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

• Forecast Value

• Forecasting Process

• Setting goals

Fixed Rolling

Static Flexible

Incremental

Zero-based

Top-down Participatory

Highlighted: Cerveceria India 2009 budget

parameters

Budgeting Process

Operating Budget Process

Set up goals and key assumptions

Set up goals and key assumptions

Prepare Preliminary Budgets

Prepare Preliminary Budgets

Periodical results revision

Periodical results revision

Approval

Approval

Prepare Master Budget

Prepare Master Budget

DepartmentPlan

Set up goals and assumptions

• Define the corporate larger priorities, strategies and plans.

• Define departmental action plan.

Corporate Plan

DepartmentPlan

Deliverable:

•Document (template) the corporate and departmental plans.

DepartmentPlan

Operating Budget Process

Set up goals and key assumptions

Set up goals and key assumptions

Prepare Preliminary Budgets

Prepare Preliminary Budgets

Periodical results revision

Periodical results revision

Approval

Approval

Prepare Master Budget

Prepare Master Budget

Prepare Preliminary Budgets

Sales ForecastSales Forecast

Operating Expenses

Operating Expenses

Cerveceria India Preliminary Budget StructureCerveceria India Preliminary Budget Structure

Production ForecastProduction Forecast

Materials ForecastMaterials Forecast

Labor ForecastLabor Forecast

Overhead ForecastOverhead Forecast

SellingSelling

DeliveryDelivery

MarketingMarketing

G & AG & A

Cost of Goods Sold Forecast

Cost of Goods Sold ForecastSales Unit

Forecast

Sales Unit Forecast

Sales Revenue Forecast

Sales Revenue Forecast

Excise Taxes Forecast

Excise Taxes Forecast

Sales Units

Sales Units ForecastSales Units Forecast

•Sales Current/ Historical Reports

•Expected growth changes, targets in sales

Total Units (Cases) To Be sold Total Units (Cases) To Be sold =

Key assumptions & analysis:

Deliverable:

•Document (spreadsheet/ template) with the number of sales in units for each product, by each period.

Prepare Preliminary Budgets

Sales ForecastSales Forecast

Operating Expenses

Operating Expenses

Cerveceria India Preliminary Budget StructureCerveceria India Preliminary Budget Structure

Production ForecastProduction Forecast

Materials ForecastMaterials Forecast

Labor ForecastLabor Forecast

Overhead ForecastOverhead Forecast

SellingSelling

DeliveryDelivery

MarketingMarketing

G & AG & A

Cost of Goods Sold Forecast

Cost of Goods Sold ForecastSales Unit

Forecast

Sales Unit Forecast

Sales Revenue Forecast

Sales Revenue Forecast

Excise Taxes Forecast

Excise Taxes Forecast

Revenues Forecast

Sales Revenue Forecast

Sales Revenue Forecast

•Data sales prices and price changes

•Discounts and returns analysis

•Expected Revenue (Gross Margin Analysis)

Total Revenues net from returns and discounts of

customers

Total Revenues net from returns and discounts of

customers=

Key assumptions & analysis:

Deliverable:

•Document (spreadsheet/ template) with sales revenue forecast for each product, by each period.

Prepare Preliminary Budgets

Sales ForecastSales Forecast

Operating Expenses

Operating Expenses

Cerveceria India Preliminary Budget StructureCerveceria India Preliminary Budget Structure

Production ForecastProduction Forecast

Materials ForecastMaterials Forecast

Labor ForecastLabor Forecast

Overhead ForecastOverhead Forecast

SellingSelling

DeliveryDelivery

MarketingMarketing

G & AG & A

Cost of Goods Sold Forecast

Cost of Goods Sold ForecastSales Unit

Forecast

Sales Unit Forecast

Sales Revenue Forecast

Sales Revenue Forecast

Excise Taxes Forecast

Excise Taxes Forecast

Packaging Production Forecast

Packaging ForecastPackaging Forecast

•Sales Unit Forecast analysis

•Safety Stock requirements

•Sales Volume/ Capacity Analysis

Total units that has to be produced by packaging lines in

order to fulfill sales forecast

Total units that has to be produced by packaging lines in

order to fulfill sales forecast

=

Key assumptions & analysis:

Deliverable:

•Document (spreadsheet/ template) with packaging production forecast for each product, by each period.

Brewing Production Forecast

Brewing ForecastBrewing Forecast

•Packaging Forecast

•Historical/ Expected Process Loss

•Safety Stock Requirements

•Sales Volume/ Capacity Analysis

= Total units produced by the brew house and the cold block in order to fulfill sales forecast

Total units produced by the brew house and the cold block in order to fulfill sales forecast

Key assumptions & analysis:

Deliverable:•Document (spreadsheet/ template) with brewing production forecast for each product, by each period.

Prepare Preliminary Budgets

Sales ForecastSales Forecast

Operating Expenses

Operating Expenses

Cerveceria India Preliminary Budget StructureCerveceria India Preliminary Budget Structure

Production ForecastProduction Forecast

Materials ForecastMaterials Forecast

Labor ForecastLabor Forecast

Overhead ForecastOverhead Forecast

SellingSelling

DeliveryDelivery

MarketingMarketing

G & AG & A

Cost of Goods Sold Forecast

Cost of Goods Sold ForecastSales Unit

Forecast

Sales Unit Forecast

Sales Revenue Forecast

Sales Revenue Forecast

Excise Taxes Forecast

Excise Taxes Forecast

Materials Forecast

Materials ForecastMaterials Forecast

•Materials Consumption Analysis

•Price information and changes

= Total materials (units, $) required to meet the production forecast

Total materials (units, $) required to meet the production forecast

Key assumptions & analysis:

Deliverables:•Document (spreadsheet/ template) with materials required to produce,unit and total cost.

•Document with materials cost by finished product

Prepare Preliminary Budgets

Sales ForecastSales Forecast

Operating Expenses

Operating Expenses

Cerveceria India Preliminary Budget StructureCerveceria India Preliminary Budget Structure

Production ForecastProduction Forecast

Materials ForecastMaterials Forecast

Labor ForecastLabor Forecast

Overhead ForecastOverhead Forecast

SellingSelling

DeliveryDelivery

MarketingMarketing

G & AG & A

Cost of Goods Sold Forecast

Cost of Goods Sold ForecastSales Unit

Forecast

Sales Unit Forecast

Sales Revenue Forecast

Sales Revenue Forecast

Excise Taxes Forecast

Excise Taxes Forecast

Labor Forecast

Labor ForecastLabor Forecast

•Headcount per department

•Man hour average rate

•Machine/process hours required to meet production forecast

•Total regular hours and overtime per department

= Total Direct & Indirect Labor (Men Hours & $$)

Total Direct & Indirect Labor (Men Hours & $$)

Key assumptions & analysis:

Deliverable:

•Document (spreadsheet/ template) with monthly labor cost (direct/ indirect) per department.

Prepare Preliminary Budgets

Sales ForecastSales Forecast

Operating Expenses

Operating Expenses

Cerveceria India Preliminary Budget StructureCerveceria India Preliminary Budget Structure

Production ForecastProduction Forecast

Materials ForecastMaterials Forecast

Labor ForecastLabor Forecast

Overhead ForecastOverhead Forecast

SellingSelling

DeliveryDelivery

MarketingMarketing

G & AG & A

Cost of Goods Sold Forecast

Cost of Goods Sold ForecastSales Unit

Forecast

Sales Unit Forecast

Sales Revenue Forecast

Sales Revenue Forecast

Excise Taxes Forecast

Excise Taxes Forecast

Overhead Forecast

Overhead ForecastOverhead Forecast

•Historical information revision

•Expected changes

•Zero-based expenditure plan for each “account”/ categories

= Total indirect costs not associated directly with a particular item

Total indirect costs not associated directly with a particular item

Key assumptions & analysis:

Deliverable:

•Document (spreadsheet/ template) with a detail per indirect cost account per department.

Prepare Preliminary Budgets

Sales ForecastSales Forecast

Operating Expenses

Operating Expenses

Cerveceria India Preliminary Budget StructureCerveceria India Preliminary Budget Structure

Production ForecastProduction Forecast

Materials ForecastMaterials Forecast

Labor ForecastLabor Forecast

Overhead ForecastOverhead Forecast

SellingSelling

DeliveryDelivery

MarketingMarketing

G & AG & A

Cost of Goods Sold Forecast

Cost of Goods Sold ForecastSales Unit

Forecast

Sales Unit Forecast

Sales Revenue Forecast

Sales Revenue Forecast

Excise Taxes Forecast

Excise Taxes Forecast

Excise Tax Forecast

Excise Taxes ForecastExcise Taxes Forecast

•Excise tax per gallon produced

•Expected changes in law

•Projection of tax per case sold

= Total tax cost per unit of beer sold

Total tax cost per unit of beer sold

Key assumptions & analysis:

Deliverable:

•Document (spreadsheet/ template) with a detail of beer unit sold and its excise tax.

Prepare Preliminary Budgets

Sales ForecastSales Forecast

Operating Expenses

Operating Expenses

Cerveceria India Preliminary Budget StructureCerveceria India Preliminary Budget Structure

Production ForecastProduction Forecast

Materials ForecastMaterials Forecast

Labor ForecastLabor Forecast

Overhead ForecastOverhead Forecast

SellingSelling

DeliveryDelivery

MarketingMarketing

G & AG & A

Cost of Goods Sold Forecast

Cost of Goods Sold ForecastSales Unit

Forecast

Sales Unit Forecast

Sales Revenue Forecast

Sales Revenue Forecast

Excise Taxes Forecast

Excise Taxes Forecast

Operating Expenses Forecast

Operating ExpensesOperating Expenses

•Historical information revision

•Expected changes

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

= Total non-manufacturing expenses

Total non-manufacturing expenses

Key assumptions & analysis:

Deliverable:

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

Budget Process

Set up goals and key assumptions

Set up goals and key assumptions

Prepare Preliminary Budgets

Prepare Preliminary Budgets

Periodical results revision

Periodical results revision

Approval

Approval

Prepare Master Budget

Prepare Master Budget

Approval Process

• Preliminary budgets submission to Top Management for approval.

Deliverable:

•Approved budget (Document/ System) by Top management

Budget Process

Set up goals and key assumptions

Set up goals and key assumptions

Prepare Preliminary Budgets

Prepare Preliminary Budgets

Periodical results revision

Periodical results revision

Approval

Approval

Prepare Master Budget

Prepare Master Budget

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 up goals and key assumptions

Set up goals and key assumptions

Prepare Preliminary Budgets

Prepare Preliminary Budgets

Periodical results revision

Periodical results revision

Approval

Approval

Prepare Master Budget

Prepare Master Budget

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.

CASES SOLD

Gross Sales Returns Discounts

NET SALES COST OF GOODS SOLD EXCISE TAXES GROSS PROFIT OPERATIONAL EXPENSES

Selling Expenses Delivery Expenses

Marketing Expenses General and Administrative Exp. TOTAL OPERATIONAL EXPENSES

TOTAL OPERATIONAL INCOME(LOSS) OTHER INCOME/EXPENSES

INCOME TAXES INCOME (LOSS) AFTER INCOME TAXES

BUDGETED INCOME STATEMENT LINES Sales Forecast

Sales Forecast X Unit PriceReturns Forecast X Unit PriceDiscounts Forecast X Unit PriceGross Sales- Returns - DiscountsBudgeted Direct and Indirect CostsBeer Sales Forecast X Taxes

BUDGETED INCOME STATEMENT LINE COMPONENTS

Net Sales-Cost of Goods Sold- Excise TaxesBudgeted Selling ExpensesBudgeted Delivery ExpensesBudgeted Marketing ExpensesBudgeted Gen.and Adm.ExpensesSelling +Delivery+Marketing+Gen.&Adm. Exp.Gross Profit- ExpensesBudgeted Incomes or Loss not related to

Operating activities

Budgeted Incomes Taxes (2% Income Before Taxes)

INCOME BEFORE TAXES

Operational Income+Other Income

Income Before taxes- Income taxes

COSTOS DE MATERIALES509999 COSTO DE VENTA

COSTOSLABOR DIRECTA (PROVIENE DIRECTAMENTE DELSISTEMA DE NOMINA)512501 J ORNALES Y SUELDOS512502 TIEMPO EXTRA512503 DIA CUMPLEAÑOS Y FERIADOS512504 CONTRIB. SOBRE J ORNALES Y SUELD512506 ALIMENTACION513001 VACACIONES513002 ENFERMEDAD513501 BONO NAVIDAD513502 BONO ASISTENCIA

LABOR INDIRECTA (PROVIENE DIRECTAMENTE DEL SISTEMA DE NOMINA)520501 J ORNALES Y SUELDOS520503 DIA CUMPLEAÑOS Y FERIADOS520504 CONTRIB. SOBRE J ORNALES Y SUELD521001 VACACIONES521002 ENFERMEDAD521503 BONOS ESPECIALES522001 RETIRO522002 SEGURO OBRERO522003 SEGURO MEDICO522004 SEGURO DE VIDA

OTROS COSTOS INDIRECTOS522501 AGUA522502 ENERGIA ELECTRICA522503 ALCANTARILLADO523005 GAS CARBONICO (CO2)523022 PIEZAS Y MATERIALES DE FABRICA523023 SERVICIO DE REPARACION Y MANTENIMIENTO523009 MATERIALES DE LABORATORIO524001 CONTRIB. SOBRE LA PROPIEDAD524018 SERVICIOS PROFESIONALES

GASTOS OPERACIONALES

GASTOS GENERALES Y ADMINISTRATIVOS642502 GASTOS DE VIAJ E Y REPRESENTACION

643003 GASOLINA Y ACEITE644005 SEMINARIOS Y ADIESTRAMIENTOS645502 CUOTAS Y SUBSCRIPCIONES647002 GASTOS DE OFICINA648506 GASTOS MISCELANEOS

Direct Labor Forecast Template

Indirect Labor Forecast Template

Utilities Forecast Template

Other Costs Forecast

Templates

Spending Forecast

Templates

Materials Forecast Template

Production Forecast Template

CASES SOLD

NET SALES

COST OF GOODS SOLD

EXCISE TAXES

GROSS PROFIT

OPERATING EXPENSES

Selling Expenses

Delivery Expenses

Marketing Expenses

General and Administrative Exp.

TOTAL OPERATIONAL EXPENSES

TOTAL OPERATIONAL INCOME(LOSS)

OTHER INCOME/EXPENSES

INCOME TAXES

INCOME (LOSS) AFTER INCOME TAXES

INCOME BEFORE TAXES

INCOME STATEMENTBUDGET ACCOUNTSBUDGET TEMPLATES

Packaging Forecast & Budget Map

Plans and strategies

forms

Indirect Labor Forecast Template

Other Costs Forecast

Templates

Spending Forecast

Templates

CASES SOLD

NET SALES

COST OF GOODS SOLD

EXCISE TAXES

GROSS PROFIT

OPERATING EXPENSES

Selling Expenses

Delivery Expenses

Marketing Expenses

General and Administrative Exp.

TOTAL OPERATIONAL EXPENSES

TOTAL OPERATIONAL INCOME(LOSS)

OTHER INCOME/EXPENSES

INCOME TAXES

INCOME (LOSS) AFTER INCOME TAXES

INCOME BEFORE TAXES

INCOME STATEMENTBUDGET ACCOUNTSBUDGET TEMPLATES

Technical Services Forecast & Budget Map

Plans and strategies

forms

COSTOSLABOR INDIRECTA (PROVIENE DIRECTAMENTE DELSISTEMA DE NOMINA)520501 J ORNALES Y SUELDOS520502 TIEMPO EXTRA520503 DIA CUMPLEAÑOS Y FERIADOS

520504 CONTRIB. SOBRE J ORNALES Y SUELD

520505 ALIMENTACION521001 VACACIONES521002 ENFERMEDAD521501 BONO NAVIDAD521502 BONO ASISTENCIA521503 BONOS ESPECIALES522001 RETIRO522002 SEGURO OBRERO522003 SEGURO MEDICO522004 SEGURO DE VIDA

OTROS COSTOS INDIRECTOS 523022 PIEZAS Y MATERIALES DE FABRICA

523023 SERVICIO DE REPARACION Y MANTENIMIENTO

524018 SERVICIOS PROFESIONALES

GASTOS OPERACIONALES GASTOS GENERALES Y ADMINISTRATIVOS 642502 GASTOS DE VIAJ E Y REPRESENTACION

644005 SEMINARIOS Y ADIESTRAMIENTOS

647002 GASTOS DE OFICINA

End of Budget Process