Behavior Based Budgeting:Financial Management In Rough Times               A. Michael Gellman, CPA               mgellman@...
AgendaPart I:• Non-Financial Managers• Review of Behavioral Based BudgetingPart II:• Review Other Critical Budget Consider...
Learning Objectives• By the end of the module, you will increase your  understanding of:  – Understand the importance of N...
Part IImportance of the Non-FinancialManager &Behavioral Based Budgeting                                  4
Key Stakeholders• Non-Financial Managers: (three W’s)  – Who  – What  – When
Key Stakeholders• Non-Financial Managers:  – Everyone but the Accountants:     • Who:        – Project Managers, Directors...
Key Stakeholders• Non-Financial Managers:  – Need (Must) Raise the Financial Awareness Levels    of Non-Financial Managers...
Key Stakeholders• Even Better:  – Get Non-Financial Managers to:     • Interact with:         – Each Other         – Budge...
Key Stakeholders• End Result:  – Get Non-Financial Managers to take:     • Ownership     • Responsibility        – Leads t...
Key Stakeholders• Method:  – Get Non-Financial Managers to Adopt:       • An effective budget tool that will help them to ...
Budgeting for Nonprofits• Adopt a: User Based Budget Approach
WHAT’S WRONG WITH BUDGETS TODAY?• Conceptually  – Budgets are most often viewed as an end    product or as a static docume...
WHAT’S IS WRONG WITH BUDGETS TODAY?• Budgets should be viewed as an interactive  user-based platform that supports today’s...
NEW PERSPECTIVE ON BUDGETING! • First Step: View budgeting backwards   – Teach the importance of how to use a budget     b...
NEW PERSPECTIVE ON BUDGETING! • Why should we teach someone how to ride   a bicycle if they have no use for a bicycle?
NEW PERSPECTIVE ON BUDGETING!• Organizational leaders have to get staff and  management to buy into the concept that:     ...
Glossary of Budget Terms        CONCEPTS             TECHNICAL•   Use              •   Projections•   Everyday         •  ...
Financially – Are We Ok?  Good question to ask yourself?
Financially – Are We Ok?  How Am [ I ] Doing?      (as a manager)
Financially - Are We OK?More Importantly - How are    [         WE ] Doing?       (as an organization)
Financially - Are We OK?• To Answer the Question:  – Goals are the KEY  – Budgets are critical to managing goals
Managing Through >>> Financial Reports• This is How it Works:  – Raise Awareness  – Change Behavior     EQUALS =     Impro...
Managing Through >>> Financial Reports                REMEMBER• Re-direct the Budget System to Gear it  Towards:          ...
Everyday Use >>>> Example• Let’s Now Look at a Four-Part Budget Application  Example
Budget >>> Cycles• Budgets From Two Points of View:  – Process View (traditional budget cycle)  – Management View (working...
Budget >>> Cycles• Process View (budget cycle)  – Preparation  – Approval  – Installation  – Measurement  – Projection    ...
Budget >>> Cycles• Management View (monthly cycle)  – Monitor  – Feedback  – Override  – React                            ...
Results Through >>> Financial Reports• Get:          EVERYONE INVOLVED                   In the Budgeting Process         ...
Results Through >>> Financial Reports            BUDGETS,        NOT A DOCUMENT,           A PROCESS                      ...
Results Through >>> Financial Reports• Make Projections:          PART OF THE SYSTEM                                    30
Results Through >>> Financial Reports• Projections - The Magic  – View Current Transactions in Terms of Year-end    Result...
Results Through >>> Financial Reports• History - Has Its Place  – What Role Does History Play     • History is FREE     • ...
Results Through >>> Financial Reports• Paint the Perfect Picture Through:       ENHANCED REPORT DESIGN                    ...
Results Through >>> Financial Reports• Time is the:                 ENEMY                         Put Time to Work        ...
Results Through >>> Financial Reports• Political Bottom-lines:              HAVE A STRATEGY                               ...
Results Through >>> Financial Reports• Do Not Forget the Three Secret Weapons:  – Monthly Budgets  – Projections  – Contin...
Unlocking Results by USING Budgets: A                   Summary• The Goal: (for your Budget)  – A WORKING Budget System  –...
Part IIOther Critical Budget  Considerations                        38
Other Critical Budget Considerations•   In-Kind Contributions•   Indirect Costs and the Allocation of Overhead•   Continge...
Other Critical Budget Considerations•   Reporting to Boards – Dashboards•   Reserves•   Budgets and Link to Strategic Plan...
Common Budget Pitfalls                     41
COMMON BUDGET PITFALLS #1• Assumption Documentation  – Not Emphasized  – No Consistent Methods or Procedures  – All in the...
COMMON BUDGET PITFALLS #2• Cash Flow  – Ignored  – Misunderstood  – Needs to be Monitored Closely                         ...
COMMON BUDGET PITFALLS #3• Get Staffed Involved  – Where?     • Everywhere         – Monitoring Budget Reports         – B...
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Behavior based budgeting

  1. 1. Behavior Based Budgeting:Financial Management In Rough Times A. Michael Gellman, CPA mgellman@rubino.com Rubino & McGeehin, CPA’s and Consultants April 20, 2012
  2. 2. AgendaPart I:• Non-Financial Managers• Review of Behavioral Based BudgetingPart II:• Review Other Critical Budget Considerations• Common Budget Pitfalls 2
  3. 3. Learning Objectives• By the end of the module, you will increase your understanding of: – Understand the importance of Non-Financial Managers – Behavior based budgeting and the techniques and applications that are essential for nonprofit organizations – Review other critical budget considerations that impact your budget 3
  4. 4. Part IImportance of the Non-FinancialManager &Behavioral Based Budgeting 4
  5. 5. Key Stakeholders• Non-Financial Managers: (three W’s) – Who – What – When
  6. 6. Key Stakeholders• Non-Financial Managers: – Everyone but the Accountants: • Who: – Project Managers, Directors, Board Members, Committee Members, Even Staff of All Levels • What: – They all are making decisions that directly effect the financial health of your organization • When: – Every minute of everyday decisions both small and large are made that involve dollars and cents
  7. 7. Key Stakeholders• Non-Financial Managers: – Need (Must) Raise the Financial Awareness Levels of Non-Financial Managers • How: – Incorporate Budgets into Their EVERYDAY Decision Making Process
  8. 8. Key Stakeholders• Even Better: – Get Non-Financial Managers to: • Interact with: – Each Other – Budgets » Interact implies a high level sharing and giving of information with an outcome to improve results
  9. 9. Key Stakeholders• End Result: – Get Non-Financial Managers to take: • Ownership • Responsibility – Leads to: » Accountability
  10. 10. Key Stakeholders• Method: – Get Non-Financial Managers to Adopt: • An effective budget tool that will help them to safeguard operational results and predict outcomes of programs and efforts that will allow them to improve results and performance. • Give them a tool they can work with.
  11. 11. Budgeting for Nonprofits• Adopt a: User Based Budget Approach
  12. 12. WHAT’S WRONG WITH BUDGETS TODAY?• Conceptually – Budgets are most often viewed as an end product or as a static document • This view point is 180 degrees in the wrong direction
  13. 13. WHAT’S IS WRONG WITH BUDGETS TODAY?• Budgets should be viewed as an interactive user-based platform that supports today’s most advanced managerial systems
  14. 14. NEW PERSPECTIVE ON BUDGETING! • First Step: View budgeting backwards – Teach the importance of how to use a budget before how to build a budget
  15. 15. NEW PERSPECTIVE ON BUDGETING! • Why should we teach someone how to ride a bicycle if they have no use for a bicycle?
  16. 16. NEW PERSPECTIVE ON BUDGETING!• Organizational leaders have to get staff and management to buy into the concept that: Budgets Work IF Put to Use
  17. 17. Glossary of Budget Terms CONCEPTS TECHNICAL• Use • Projections• Everyday • Time is on Our Side• Simple • Raise Awareness• Understandable • Change Behavior – A Tool for – Behavioral Improvement Based Budgeting
  18. 18. Financially – Are We Ok? Good question to ask yourself?
  19. 19. Financially – Are We Ok? How Am [ I ] Doing? (as a manager)
  20. 20. Financially - Are We OK?More Importantly - How are [ WE ] Doing? (as an organization)
  21. 21. Financially - Are We OK?• To Answer the Question: – Goals are the KEY – Budgets are critical to managing goals
  22. 22. Managing Through >>> Financial Reports• This is How it Works: – Raise Awareness – Change Behavior EQUALS = Improved Bottom-line Results
  23. 23. Managing Through >>> Financial Reports REMEMBER• Re-direct the Budget System to Gear it Towards: EVERYDAY USE
  24. 24. Everyday Use >>>> Example• Let’s Now Look at a Four-Part Budget Application Example
  25. 25. Budget >>> Cycles• Budgets From Two Points of View: – Process View (traditional budget cycle) – Management View (working monthly cycle) 25
  26. 26. Budget >>> Cycles• Process View (budget cycle) – Preparation – Approval – Installation – Measurement – Projection 26
  27. 27. Budget >>> Cycles• Management View (monthly cycle) – Monitor – Feedback – Override – React 27
  28. 28. Results Through >>> Financial Reports• Get: EVERYONE INVOLVED In the Budgeting Process 28
  29. 29. Results Through >>> Financial Reports BUDGETS, NOT A DOCUMENT, A PROCESS 29
  30. 30. Results Through >>> Financial Reports• Make Projections: PART OF THE SYSTEM 30
  31. 31. Results Through >>> Financial Reports• Projections - The Magic – View Current Transactions in Terms of Year-end Results – A Clearer Picture – Achieving Goals through Projections – How they Work – Projections are Flexible Budgets in Disguise 31
  32. 32. Results Through >>> Financial Reports• History - Has Its Place – What Role Does History Play • History is FREE • History Cannot be Changed – Is History a Direct Predictor of the Future • NO • Can be Misleading 32
  33. 33. Results Through >>> Financial Reports• Paint the Perfect Picture Through: ENHANCED REPORT DESIGN 33
  34. 34. Results Through >>> Financial Reports• Time is the: ENEMY Put Time to Work 34
  35. 35. Results Through >>> Financial Reports• Political Bottom-lines: HAVE A STRATEGY 35
  36. 36. Results Through >>> Financial Reports• Do Not Forget the Three Secret Weapons: – Monthly Budgets – Projections – Contingency Budgets 36
  37. 37. Unlocking Results by USING Budgets: A Summary• The Goal: (for your Budget) – A WORKING Budget System – for EVERYDAY USE that – RAISES AWARENESS which – CHANGES Staff BEHAVIOR which – Equals RESULTS 37
  38. 38. Part IIOther Critical Budget Considerations 38
  39. 39. Other Critical Budget Considerations• In-Kind Contributions• Indirect Costs and the Allocation of Overhead• Contingency Budgets• Cash Flow Considerations and Reports• Forecasting Methods 39
  40. 40. Other Critical Budget Considerations• Reporting to Boards – Dashboards• Reserves• Budgets and Link to Strategic Plans• Budgeting for Grants and Awards• Capital Budgets• Budgeting for Salaries 40
  41. 41. Common Budget Pitfalls 41
  42. 42. COMMON BUDGET PITFALLS #1• Assumption Documentation – Not Emphasized – No Consistent Methods or Procedures – All in the Preparation • What-to-Do • What-Not-to-Do 42
  43. 43. COMMON BUDGET PITFALLS #2• Cash Flow – Ignored – Misunderstood – Needs to be Monitored Closely 43
  44. 44. COMMON BUDGET PITFALLS #3• Get Staffed Involved – Where? • Everywhere – Monitoring Budget Reports – Building the Budget » Ownership » Responsibility » Accountability 44

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