Operating Budget Process and

Structure

Cerveceria India, Inc.

Finance Department
 Agenda

• Cerveceria India Budget

– Introduction
– Parameters
– Process/ Structure
 Budget Purpose

• Budget is a financial action plan, that comes as a result of the

strategic planning of the organization.

– Promotes a system to plan future events.

– Provides a view of the company’s future financial results.

– Provides a benchmark in which performance can be

measured.

– Provide expenditure controls.

 Budget Types

• Operating Budget

• Capital Budget

• Cash Budgets
Operating Budget Parameters

• Time period Fixed Rolling

• Forecast Value Static Flexible

• Forecasting Process
Incremental Zero-based
• Setting goals
Top-down Participatory

Highlighted: Cerveceria
India 2009 budget
parameters
Budgeting Process
 Operating Budget Process

Set
Setup
upgoals
goalsand
and
key
keyassumptions
assumptions

Prepare
PreparePreliminary
Preliminary
Budgets
Budgets

Approval
Approval

Prepare
PrepareMaster
Master
Budget
Budget

Periodical
Periodicalresults
results
revision
revision
 Set up goals and assumptions

Department
• Define the corporate larger Plan

priorities, strategies and plans. Corporate

Plan Department
• Define departmental action Plan

plan.
Department
Plan

Deliverable:
•Document (template) the corporate and departmental plans.
 Operating Budget Process

Set
Setup
upgoals
goalsand
and
key
keyassumptions
assumptions

Prepare
PreparePreliminary
Preliminary
Budgets
Budgets

Approval
Approval

Prepare
PrepareMaster
Master
Budget
Budget

Periodical
Periodicalresults
results
revision
revision
 Prepare Preliminary Budgets
Cerveceria
CerveceriaIndia
IndiaPreliminary
PreliminaryBudget
Budget Structure
Structure
Sales
SalesForecast
Forecast
Cost
CostofofGoods
GoodsSold
Sold
Sales
SalesUnit
Unit Forecast
Forecast Operating
Operating
Forecast
Forecast Expenses
Expenses
Production
ProductionForecast
Forecast
Sales
SalesRevenue
Revenue
Forecast Materials
MaterialsForecast
Forecast Selling
Forecast Selling

Labor
LaborForecast
Forecast
Delivery
Delivery
Overhead
OverheadForecast
Forecast
Marketing
Marketing
Excise
ExciseTaxes
Taxes
Forecast
Forecast
GG&&AA
Sales Units

Sales
SalesUnits
UnitsForecast
Forecast = Total
TotalUnits
Units(Cases)
(Cases)To
ToBe
Besold
sold

Key assumptions & analysis:

•Sales Current/ Historical Reports
•Expected growth changes, targets in
sales

Deliverable:
•Document (spreadsheet/ template) with the number of sales in
units for each product, by each period.
 Prepare Preliminary Budgets
Cerveceria
CerveceriaIndia
IndiaPreliminary
PreliminaryBudget
Budget Structure
Structure
Sales
SalesForecast
Forecast
Cost
CostofofGoods
GoodsSold
Sold
Sales
SalesUnit
Unit Forecast
Forecast Operating
Operating
Forecast
Forecast Expenses
Expenses
Production
ProductionForecast
Forecast
Sales
SalesRevenue
Revenue
Forecast Materials
MaterialsForecast
Forecast Selling
Forecast Selling

Labor
LaborForecast
Forecast
Delivery
Delivery
Overhead
OverheadForecast
Forecast
Marketing
Marketing
Excise
ExciseTaxes
Taxes
Forecast
Forecast
GG&&AA
Revenues Forecast

Sales Total
TotalRevenues
Revenuesnet
netfrom
SalesRevenue
Revenue = returns
from
Forecast returnsand
anddiscounts
discountsofof
Forecast customers
customers
Key assumptions & analysis:

•Data sales prices and price changes

•Discounts and returns analysis
•Expected Revenue (Gross Margin Analysis)

Deliverable:

•Document (spreadsheet/ template) with sales revenue forecast

for each product, by each period.
 Prepare Preliminary Budgets
Cerveceria
CerveceriaIndia
IndiaPreliminary
PreliminaryBudget
Budget Structure
Structure
Sales
SalesForecast
Forecast
Cost
CostofofGoods
GoodsSold
Sold
Sales
SalesUnit
Unit Forecast
Forecast Operating
Operating
Forecast
Forecast Expenses
Expenses
Production
ProductionForecast
Forecast
Sales
SalesRevenue
Revenue
Forecast Materials
MaterialsForecast
Forecast Selling
Forecast Selling

Labor
LaborForecast
Forecast
Delivery
Delivery
Overhead
OverheadForecast
Forecast
Marketing
Marketing
Excise
ExciseTaxes
Taxes
Forecast
Forecast
GG&&AA
Packaging Production Forecast

Packaging Total
Totalunits
unitsthat
thathas
hastotobe
PackagingForecast
Forecast = produced
be
producedby bypackaging
packaginglines
linesin
in
order
ordertotofulfill
fulfillsales
salesforecast
forecast
Key assumptions & analysis:
•Sales Unit Forecast analysis
•Safety Stock requirements
•Sales Volume/ Capacity Analysis

Deliverable:

•Document (spreadsheet/ template) with packaging production

forecast for each product, by each period.
Brewing Production Forecast

Total
Totalunits
unitsproduced
producedby bythe
the
Brewing
BrewingForecast
Forecast = brew
brewhouse
houseand
andthe thecold
coldblock
block
in
inorder
orderto
tofulfill
fulfillsales
salesforecast
forecast
Key assumptions & analysis:
•Packaging Forecast
•Historical/ Expected Process Loss
•Safety Stock Requirements
•Sales Volume/ Capacity Analysis

Deliverable:
•Document (spreadsheet/ template) with brewing production forecast
for each product, by each period.
 Prepare Preliminary Budgets
Cerveceria
CerveceriaIndia
IndiaPreliminary
PreliminaryBudget
Budget Structure
Structure
Sales
SalesForecast
Forecast
Cost
CostofofGoods
GoodsSold
Sold
Sales
SalesUnit
Unit Forecast
Forecast Operating
Operating
Forecast
Forecast Expenses
Expenses
Production
ProductionForecast
Forecast
Sales
SalesRevenue
Revenue
Forecast Materials
MaterialsForecast
Forecast Selling
Forecast Selling

Labor
LaborForecast
Forecast
Delivery
Delivery
Overhead
OverheadForecast
Forecast
Marketing
Marketing
Excise
ExciseTaxes
Taxes
Forecast
Forecast
GG&&AA
Materials Forecast

Total
Totalmaterials
materials(units,
(units,$)
$)required
requiredto
to
Materials
MaterialsForecast
Forecast = meet
meetthe
theproduction
productionforecast
forecast

Key assumptions & analysis:

•Materials Consumption Analysis

•Price information and changes

Deliverables:
•Document (spreadsheet/ template) with materials required to
produce,unit and total cost.
•Document with materials cost by finished product
 Prepare Preliminary Budgets
Cerveceria
CerveceriaIndia
IndiaPreliminary
PreliminaryBudget
Budget Structure
Structure
Sales
SalesForecast
Forecast
Cost
CostofofGoods
GoodsSold
Sold
Sales
SalesUnit
Unit Forecast
Forecast Operating
Operating
Forecast
Forecast Expenses
Expenses
Production
ProductionForecast
Forecast
Sales
SalesRevenue
Revenue
Forecast Materials
MaterialsForecast
Forecast Selling
Forecast Selling

Labor
LaborForecast
Forecast
Delivery
Delivery
Overhead
OverheadForecast
Forecast
Marketing
Marketing
Excise
ExciseTaxes
Taxes
Forecast
Forecast
GG&&AA
Labor Forecast

Total
TotalDirect
Direct&&Indirect
IndirectLabor
Labor
Labor
LaborForecast
Forecast = (Men
(MenHours
Hours&&$$)
$$)

Key assumptions & analysis:

•Headcount per department
•Man hour average rate
•Machine/process hours required to meet production forecast
•Total regular hours and overtime per department

Deliverable:
•Document (spreadsheet/ template) with monthly labor cost
(direct/ indirect) per department.
 Prepare Preliminary Budgets
Cerveceria
CerveceriaIndia
IndiaPreliminary
PreliminaryBudget
Budget Structure
Structure
Sales
SalesForecast
Forecast
Cost
CostofofGoods
GoodsSold
Sold
Sales
SalesUnit
Unit Forecast
Forecast Operating
Operating
Forecast
Forecast Expenses
Expenses
Production
ProductionForecast
Forecast
Sales
SalesRevenue
Revenue
Forecast Materials
MaterialsForecast
Forecast Selling
Forecast Selling

Labor
LaborForecast
Forecast
Delivery
Delivery
Overhead
OverheadForecast
Forecast
Marketing
Marketing
Excise
ExciseTaxes
Taxes
Forecast
Forecast
GG&&AA
Overhead Forecast

Total
Totalindirect
indirectcosts
costsnot
notassociated
associated
Overhead
OverheadForecast
Forecast = directly
directlywith
withaaparticular
particularitem
item
Key assumptions & analysis:
•Historical information revision
•Expected changes
•Zero-based expenditure plan for each “account”/
categories
Deliverable:
•Document (spreadsheet/ template) with a detail per indirect cost
account per department.
 Prepare Preliminary Budgets
Cerveceria
CerveceriaIndia
IndiaPreliminary
PreliminaryBudget
Budget Structure
Structure
Sales
SalesForecast
Forecast
Cost
CostofofGoods
GoodsSold
Sold
Sales
SalesUnit
Unit Forecast
Forecast Operating
Operating
Forecast
Forecast Expenses
Expenses
Production
ProductionForecast
Forecast
Sales
SalesRevenue
Revenue
Forecast Materials
MaterialsForecast
Forecast Selling
Forecast Selling

Labor
LaborForecast
Forecast
Delivery
Delivery
Overhead
OverheadForecast
Forecast
Marketing
Marketing
Excise
ExciseTaxes
Taxes
Forecast
Forecast
GG&&AA
Excise Tax Forecast

Excise Total
Totaltax
taxcost
costper
perunit
unitof
of
ExciseTaxes
TaxesForecast
Forecast = beer
beersold
sold
Key assumptions & analysis:
•Excise tax per gallon produced
•Expected changes in law
•Projection of tax per case sold

Deliverable:
•Document (spreadsheet/ template) with a detail of beer unit sold
and its excise tax.
 Prepare Preliminary Budgets
Cerveceria
CerveceriaIndia
IndiaPreliminary
PreliminaryBudget
Budget Structure
Structure
Sales
SalesForecast
Forecast
Cost
CostofofGoods
GoodsSold
Sold
Sales
SalesUnit
Unit Forecast
Forecast Operating
Operating
Forecast
Forecast Expenses
Expenses
Production
ProductionForecast
Forecast
Sales
SalesRevenue
Revenue
Forecast Materials
MaterialsForecast
Forecast Selling
Forecast Selling

Labor
LaborForecast
Forecast
Delivery
Delivery
Overhead
OverheadForecast
Forecast
Marketing
Marketing
Excise
ExciseTaxes
Taxes
Forecast
Forecast
GG&&AA
Operating Expenses Forecast

Total
Totalnon-manufacturing
non-manufacturing
Operating
OperatingExpenses
Expenses = expenses
expenses
Key assumptions & analysis:

•Historical information revision

•Expected changes
•Zero-based expenditure plan for “accounts”/ categories

Deliverable:
•Document (spreadsheet/ template) with a detail per operating
expense account per department.
 Budget Process

Set
Setup
upgoals
goalsand
and
key
keyassumptions
assumptions

Prepare
PreparePreliminary
Preliminary
Budgets
Budgets

Approval
Approval

Prepare
PrepareMaster
Master
Budget
Budget

Periodical
Periodicalresults
results
revision
revision
 Approval Process

• Preliminary budgets submission to Top

Management for approval.

Deliverable:
•Approved budget (Document/ System) by Top management
 Budget Process

Set
Setup
upgoals
goalsand
and
key
keyassumptions
assumptions

Prepare
PreparePreliminary
Preliminary
Budgets
Budgets

Approval
Approval

Prepare
PrepareMaster
Master
Budget
Budget

Periodical
Periodicalresults
results
revision
revision
 Prepare Master Budget

• Finance Team:
– Check completeness of information
– Prepare templates to upload information to GL
– Reproduce a monthly closing in GL with Budget
Information
– Present Budget Reports and Financial Statement

Deliverables:

•Budget Templates (analysis, worksheet per department) completed.

•Budget information checklist.
•Budgeted Income Statement report.
 Budget Process

Set
Setup
upgoals
goalsand
and
key
keyassumptions
assumptions

Prepare
PreparePreliminary
Preliminary
Budgets
Budgets

Approval
Approval

Prepare
PrepareMaster
Master
Budget
Budget

Periodical
Periodicalresults
results
revision
revision
 Periodical Revision

• Finance Department discuss with managers the monthly

results and transactions.

• Justify variances compared with assumptions.

• Evaluate any mayor change and update the budget.

Deliverables:

•Report with revised transactions by department managers.

BUDGETED INCOME STATEMENT LINES BUDGETED INCOME STATEMENT LINE COMPONENTS
CASES SOLD Sales Forecast
Gross Sales Sales Forecast X Unit
Price
Returns Forecast X Unit Price
Returns
Discounts Discounts Forecast X Unit Price
NET SALES Gross Sales- Returns - Discounts
COST OF GOODS SOLD Budgeted Direct and Indirect
Costs
EXCISE TAXES Beer Sales Forecast X Taxes
GROSS PROFIT Net Sales-Cost of Goods Sold- Excise Taxes
OPERATIONAL EXPENSES
Selling Expenses Budgeted Selling Expenses
Delivery Expenses Budgeted Delivery
Expenses
Marketing Expenses Budgeted Marketing
Expenses
General and Administrative Exp. Budgeted Gen.and
Adm.Expenses
TOTAL OPERATIONAL EXPENSES Selling +Delivery+Marketing+Gen.&Adm. Exp.
TOTAL OPERATIONAL INCOME(LOSS) Gross Profit- Expenses
OTHER INCOME/EXPENSES Budgeted Incomes or Loss not related to Operating
activities
INCOME BEFORE TAXES Operational Income+Other Income

INCOME TAXES Budgeted Incomes Taxes (2% Income Before Taxes)

INCOME (LOSS) AFTER INCOME TAXES Income Before taxes- Income taxes
 Packaging Forecast & Budget Map

BUDGET TEMPLATES BUDGET ACCOUNTS INCOME STATEMENT

COSTOS DE MATERIALES
509999 COS TO DE VENTA
Materials Forecast
CASES SOLD
Template COSTOS
LA BOR DIRECTA (PROVIENE DIRECTA MENTE DELS IS TEMA DE NOMINA )
512501 JORNALES Y S UELDOS NET SALES
512502 TIEMP O EXTRA
512503 DIA CUMP LEAÑOS Y FERIADOS
Plans and 512504 CONTRIB. S OBRE JORNALES Y S UE LD COST OF GOODS SOLD
strategies Direct Labor 512506 ALIMENTACION
513001 VACACIONES
forms Forecast Template 513002 ENFERMEDAD
EXCISE TAXES
513501 BONO NAVIDAD
513502 BONO AS IS TE NCIA GROSS PROFIT
LA BOR INDIRECTA (PROVIENE DIRECTA MENTE DEL S IS TEMA DE NOMINA )
520501 JORNALES Y S UELDOS OPERATING EXPENSES
520503 DIA CUMP LEAÑOS Y FERIADOS
Production Indirect Labor 520504 CONTRIB. S OBRE JORNALES Y S UE LD Selling Expenses
521001 VACACIONES
Forecast Forecast Template 521002 ENFERMEDAD
Delivery Expenses
Template 521503 BONOS ES P ECIALES Marketing Expenses
522001 RETIRO General and Administrative Exp.
522002 S EGURO OBRERO
522003 S EGURO MEDICO TOTAL OPERATIONAL EXPENSES
522004 S EGURO DE VIDA
OTROS COSTOS INDIRECTOS
Utilities Forecast 522501 AGUA
TOTAL OPERATIONAL INCOME(LOSS)

Template 522502 ENE RGIA ELECTRICA

OTHER INCOME/EXPENSES
522503 ALCANTARILLADO
523005 GAS CARBONICO (CO2)
523022 P IEZAS Y MATERIALES DE FABRICA INCOME BEFORE TAXES
523023 S ERVICIO DE REP ARACION Y
MANTENIMIENTO
Other Costs Forecast 523009 MATERIALES DE LABORATORIO INCOME TAXES
Templates 524001 CONTRIB. S OBRE LA P ROP IEDAD
524018 S ERVICIOS P ROFES IONALES
INCOME (LOSS) AFTER INCOME TAXES

GASTOS OPERACIONALES
GASTOS GENERALES Y ADM INISTRATIVOS
642502 GAS TOS DE VIAJE Y REP RE S ENTACION
Spending Forecast
643003 GAS OLINA Y ACEITE
Templates 644005 S EMINARIOS Y ADIES TRAMIENTOS
645502 CUOTAS Y S UBS CRIP CIONE S
647002 GAS TOS DE OFICINA
648506 GAS TOS MIS CELANEOS
Technical Services Forecast & Budget Map

BUDGET TEMPLATES BUDGET ACCOUNTS INCOME STATEMENT

Plans and
COSTOS CASES SOLD
strategies forms LABOR INDIRECTA (PROVIENE DIRECTAMENTE DELS IS TEMA DE NOMINA)
520501 J ORNALES Y S UELDOS
520502 TIEMP O EXTRA NET SALES
520503 DIA CUMP LEAÑOS Y FERIADOS
COST OF GOODS SOLD
Indirect Labor 520504 CONTRIB. S OBRE J ORNALES Y S UELD

Forecast 520505 ALIMENTACION EXCISE TAXES

521001 VACACIONES
Template 521002 ENFERMEDAD
521501 BONO NAVIDAD GROSS PROFIT
521502 BONO AS IS TENCIA
521503 BONOS ES P ECIALES
OPERATING EXPENSES
522001 RETIRO
522002 S EGURO OBRERO
Selling Expenses
522003 S EGURO MEDICO
522004 S EGURO DE VIDA Delivery Expenses
Marketing Expenses
OTROS COSTOS INDIRECTOS
General and Administrative Exp.
Other Costs 523022 P IEZAS Y MATERIALES DE FABRICA

Forecast 523023 S ERVICIO DE REP ARACION Y TOTAL OPERATIONAL EXPENSES

Templates MANTENIMIENTO
TOTAL OPERATIONAL INCOME(LOSS)
524018 S ERVICIOS P ROFES IONALES
OTHER INCOME/EXPENSES

GASTOS OPERACIONALES INCOME BEFORE TAXES

Spending Forecast GASTOS GENERALES Y ADMINISTRATIVOS
642502 GAS TOS DE VIAJ E Y REP RES ENTACION INCOME TAXES
Templates 644005 S EMINARIOS Y ADIES TRAMIENTOS
647002 GAS TOS DE OFICINA INCOME (LOSS) AFTER INCOME TAXES
End of Budget Process