BASED PLANNING AND BUDGETING
      7. ACTIVITY-BASED COST ESTIMATING
      8. ACTIVITY-BASED PLANNING AND BUDGETING SOLUTION
      9. EARLY VIEWS OF ACTIVITY-BASED PLANNING AND BUDGETING WERE TOO SIMPLISTIC
      10. IMPORTANT ROLE OF RESOURCE CAPACITY CAUSES NEW THINKING
      11. MAJOR CLUE: CAPACITY EXISTS ONLY AS A RESOURCE
      12. MEASURING AND USING COST DATA
      13. USEFULNESS OF HISTORICAL FINANCIAL DATA
      14. WHERE DOES ACTIVITY-BASED PLANNING AND BUDGETING FIT IN?
      15. ACTIVITY-BASED PLANNING AND BUDGETING SOLUTION
      16. RISK CONDITIONS FOR FORECASTING EXPENSES AND CALCULATED COSTS
      17. FRAMEWORK TO COMPARE AND CONTRAST EXPENSE-ESTIMATING METHODS
      18. ECONOMICS 101?
    10. Chapter Nineteen: Cost Behavior and the Relationship to the Budgeting Process
      1. INTRODUCTION
      2. COST BEHAVIOR
      3. BREAK-EVEN ANALYSIS
      4. ADDITIONAL COST CONCEPTS
      5. DIFFERENTIAL COST CONCEPTS
      6. MAXIMIZING RESOURCES
      7. ESTIMATING COSTS
      8. SUMMARY
  9. Part Three: Preparation of Specific Budgets
    1. Chapter Twenty: Sales and Marketing Budget
      1. INTRODUCTION
      2. OVERVIEW OF THE BUDGET PROCESS
      3. SPECIAL BUDGETING PROBLEMS
      4. PERTINENT TOOLS
      5. UNIQUE ASPECTS OF SOME INDUSTRIES
      6. SUMMARY
    2. Chapter Twenty-One: Manufacturing Budget
      1. INTRODUCTION
      2. CONCEPTS
      3. CHANGING TO A COST-MANAGEMENT SYSTEM
      4. PROBLEMS IN PREPARING THE MANUFACTURING BUDGET
      5. THREE SOLUTIONS
      6. TECHNIQUE
      7. DETERMINING PRODUCTION REQUIREMENTS
      8. STEP 1: DEVELOPING THE PLANNABLE CORE
      9. STEP 2: OBTAINING SALES HISTORY AND FORECAST
      10. STEP 3: SCHEDULING NEW AND REVISED PRODUCT APPEARANCE
      11. STEP 4: DETERMINING REQUIRED INVENTORY LEVELS
      12. STEP 5: ESTABLISHING REAL DEMONSTRATED SHOP CAPACITY
      13. STEP 6: PUBLISHING THE MASTER SCHEDULE
      14. A TOTAL QUALITY PROGRAM’THE OTHER ALTERNATIVE
      15. INVENTORY AND REPLENISHMENT
      16. MORE ON THE MANUFACTURING BUDGET
      17. DETERMINING RAW-MATERIAL REQUIREMENTS
      18. DETERMINING OTHER INDIRECT-MATERIAL COSTS
      19. DETERMINING DIRECT-LABOR COSTS
      20. ESTABLISHING THE MANUFACTURING OVERHEAD FUNCTIONS AND SERVICES
      21. QUALITY CONTROL ECONOMICS REVIEW QUESTIONS
      22. PLANT ENGINEERING BUILDINGS AND EQUIPMENT MAINTENANCE REVIEW QUESTIONS
      23. FLOOR AND WORK-IN-PROCESS CONTROL REVIEW QUESTIONS
      24. SUMMARY
    3. Chapter Twenty-Two: Research and Development Budget
      1. RELATIONSHIP OF RESEARCH AND DEVELOPMENT AND ENGINEERING TO THE TOTAL BUDGETING PROCESS
      2. PROBLEMS IN ESTABLISHING RESEARCH AND DEVELOPMENT AND ENGINEERING OBJECTIVES
      3. DEVELOPING A TECHNOLOGICAL BUDGET
      4. PREPARING A DEPARTMENTAL BUDGET
      5. MANAGING A BUDGET
      6. COORDINATING PROJECT BUDGETS
    4. Chapter Twenty-Three: Administrative-Expense Budget
      1. INTRODUCTION
      2. ROLE AND SCOPE OF THE ADMINISTRATIVE-EXPENSE BUDGET
      3. METHODS USED FOR PREPARING THE ADMINISTRATIVE-EXPENSE BUDGET
      4. FACTORS THAT IMPACT THE ADMINISTRATIVE-EXPENSE BUDGET
      5. UNIQUE ISSUES IMPACTING THE ADMINISTRATIVE-EXPENSE BUDGET
      6. TOOLS AND TECHNIQUES FOR MANAGING THE ADMINISTRATIVE-EXPENSE BUDGET
      7. SUMMARY
    5. Chapter Twenty-Four: Budgeting the Purchasing Department and the Purchasing Process
      1. DESCRIPTION AND DEFINITION OF THE PROCESS APPROACH
      2. ROLE OF PROCESS MEASURES
      3. PROCESS MEASURES
      4. CREATING THE PROCUREMENT PROCESS BUDGET
    6. Chapter Twenty-Five: Capital Investment Review: Toward a New Process
      1. INTRODUCTION
      2. CONTEXT OF THE REVISED CAPITAL-INVESTMENT REVIEW PROCESS
      3. BENCHMARKING CAPITAL-INVESTMENT REVIEW BEST PRACTICES
      4. REVISED CAPITAL-INVESTMENT REVIEW PROCESS: OVERVIEW
      5. IMPLEMENTATION: WHAT BONNEVILLE LEARNED IN THE FIRST THREE YEARS
      6. SUMMARY
    7. Chapter Twenty-Six: Leasing
      1. INTRODUCTION
      2. OVERVIEW OF THE LEASING PROCESS
      3. POSSIBLE ADVANTAGES OF LEASING
      4. POSSIBLE DISADVANTAGES OF LEASING
      5. TYPES OF LEASE SOURCES
      6. LEASE REPORTING
      7. LEASE VERSUS PURCHASE ANALYSIS
      8. FINANCIAL ACCOUNTING STANDARDS BOARD RULE 13 CASE ILLUSTRATION
      9. NEGOTIATION OF LEASES
      10. SELECTING A LESSOR
      11. LEASE-ANALYSIS TECHNIQUES
      12. LEASE FORM
      13. SUMMARY
    8. Chapter Twenty-Seven: Balance-Sheet Budget
      1. INTRODUCTION
      2. PURPOSE OF THE BALANCE-SHEET BUDGET
      3. DEFINITION
      4. RESPONSIBILITY FOR THE BUDGET
      5. TYPES OF FINANCIAL BUDGETS
      6. PREPARING FINANCIAL BUDGETS
      7. PREPARING THE BALANCE-SHEET BUDGET
      8. ADEQUATE CASH
      9. FINANCIAL RATIOS
      10. ANALYZING CHANGES IN THE BALANCE SHEET
    9. Chapter Twenty-Eight: Budgeting Property and Liability Insurance Requirements
      1. INTRODUCTION
      2. ROLE RISK MANAGEMENT PLAYS IN THE BUDGETING PROCESS
      3. TYPES OF INSURANCE MECHANISMS
      4. ROLE OF INSURANCE/RISK CONSULTANTS
      5. USE OF AGENTS/BROKERS
      6. SELF-INSURANCE ALTERNATIVES
      7. IDENTIFYING THE NEED FOR INSURANCE
      8. KEY INSURANCE COVERAGES
      9. IDENTIFYING YOUR OWN RISKS
      10. HOW TO BUDGET FOR CASUALTY PREMIUMS
      11. SUMMARY
  10. Part Four: Budgeting Applications
    1. Chapter Twenty-Nine: Budgeting: Key to Corporate Performance Management
      1. FUTURE OF BUDGETING
      2. ADDING VALUE TO THE ORGANIZATION
      3. CORPORATE PERFORMANCE MANAGEMENT
      4. DEVELOPING A BUDGET PROCESS FOCUSED ON IMPLEMENTATION OF STRATEGY
      5. ROLE OF TECHNOLOGY
      6. OVERCOMING ORGANIZATIONAL RESISTANCE
      7. PLANNING AND CONTROLLING IMPLEMENTATION OF A NEW SYSTEM
      8. CONCLUSION
    2. Chapter Thirty: Zero-Based Budgeting
      1. INTRODUCTION
      2. PROBLEMS WITH TRADITIONAL TECHNIQUES
      3. ZERO-BASED APPROACH
      4. ZERO-BASED BUDGETING PROCEDURES
      5. DECISION PACKAGE
      6. RANKING PROCESS
      7. COMPLETING THE PROFIT AND LOSS
      8. PREPARING DETAILED BUDGETS
      9. SUMMARY
    3. Chapter Thirty-One: Bracket Budgeting
      1. INTRODUCTION
      2. APPLICATION OF BRACKET BUDGETING
      3. PREMISES TO PROFITS?
      4. DEVELOPING A TACTICAL BUDGETING MODEL
      5. BRACKET BUDGETING IN ANNUAL PLANNING
      6. CONSOLIDATING INCOME STATEMENTS
      7. SUMMARY OF BENEFITS
      8. SUMMARY
    4. Chapter Thirty-Two: Program Budgeting: Planning, Programming, Budgeting
      1. INTRODUCTION
      2. DESCRIPTION OF PROGRAM BUDGETING
      3. HISTORY
      4. FRAMEWORK OF PROGRAM BUDGETING
      5. PROGRAM STRUCTURING
      6. TYPES OF ANALYSIS
      7. INSTALLATION CONSIDERATIONS
      8. SUMMARY
    5. Chapter Thirty-Three: Activity-Based Budgeting
      1. INTRODUCTION
      2. TRADITIONAL BUDGETING DOES NOT SUPPORT EXCELLENCE
      3. ACTIVITY-BASED BUDGETING DEFINITIONS
      4. ACTIVITY-BASED BUDGETING PROCESS
      5. LINKING STRATEGY AND BUDGETING
      6. TRANSLATE STRATEGY TO ACTIVITIES
      7. DETERMINE WORKLOAD
      8. CREATE PLANNING GUIDELINES
      9. IDENTIFY INTERDEPARTMENTAL PROJECTS
      10. IMPROVEMENT PROCESS
      11. FINALIZING THE BUDGET
      12. PERFORMANCE REPORTING
      13. SUMMARY
  11. Part Five: Industry Budgets
    1. Chapter Thirty-Four: Budgeting for Corporate Taxes
      1. INTRODUCTION
      2. TAXATION OF C CORPORATIONS
      3. PERSONAL HOLDING COMPANY TAX
      4. NET OPERATING LOSS UTILIZATION
      5. CHARITABLE CONTRIBUTIONS
      6. TAXATION BUDGET
      7. FEDERAL CORPORATE TAX
      8. PURPOSES
      9. TAX RETURN
    2. Chapter Thirty-Five: Budgeting in the Global Internet Communication Technology Industry
      1. OVERVIEW
      2. ESSENTIALS FROM EARLIER CHAPTERS
      3. FREEMIUM STRATEGIES
      4. VOLUNTEER SERVICES
      5. ENTERPRISE RISK MANAGEMENT
  12. About the Editor
  13. About the Contributors
  14. Index