PRESENTATION 3: COMMUNICATE BUDGET AND FINANCIAL PLANS

PRESENTATION 3 OUTLINE

The following areas are covered in this presentation:

• The Communications Package

• Reviewing and Amending the Communications Package

• Training Activities

• Definitions of Terms and Data

THE COMMUNICATIONS PACKAGE

• Before you can distribute your forthcoming budget to all

concerned, it will need to be reviewed and checked

• The method of communicating the budget will also need to be well

thought out especially for the larger corporations that may have

interstate offices and branches

• A large organisation at a single location will nearly always have

separate divisions and departments all with different parts of the

budget they are concerned with

• The skills that input daily decisions are solely dependent on whom

you engage in the decision process

THE COMMUNICATIONS PACKAGE

Finance Specialists

• You may be comfortable making financial decisions when the

company is small, say 1-5 people, but as the business grows so

does the need to seek specialist input

• In a mature corporate trading entity you may find that the

business is broken into several divisions with skilled and

responsible managers leading these internal teams

• The reliance upon external advisors is unavoidable and essentially

a key to operating successfully. Externals advisors can include

Lawyers, Accountants, Financial planners and industry consultants

THE COMMUNICATIONS PACKAGE

Finance Specialists

• Internal to the operation you may have a complete accounts

department made up of several staff and specialists including:

Data entry and customer service officers Debtor and creditor managers

Reconciliation staff Book keepers and Accountants

Procurement or contract managers Budget and risk analysts

Audit and compliance officers Chief Financial Officer (CFO)

THE COMMUNICATIONS PACKAGE

Finance Specialists

• A review by a financial specialist or members of the accounts team

will ensure the following considerations have been addressed:

− The budget and forecast makes sense

− The revenues match expenses in terms of timing

− The budget or plans are systematic and address all types of

expense or revenue expected

− The budget or plan documents all the assumptions and special

entries thoroughly

− Implementation of procedures to regularly compare the budget

or forecast to actual data and track the cause of variances is

undertaken

THE COMMUNICATIONS PACKAGEBudget Communications

• Stakeholder engagement ‘is the process used by an organisation to

engage relevant stakeholders for a clear purpose to achieve accepted

outcomes’

• It can provide useful information to shape the implementation of the

budget or financial plans at policy, operations, program or project level

• The key elements of effective engagement include:

− involving the right stakeholders

− ensuring a fit-for-purpose approach, with well-managed

interactions

− managing expectations

− using the information obtained from stakeholders

THE COMMUNICATIONS PACKAGEBudget Communications

• The terms communication and engagement are not interchangeable,

though they are inherently linked.

• There are different skills, tools and techniques for communication and

engagement, and engaging with stakeholders will usually require a mix

of both.

• In order to gain acceptance and adherence to the budget, an effective

communications process must be used

Communication usually involves a one-way flow of information (whether by speaking, writing or other means)

Engagement is about working with and involving stakeholders for a clear purpose—usually a two-way flow of information.

THE COMMUNICATIONS PACKAGEBudget Communications

• An effective communications process:

WHAT - Agreement on budget content WHO - Clear identification of responsibilities, accountabilities and delegations

Address stakeholders in the business and their information needs. Communication packages combine defined reports and the opportunity to query and clarify

A review process to address:How will you communicate and ensure consistency with organisational requirements

Make sure formats convey the correct messageBudget meetings must suit the audience and content

Opportunities to review and amend the communication

Effective communication activities to suit the target audience and content consult with team to ascertain best methods of communication

THE COMMUNICATIONS PACKAGE

• The communications package is designed to provide individual

team members with information through a medium of which is

useful for them in making informed decisions, and measuring their

progress against plans and budgets.

• When developing your package, you will need to address:

The overall budget and financial plan strategy needs to be broadcast to everyone

A top down budget will have specified the company-wide objectives of the budget

The communications package must deliver the budget and plan to all levels of the company

THE COMMUNICATIONS PACKAGE

• When developing your communications package, you will need to

address:

The responsibility for communicating the budget company-wide is a specialised task and should be assigned to either a permanent budget committee or a

senior manager. The financial aspects of the package are checked for accuracy and relevance by a specialist such as the finance director or accountant

The financial plan and associated detailed budgets need to be disseminated across as well as up and down the company personnel

The budget and plans need to be clearly documented

THE COMMUNICATIONS PACKAGE

• When developing your communications package, you will need to

address:

The budget and plan will need to clearly show the targets to be met and those responsible for the various implementations. For example the sales staff will be

responsible for the sales and revenue budget

It is most important for staff to be able to take ownership of the parts of the budget and plan that applies to them

Full budget details do not need to be conveyed to each person in the company, only those parts of the budget that affects them

THE COMMUNICATIONS PACKAGE

• The communication plan will specify how the budget and plan

details are to be disseminated. Your options include the following:

Newsletter Email Memos

Bulletins Meetings and Staff Discussions

THE COMMUNICATIONS PACKAGE

• The communication medium chosen should be catered towards

the preferences of staff members in receiving company directives.

• Some people will be happy to receive the information via an email,

some will prefer a one to one with their manager and some will

prefer a staff discussion.

• It may be the practice of a particular department to have regular

meetings to inform of or discuss new business

REVIEWING AND AMENDING THE COMMUNICATIONS PACKAGE

• It is important to review the communications ackage. This should

be done before the communications package is delivered to staff.

• The points that might be looked at during a final review include

the following:

Identify potential problems or foreseeable situations that may occur

Quantify and prioritise potential risks, problems or situations in terms of likelihood and impact

Identify actions that can be taken to avoid, manage or minimise impact of risks, problems or situations

REVIEWING AND AMENDING THE COMMUNICATIONS PACKAGE

• After a review by either the financial specialists or the

communication specialists or the budget committee, or any other

specialist group, there may well be some recommendations for

changes in the package.

• Some potential corrections may be required due to the following:

− Unexpected increases in costs

− Changes in sales levels and income

− Market fluctuations affecting supply and demand for labour

− Unexpected delays to projects

− Changes in legislation and financial obligations

REVIEWING AND AMENDING THE COMMUNICATIONS PACKAGE• Amending the communications package is not unusual. Quantifying

and prioritising budget risks, problems or unforeseeable situations

require a risk management process

• They should be managed in accordance with the organisation’s risk

management policies and procedures and any actions available for

unforseen budget situations will vary, but may include provisions for:

− Reducing or restructuring production to maintain stocks at a

manageable level

− Reducing costs by recycling, sourcing cheaper or alternative

materials or waste management

− Looking for alternate markets and opportunities

− Increasing marketing and promotions

− Maintaining a buffer for increases in costs

REVIEWING AND AMENDING THE COMMUNICATIONS PACKAGE

− Maintaining a buffer for increases in costs

− The ability to outsource certain tasks with more economical outcomes

− Diversifying outcomes

− Working on cheaper or lower quality raw materials where possible

− Increasing sales or production

− Reducing, recycling or reusing. Can another manufacturer use your

waste? It may reduce your expense to dispose of the waste

− Rental, leasing or hiring rather that purchasing outright

− Restructuring tasks to minimise costs associated with labour

− Succession planning

− Are there other ways to finance the cost? Maintain a contingency fund

for extra costs in times of unforeseeable situations

TRAINING ACTIVITIES

• Meetings and electronic communication will be the two most

common methods of disseminating the budgets and plans across

the organisation. This can be considered as budget training.

• There is no preferred method of communication; it will be

entirely up to each organisation

• The various forms of communication include:

Formal meetings Informal meetings One to one and small group meetings

Videoconferencing Email Other

TRAINING ACTIVITIES

Formal Meetings

Has an agenda, a chairperson or team leader and the target audience will have been identified in the communication

package.

Most targeted for a specific group in that the management level or individual competencies of the audience will be similar e.g. it may be a meeting of state managers and be chaired by

a chief operating officer

The participants will be expected to provide professional feedback with a desire to improve the process and delivery of

the communication package

TRAINING ACTIVITIES

Informal Meetings

Not as structured as formal meetings and are sometimes easier to arrange, usually much shorter in duration and designed to

give everyone a voice.

May be run in conjunction with a formal meeting, for example smaller groups may break up and discuss something specific in

an informal style.

Participants should be from a range of levels so that there is some knowledge base available to answer questions or explain

something to the others or provide clarification.

TRAINING ACTIVITIES

Small Group Discussions

Ideal for getting the message across, especially to a specialised group who all need to receive identical information.

E.g. all the regional purchasing managers will need to be informed of a budget initiative that has reduced expenses in

waste disposal due to a new supplier and contract.

Individual attention can be achieved in a small group discussion or one to one meeting and may be the optimum

means of budget training for the smaller organisation.

TRAINING ACTIVITIES

Videoconferencing

Handy communication method for a geographically diverse situation such as a national organisation with many branches e.g. national

supermarket chains.

Advantage: larger groups can be addressed and the proceedings can be recorded for future use and training proposes.

Disadvantage: meeting cannot be easily halted to respond to non-agenda items and feedback is not immediate as the participants are

not in the same room.

Videoconferencing can be used for both formal and non-formal meetings.

TRAINING ACTIVITIES

Electronic Communication

Easy, widespread and well-understood method of communication and has the advantage of being able to be targeted to individuals

and groups at any time

Can also be monitored, changed rapidly, is geographically independent and can be referred to at the recipient’s convenience

The monotony of the message however does little to allow for individuals learning speed or comprehension levels and email

communications should be monitored for completeness of understanding and backed up with informal meetings.

Responding to emails should be encouraged if further information is required

TRAINING ACTIVITIES

Other

Bulletin boards, internal newsletters, printed matter and letters

These methods have a place but usually in conjunction with one of the previous modes.

Best described as ancillary to the meeting and electronic scenarios, but they have their place. If your organisation uses newsletters and

internal bulletin boards extensively then this method will be well tolerated, accepted and expected to be the preferred method of

communication

DEFINITIONS OF TERMS AND DATA

• Communication and financial specialists much ensure there is zero

ambiguity in the terms and concepts used in the budget

• If definitions are required they should form part of the

communication package

• Whatever format is adopted for use in the budget must be

consistent and unambiguous

• The use of the terms cost of goods, overheads and fixed costs can

cause confusion sometimes, so a brief explanation is advised.

When preparing a budget, expenses and costs need to be known

and in some cases predicted or allowed for

DEFINITIONS OF TERMS AND DATA• Some expenses will be easy to predict, as they are known. These are

called fixed costs (or fixed expenses/overheads). Examples are your

rent, lease payments, loan repayments, wages and salaries. You will

incur these no matter what.

• The other type of expense is called variable expenses and these have

to be allowed for when you are making up a budget.

• One of the biggest contributors to variable expenses for a

manufacturing business is the raw material expense, sometimes called

cost of goods sold. These are the costs directly related to production.

• For a service type business, variable expenses will include advertising,

office and computer expenses, vehicle expenses, some insurances,

safety equipment, waste disposal etc. These expenses will also occur

within a manufacturing business, a trading company and in a sole

trader type business.