Preparation of operating budgets and liquidity budget

Overview

One of the most important uses of budgets is as a control tool. Once the budgets of the various departments have been planned and approved, they guide the activities of each department towards achieving the budgetary goals. Department managers, together with the organization’s management, analyze the department’s performance over a set period of time and identify deviations from budget targets. In particular, adverse deviations are identified and, where possible, corrective action is taken to restore the department’s performance to a normal path. If the causes of the deviation are not under the control of the organization, the budgets must be reviewed.

This course deals with the analysis of budget variance as a tool for controlling and managing operational activities within an organization. It presents some examples of effective management during the budget planning and control process. The course also addresses various types of budget variances and how the most common ones can be identified through appropriate examples. Variants are also analyzed, their root causes and which of them are worth investigating through the budgeted profit and loss account.

Target Audience

Financial and non-financial professionals, functional managers, directors and all persons directly or indirectly involved in the planning and control process of an organization.

Objectives

• Use of budgets for management and control
• Recognition of examples of effective management during the planning and control process budgeting
• Determining how to react to variances in a given scenario
• Associating examples of causes of variances that impact profit with appropriate corrective actions
• Determining which variances of a profit and loss account variance ratio are worth investigating in a particular scenario