The annual budgeting process is often criticized as an accounting exercise that is obsolete soon after it is published, prone to gamesmanship, cumbersome, not volume sensitive, and disconnected from the organization's strategy and risk management processes. You can resolve these deficiencies using capacity-sensitive driver-based projections. Driver-based budgeting allows for quick scenario planning and far easier analysis of a growing organization whose future may look nothing like today. The driver-based budgets can be periodically refreshed to create rolling financial forecasts extending well beyond the fiscal year end. Learn how managerial accounting can become managerial economics.
Learning Objectives
- Understand how to create driver-based budgets and rolling financial forecasts
Major Topics
- The shift to “predictive accounting” for Decision Making, Planning, and Budgeting
- Problems with traditional annual budget processes
- Develop a driver-based “operational budget” based on resource capacity planning
- Classify resource capacities and their expenses as sunk, fixed, step-variable, and variable
- Create closed loop capacity plans
- Forecast demand for budgeting and rolling financial forecasts
- Integrating enterprise risk management (ERM) with management accounting
- Applying target costing for cost estimating
