Show Me The Return… Marjorie Jackson Director, Corporate Security Gap, Inc. The evolving security professional… 1 Does your department strategy align with your company’s? ‘…expense reductions and productivity improvements over the next two years…’ Michael T. Duke, Walmart President and CEO ‘We have the clear opportunity to double the business in the next five years.’ Leslie H. Wexner, Limited Chairman and CEO 2 The Learning Curve • Requests & Approvals • Delegated portion of the budget • Managing a function’s budget 3 Finance Key Terms • Budget – the approved spending plan • Forecast – latest estimate of expenses • P&L – Profit and Loss statement, i.e. income statement • Balance Sheet – Financial statement containing assets and liabilities, e.g. accruals • GL Account - General Ledger account that classifies a financial entry e.g. travel, repairs, etc. • Accrual – Finance entry in GL system to reflect expenses when incurred (actual payment timing could differ) • COA String – Chart of accounts string consisting of segments that represent a specific department value in the GL 4 Types of Spend • Payroll and Benefits • Training and Development: In-house Training, Outside Training • Travel and Entertainment: Airfare, Car Rental, Non-Travel Meals, Entertainment, Travel Per Diem (Hotel, Meals, etc.) • Leased Auto: i.e. Runzheimer fees • Services Purchased • Other Operating Expense: Network Expense, Hardware Equipment Expense • Administrative: Supplies, Printing, Consulting fees 5 Understand the Process • • • • • • Leverage – business partners Systems purchase orders initiation Invoicing/Billing Payment – net terms Timing 6 Building a Budget • If you can, build a bottom’s up budget. It is much easier to manage during the year because the numbers make sense and it is easier to update your forecast. • Analyze past spend & trends (3 years – baseline) fixed vs. variable costs • Are there opportunities or risks? reallocate, cut, or add • How are you sourcing? • Each line item – really analyze it • Are you lining up with your strategic goals for the year and long range? Any adjustments to be made? • After the many iterations – finalize your plan! Commit & Communicate! 7 Actual Budget Six Tips For Budget Management By Gene Siciliano, CMC, CPA, author, speaker, financial consultant 1. Look at the budget before you commit funds. 2. Negotiate pricing with your vendors. 3. Made trade-offs. 4. If revenue doesn’t develop as planned, plan to under-spend accordingly. Ultimately, the budget is about the bottom line. 5. Timing is not trivial—don’t spend ahead of schedule. 6. “Oops!” is not a good explanation for overspending. 8 Forecasting REPITITION IS KEY: Review, review, review • Keep to a weekly, monthly, and quarterly review habit • Forecasting is about Full year updates…not just monthly updates • Estimating Costs: If you do not know actual costs of a future trip or project, estimate spend based on history or use budget template • Incorporate all costs, e.g. taxes, shipping, etc. • Timing of spend should be reflected when services are rendered or purchases made • Keep your team accountable! 9 Finance Best Practices • Always question the details – Once costs are rolled up at the highest level, it is easy to lose sight of the smaller details. There is a saying “the devil is in the details”. • Always be prepared to answer questions about historical trends and irregular activity. Keep a log with you for the year on random charges, document it and file it away. • Pay attention to un-forecasted/un-budgeted activity occurring today and plan to budget for it next year. • It is good to review costs as a percent of something (% of cost sales) or $/SQFT. This way it is easy to recognize large variances and flag where your research efforts should go. • Question suspicious activity • When looking at monthly trends, it is best to have at least 13 months of activity because seasonality plays a big part in forecasting accurately. • Common metrics to look at each month are current period vs. prior, Year to Date vs. prior, Total year vs. LY, actual vs. forecast, actual vs. budget, forecast vs. budget. • Always print out your final forecast so in case you need to make changes, you have a hard copy to reference and confirm the update was accurately posted. 10 More Tips & Traps Use the calendar – fiscal, outlook, etc. 11 More Tips & Traps Review your reports - highlight things in red (worse) or green (better) 12 More Tips & Traps Project Plans & Timing 13 Lastly… Check In with your team….never assume! 14 15