Budgeting and Forecasting
Learning outcome
Outline
Introduction
Budgeting concepts
Strategic planning, Budgetary planning and Operational planning
Exhibit 12-1—Strategy, Planning,and Budgets
Budgeting Cycle
Budget Cycle
Reasons for Budgeting
Operations and Performance Goals
Successful Budgeting
Budget participants
Challenges in Administering Budgets
Resource Allocation
How are short-term goals related to strategic planning?
Master Budget
Preparation of a Master Budget for a Retail Organization
Identification of Principle Budget Factor
Forecasting Techniques
Why is forecasting important?
What’s Forecasting All About?
Some general characteristics of forecasts
Types of forecasting methods
Qualitative forecasting methods
Exponential Smoothing
Sensitivity Analysis:
How should we pick our forecasting model?
Budget Methodologies
Zero based budgeting:

Budget Methodologies
To use its budget as an effective planning and management tool, a company must choose and budget methodology that supports and reinforces its management approach.
Depending on type of business, organizational structure, complexity of operations and management philosophy a company choose different approaches in formulating its master budget.
Project Budgeting: Used for creating a budget for specific projects rather than for an entire company
Activity based budgeting: focuses on classifying costs based on activities rather than based on departments or products.
Incremental budgeting: starts with the prior year budget and produces increments into the future based upon the prior year’s results and coming year’s expectations.(Opposite of the zero based budget.)