This document summarizes a presentation about basic budgeting concepts for non-financial managers. The presentation defines what a budget is, discusses the key components of revenue and expenses, and how budgets can get broken and fixed. It provides information on sources of revenue, types of expenses, and what makes up the cost of sales. The presentation encourages participants to ask questions and discuss budgeting terms and processes they do not understand. Slides and a glossary of terms are provided as resources.

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. Resource: AAUP Business Handbook
http://aaupwiki.princeton.edu/index.php/The_AAUP_Business_Handbook

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 that
question you did not want to
ask your finance officer ..but
you were always dying to
know?

4. What is a budget?
• Detailed financial plan
• Given time period
• Revenue and Expenses
• Often - Cash Flow
• Often - Balance Sheet

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. Two sides of a budget
Revenue
Expense

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. 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. 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. 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. 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. • Prepaid, then expensed
over time
– Balance sheet & Cash
Flow
• Prepaids
• Receivables
• Liabilities
Examples
• Computers
• Author advances
• Inventory
• Design

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. What goes into Cost of Sales?
• Cost of book
– Fixed
– Variable
• Other cost of sales
– Inventory write-
down
– Royalties
– Freight-in

15. Let’s walk
through a budget!

19. Why do budgets get broken?
• Timing/Phasing
• “A pig in a snake”
• Inaccurate initial
forecasts
• Mission Creep /
Scope Creep
• Poor revenue /
expense tracking

20. 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

21. Let’s see what you
remembered?

22. Resources
Powerpoint slides handout
Glossary of Terms handout
Presentation materials can be found, after 6/20/12 at:
http://aaupwiki.princeton.edu/index.php/2012_Friendly_Budget_Basics_
Contact Information for presenters
Rachel Levy, rlevy@nas.edu
Sandy Adams, sadams@nas.edu
AAUP Businesss Handbook Link
http://aaupwiki.princeton.edu/index.php/The_AAUP_Business_Handboo