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AAUP 2012: Friendly Budget Basics (R. Levy and S. Adams)


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AAUP 2012: Friendly Budget Basics (R. Levy and S. Adams)

  1. 1. Friendly Budget Basics for Non-Financial Managers Rachel Levy, Business Manager, National Academies Press Sandy Adams, Director of Operations and Fulfillment, National Academies Press
  2. 2. Resource: AAUP Business Handbook
  3. 3. What do you want to know about budgeting?In the next 5 minutes, talk to your neighbors, grab a marker and write on the white sheets provided - budgeting terms or processes you don’t understand!This is your chance to ask thatquestion you did not want toask your finance officer ..butyou were always dying toknow?
  4. 4. What is a budget?• Detailed financial plan• Given time period• Revenue and Expenses• Often - Cash Flow• Often - Balance Sheet
  5. 5. Key glossary when building a book budget • List price, aka Retail price, Cover price • Discount/Sales Channel • Cost of book; • Cost of sales; aka cost of goods sold • Gross margin • Depreciation/amortization • Cash basis vs accrual basis • Full glossary on website
  6. 6. Two sides of a budget RevenueExpense
  7. 7. Where does Revenue come from?• Talk to your neighbors for 5 minutes• Develop a list of revenue sources• Then send a delegate to write on the boards
  8. 8. Sources of Revenue Book Sales Other Publishing Income Reprint rights, permissions, bookclub, translations Journals income Advertising Non Publishing income Subsidies from parent company Grants and contributions Rental income – space, parking, etc Gift shop Food concessions
  9. 9. How does revenue come in?• Per unit sold, varies with popularity of the book – Terms can vary – Returns can affect – Collections can affect• Flat fee up front – Sale of paperback rights• Annual amount from grant or parent
  10. 10. What kinds of expenses are there? Cost of Sales Operating Expenses Salaries and Benefits Editorial Expense Marketing Expense Production Expense Fulfillment Expense General Administration The Bottom Line
  11. 11. How do we pay for expenses? • Fixed – Weekly, monthly, quarterly – Salaries, Rent – Remitting taxes collected over multiple months – Deducted from sales revenue remitted • Variable – Advertising – Sales commissions
  12. 12. • Prepaid, then expensed over time – Balance sheet & Cash Flow • Prepaids • Receivables • Liabilities Examples • Computers • Author advances • Inventory • Design
  13. 13. What makes up Cost of Sales?• Talk to your neighbors for 5 minutes; develop a list of the items you would include as unique costs for a given title.• Then send a delegate to write on the boards
  14. 14. What goes into Cost of Sales? • Cost of book – Fixed – Variable • Other cost of sales – Inventory write- down – Royalties – Freight-in
  15. 15. Let’s walkthrough a budget!
  16. 16. Why do budgets get broken? • Timing/Phasing • “A pig in a snake” • Inaccurate initial forecasts • Mission Creep / Scope Creep • Poor revenue / expense tracking
  17. 17. How can you fix them? • Rolling averages for better comparisons • Re projecting mid-year • When overages are discovered curb spending when possible (variable costs) • Cutting fixed costs/making tough choices
  18. 18. Let’s see what you remembered?
  19. 19. ResourcesPowerpoint slides handoutGlossary of Terms handoutPresentation materials can be found, after 6/20/12 at: Information for presenters Rachel Levy, Sandy Adams, sadams@nas.eduAAUP Businesss Handbook Link