BUDGETS

MADE BY: MUHAMMAD ASIF USMANI

 INTRODUCTION
 The presentation covers the following points in detail:
1. Understanding budgets
2. Reporting requirements and financial delegations
3. Key bids and estimates
4. Identifying and prioritizing significant issues
5. Review of financial management software
6. Recording transactions
7. Maintaining an audit trail
8. Compliance with due diligence
 UNDERSTANDING BUDGETS

 A budget refers to an estimation of revenue and expenses that's made for a specified future period of
time. Budgeting usually occurs on an ongoing basis, with individual budgets being re-evaluated
regularly.
 A budget is an estimation of revenue and expenses utilized by governments, businesses, and individuals
of any income level.
 A budget is a financial plan for a defined period that can greatly enhance the success of any financial
undertaking.
 Corporate budgets are essential for operating at peak efficiency.
 Aside from earmarking resources, a budget can also aid in setting goals, measuring outcomes, and
planning contingencies.
 Personal budgets are extremely useful in helping individuals and families manage their finances.
 REPORTING REQUIREMENTS AND
FINANCIAL DELEGATIONS
 Budget reporting is the comparison, analysis, and documentation of the current company's financial performance
against the projected budget.
 A budget report should include actual expenditures, budgeted amounts, variances, and explanations for significant
differences. It should also provide context, historical data, and insights to aid in decision-making.
 A Financial Delegation is the approval to purchase goods or services on the organization's behalf and is subject to
there being an approved budget in place.
 An employee needs Financial Delegation in order to perform approvals. Each Financial Delegate is assigned a
specific delegation level
 These delegations are essential to the efficient functioning of an organization and allow managers to make quick
approval decisions within well-known constraints. There are numerous delegations possible, such as financial
(authorizing payments), employee-related (approving allowances) and regulatory (issuing fines).
 KEY BIDS AND ESTIMATES

 The term "bid" refers to the highest price a buyer will pay to buy a specified number of shares of a stock
at any given time. The term "ask" refers to the lowest price at which a seller will sell the stock. The bid
price will almost always be lower than the ask or “offer,” price.
 The budget estimate approximates the time and resources needed to plan and complete a project and
develop and implement a viable budget.
 Revenue estimate- A revenue estimate is the amount of money a company can presumably spend on a
project. This value is a derivative of the company's annual earnings and is independent of any money
borrowed and assets owned.
 Cost estimate- A cost estimate is an approximation of the capital necessary to complete a project or
program. It involves considering all the elements of a project and coming up with a total figure essential
for budget development. Depending on the project, this may include labor costs, material and equipment
costs and management costs.
 KEY BIDS AND ESTIMATES

 Return estimate- A return estimate forecasts the income likely to be generated from an investment or a
project. Professionals subtract the estimated costs from the revenue estimate to obtain this value. It aids
developers in choosing between investments, as projects with higher potential returns are generally
more attractive.
 Risk estimate- A risk estimate is a forecast of the likelihood of risks occurring in a project and the
expected consequences, including the calculation of risk exposure. You can use a technique known as
"reference class forecasting" to predict these risks. This technique involves using records of historical
risks incurred in similar projects. These estimates are crucial as companies can financially prepare for
risks by including them in the budget. Organizations may also decide to disqualify high-risk projects
based on these values if they are not well-equipped to handle them.
 KEY BIDS AND ESTIMATES

 Budget estimation is fundamental in planning any successful project. The following are some reasons
why it is necessary:
1. Budget estimation allows the organization to meet all its objectives for the project at hand without
exceeding available funds. When drawing up a budget estimate, developers have to consider all the
project tasks and allocate funds for each one of them. This helps the organization track its progress
against these estimates.
2. It allows the developers to prepare for any risks throughout the project. Risk estimates are part of the
budget estimates and these values aid in developing a contingency fund for the project.
3. It enables developers only to use the available capital and not exceed this amount in the course of the
project. This prevents companies from terminating projects halfway or becoming bankrupt.
 IDENTIFYING AND PRIORITIZING
SIGNIFICANT ISSUES

 Measuring your ROI isn't always as simple as comparing your sales to your investment. Some departments have
results that are difficult to measure. For example, marketing investments might increase your brand awareness or
bring in new leads. However, you won't see a financial return for months--or even years.
 Solution-Restricting your definition of ROI to financial returns will make your budgeting implementation more
difficult. Instead, explore different calculations that account for other return types, for instance calculating a
customer's lifetime value (LTV) or establishing non-monetary returns such as new leads or employee satisfaction.
 Each department within your company has a personal budget agenda. These agendas can conflict with each other or
the business's overarching goals. This creates issues as you try implementing your budget when departments make
budget requests based on their priorities.
 Solution-When you create your budget, involve all departments in the planning process. By doing so, you can
ensure each department is aware of other needs within the company. You can also keep them focused on the bigger
picture.
 IDENTIFYING AND PRIORITIZING
SIGNIFICANT ISSUES
 The average error rate of manual data entry is 1%. That percentage causes a much more significant loss when those
errors are part of your budget planning and implementation. For example, large organizations say they lose $15
million annually from poor data quality. Errors can come from mistyping information during data entry, misreading
handwritten reports and losing paperwork or physical reports.
 Solution- Financial planning and analysis (FP&A) platforms not only save you time, but also save you millions of
dollars. For example, instead of handling physical reports, departments can input budget data directly into a
management system to keep the data accurate and avoid losing or misinterpreting information .
 Data silos occur when departments don't share data. This can cause several issues, including departments working
with outdated information, errors, duplicate data, poor business decisions and inaccurate financial forecasting.
 If your financial team doesn't have the most up-to-date information or is missing critical details, they won't know
how other departments are performing. As a result, they can't accurately track their returns, growth or necessary
budget adjustments. You need complete data to make changes during the year.
 IDENTIFYING AND PRIORITIZING
SIGNIFICANT ISSUES

 Solution-A unified financial planning software solution connects all departments within your organization. Instead
of each department working with its own data management systems separate from each other, they can upload,
update and access data from each department in real-time.
 All your departments might not know what your budget is. This can lead to overspending and poor financial
choices that impact your entire business. Issues can also occur when changes happen throughout the year that result
in a budget shift. If all departments aren't unaware of the changes, they won't adjust their spending accordingly.
 Solution- Keeping all departments involved in your budget creation, implementation and adjustments ensures
everyone stays on the same page. Budgeting software allows department heads to access the budget and to see the
latest changes to ensure they stay on track.
 Regular budget meetings throughout the year that involve key stakeholders from each department also help remind
budget owners of your business goals.
 REVIEW OF FINANCIAL
MANAGEMENT SOFTWARE
 Currently hotel is using Intacct, M3 and xero software for finances overview.
 Intacct- Sage Intacct is a robust solution tailored for hoteliers, featuring advanced reporting capabilities
for greater insights into RevPAR, occupancy rates, profitability, and budget forecasting. It automates
many reporting tasks and provides real-time performance tracking across multiple locations.
 M3- M3 is an accounting solution natively built for hotels. It offers a high degree of customization,
including the ability to use a chart of accounts based on the latest USALI standards or a customizable
format. The software imports data from the PMS automatically and provides powerful financial reporting.
 Xero- Xero is an accounting software with a business analytics functionality allowing hoteliers to track
cash flow and generate short-term financial projections and key performance forecasts. While it includes
basic payroll capabilities, Xero can also connect to third-party dedicated payroll solutions for more
advanced needs.
 RECORDING TRANSACTIONS
 Recording transactions is a critical function in accounting as it provides the basis for preparing financial
statements and tax returns. It also helps in the decision-making process by providing information about
the financial performance of a company. Management can then use this information to make informed
decisions about the allocation of resources and the management of risks.
 There are a few steps in the general process of recording transactions. First, an accountant must
determine the accounts the transaction impacts. Second, the accountant must decide if the accounts will
be debited or credited. Finally, the accountant makes entries in the journal with the date of their
occurrence, and then they are posted or transferred to the ledger.
 There are various methods of recording transactions, but the most common and simplest method is the
double-entry bookkeeping system. Under this system, an accountant records each transaction in at least
two different accounts, with a corresponding debit and credit entry. This system helps to ensure the
accuracy of financial records and provides a clear audit trail in case of any discrepancies.
 MAINTAINING AN AUDIT TRAIL

 An audit trail is a step-by-step record by which accounting, trade details, or other financial data can be traced to their
source. Audit trails are used to verify and track many types of transactions, including accounting transactions and
trades in brokerage accounts.
 It’s important for businesses to maintain a comprehensive and complete audit trail so they can track back any
irregularities and find process breakdowns if and when they happen.
 An airtight audit trail helps companies identify internal fraud by keeping track of the different users and the actions
they take with regard to a company’s data and information. Audit trail records can also help identify outside data
breach issues.
 Starting from a comprehensive audit trail that collects all data entered and versioning provides a solid baseline. Daily
inputs and activities performed by users flow into the audit logs, ideally through automation. On a periodic basis,
audit trail owners or managers should validate that their audit logs are still capturing the right information, or update
the logging mechanism to capture the correct information. When new policies or workflows are created, project teams
should understand their auditing requirements and incorporate the right level of logging. Maintaining a hub of audit
trail documentation in a knowledge base or repository can be a great way of establishing continuity for the future.
 COMPLIANCE WITH DUE
DILIGENCE
 Due diligence is an investigation, audit, or review performed to confirm facts or details of a matter under
consideration.
 In the financial world, due diligence requires an examination of financial records before entering into a
proposed transaction with another party.
 Due diligence is a systematic way to analyze and mitigate risk from a business or investment decision.
 An individual investor can conduct due diligence on any stock using readily available public information.
 The same due diligence strategy will work on many other types of investments.
 Due diligence involves examining a company's numbers, comparing the numbers over time, and
benchmarking them against competitors.
 Due diligence is applied in many other contexts, for example, conducting a background check on a
potential employee or reading product reviews.
THANK YOU SO
MUCH