cma(part1): budgeting concepts
DESCRIPTION
TRANSCRIPT
![Page 1: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/1.jpg)
Budgeting Concepts
Iyad Mourtada, CIA, CMA, CFE, CPLP
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 2: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/2.jpg)
Budgeting Concepts
• Introduction to Budgeting
• Role of the Budget
• Budget Periods
• Budget Participants
• Cost Standards
• Budget Preparation Tools
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 3: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/3.jpg)
An operational plan and control tool that identifies resources and
commitments needed to satisfy goals over a period of time.
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 4: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/4.jpg)
Bu
dg
et C
ycle
International Budget Partnership
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 5: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/5.jpg)
Resources
Budget
Goals
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 6: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/6.jpg)
Budget = Planning Tool
A Written plan.
Anticipating problems (managers are proactive rather than reactive).
Defining the goals in quantitative terms.
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 7: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/7.jpg)
Budget = Control Tool
Setting cost guidelines.
Managers will understand the budgeted cost of their departments.
Measures the performance against established goals.
Personal self-evaluation tool.
Avoiding budgetary slack.Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 8: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/8.jpg)
Budget = Motivational Tool
Motivating employees to stay within budget.
Must be seen a realistic budget and not as a restriction.
Some degree of flexibility should be allowed.
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 9: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/9.jpg)
Budget = Communication Tool
Communicating the goals.
Making everyone in the organization working toward the goals.
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 10: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/10.jpg)
Budget = Coordination Tool
Motivating departments to communicate and coordinate their work to be able to create the budget.
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 11: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/11.jpg)
Successful Budgeting
Aligned with corporate strategy.
Used to allocate resources effectively.
Used as planning, communication, coordinating, and motivating tools.
Buy-in at all levels.Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 12: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/12.jpg)
vs. Controllable
CostsNoncontrollable
Costs
Controllability
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 13: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/13.jpg)
“If you don’t know where you are going, any path will take
you there.”
12
43
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 14: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/14.jpg)
Mission Statement
Plan
ning
Strategic Plan
Long-term ObjectivesCapitalize &Amortize
Capital Investment
Capital Budget
Short-term Objectives Expense
Operating Budget
Current Investments
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 15: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/15.jpg)
Budget Periods
Strategic 10-2 years
Intermediate 2-1 year
Operational Less 1year
Strategic Plan
Long-term plans (budgets) Short-term plans (budgets)
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 16: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/16.jpg)
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 17: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/17.jpg)
Authoritative (top-down budget)
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 18: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/18.jpg)
Participative (bottom-up budget)
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 19: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/19.jpg)
Budget Participants
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 20: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/20.jpg)
Budgetary Slack
Am
ou
nt
Bu
dg
ete
d
Am
ou
nt
Ne
ed
ed
Managers can underestimate the amount of income or revenue that will come in over a given amount of time, or overestimate the expenses that are to be paid out over the same time period.
This will create “Budgetary Slack”, which is the excess of amount budgeted over and actual amount needed.
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 21: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/21.jpg)
Budgetary Slack
Advantages
• Provides flexibility for operating under unknown circumstances.
• Offsets the costly setups from design changes and/or small lot size orders.
Disadvantages• Decreases the ability to
highlight weaknesses and take timely corrective actions on problem areas.
• Decreases the overall effectiveness of corporate planning.
• It limits the objective evaluation of departmental managers and performance of subordinates by using budgetary information.
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 22: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/22.jpg)
Cost Standards
How much an operation or a service should cost?
Types of Standards:
Authoritative vs. Participative
Ideal vs. Reasonably Attainable
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 23: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/23.jpg)
Cost Standards
Standard Costs of Direct Material (Quality - Quantity - Price)
Standard Costs of Direct Labor
Sources for Standard Setting:
- Activity Analysis - Historical Data
- Market Expectations and Strategic Decisions
- BenchmarkingIyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 24: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/24.jpg)
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 25: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/25.jpg)
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 26: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/26.jpg)
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 27: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/27.jpg)
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 28: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/28.jpg)
Iyad Mourtada, CIA, CMA , CFE, CPLP Openthinkingacademy.com
![Page 29: CMA(Part1): Budgeting Concepts](https://reader035.vdocuments.us/reader035/viewer/2022062617/54c213f94a79598a728b456e/html5/thumbnails/29.jpg)
Iyad Mourtada, CMA, CIA, CFE, CPLP, M.A.
http://ae.linkedin.com/in/iyadmourtada
http://twitter.com/iyadmourtada
http://www.youtube.com/Iyadmourtada
http://www.iyadmourtada.com
http://www.facebook.com/iyad.mourtada
iyadmourtada