The planning and budgeting process in most organisations starts with the human resources (HR) department. At the same time as the sales and marketing professionals are assessing product and service mix and making short and long-term forecasts of sales demand and prices, the HR department is assessing its current level of resources and the likely level of resources required both in the short and longer term. The HR function plays an integral role in the budgeting of costs for the whole organisation. It is also responsible for the preparation and management of its own departmental budget, and is accountable for the achievement of that budget. Financial awareness is therefore an essential requirement for every role at every level within the HR departments of modern business organisations.

Companies are increasingly integrating all their business processes using systems like ERP (enterprise resource planning). Each business function should therefore understand, and be able to communicate, accounting and financial (and non-financial) information. This seminar provides the required level of financial awareness and practical application for HR practitioners to appreciate accounting and finance in the broader context, and the HR function’s involvement in the organisation’s budgeting and budgetary control processes, and participate in the decision-making process. It also includes the techniques required to prepare a detailed budget for the HR department itself, and the management of the HR department’s actual budget performance.

The Goals

• Company objectives and financial statements
• Reading and interpreting financial statements
• Discounted cash flow (DCF)
• Costing
• Decision-making
• Budgeting
• Cost/volume/profit (CVP) analysis
• HR and the budget process
• The HR budget
• Measuring HR performance
• Budgetary control
• Capital investment appraisal
• Capital budgeting

The Benefits

Following completion of this programme, you will know how to:

• Use your financial knowledge for improved planning and management decision-making
• Communicate with finance professionals, within and external to your organisation, to be able to become a more effective manager of the business
• Liaise more effectively with other departments on financial matters
• Share your financial knowledge within your own department and with other departments within your organisation
• Identify and quantify each of the areas in your organisation’s budget for which the HR function has indirect responsibility
• Identify and quantify each of the areas for which your HR function has direct responsibility to be able to prepare a comprehensive HR department budget
• Measure HR performance

The Results

This seminar will provide you with the skills to enable you to:

• Read and interpret the financial statements of a business: cash flow statement; income statement (profit and loss account); balance sheet
• Evaluate business performance using appropriate techniques of financial analysis
• Identify the differences between fixed and variable costs and recognise the impact of changes in cost structure on the performance of the business
• Use both the traditional techniques of budgeting and activity based budgeting (ABB)
• Determine the break-even point of a business using cost/volume/profit (CVP) analysis
• Recognise the importance of cash flow (as distinct from profit) as a measure of business performance
• Use the technique of discounted cash flow (DCF)
• Evaluate new capital investment using DCF and other methods
• Provide the relevant information and budgeted costs for each of the human resource-related areas within your organisation’s budget, for which the HR function has indirect responsibility
• Prepare a comprehensive HR department budget, which includes each of the areas for which the HR function has direct responsibility
• Compare actual versus planned performance using budgetary control and the use of flexed budgets

The Core Competencies

You will be able to put your learning into practice through:

• Being able to interpret the financial reporting of a business: cash flow statement; income statement (profit and loss account); balance sheet
• Using appropriate financial analysis techniques to evaluate business performance
• Appreciating the important differences between fixed and variable costs
• Recognising the ways in which changes in cost structure impact on the performance of the business
• Applying both the traditional techniques of budgeting and activity based budgeting (ABB)
• Being able to calculate the break-even point of a business
• Appreciating the importance of cash flow and discounted cash flow (DCF)
• Considering new capital investment in terms of creation of shareholder value
• Taking a proactive role in the development of your organisation’s budget for the areas in which the HR function has indirect responsibility
• Being able to construct a detailed HR departmental budget, and being accountable for its achievement
• Using the budgetary control techniques of flexed budgets and variance analysis to compare actual versus planned performance

The Programme Content

Company objectives and financial statements

• Measuring company performance
• Value creation and the primary objective of maximisation of wealth
• Income statement (profit and loss account)
• Balance sheet
• Cash flow statement

Reading and interpreting financial statements

• Measurement of operating performance
• Measures of financial performance and financial position
• Risk measurement
• Limitations of ratio analysis

Discounted cash flow (DCF)

• The importance of the timing of cash flows
• Future values
• Present values
• Discounted cash flow (DCF)

Costing

• Fixed costs, variable costs, and overheads
• Overhead allocation, absorption, and the use of activity based costing (ABC)
• Expenses versus inventory (stock valuation)
• Contribution compared with profit

Decision-making

• Relevant costs
• Shut-down versus continuation
• Make versus buy
• Product mix and limited resources
• Decision trees

Budgeting

• Purposes of budgeting
• The budget process
• Activity based budgeting (ABB)
• Uncertainty and risk
• Motivation and the behavioural aspects of budgeting
• Problems in budgeting
• Non-financial performance measures

Cost/volume/profit (CVP) analysis

• Cost, volume, profit relationships
• Break-even analysis
• The impact of cost structure changes
• Limitations of break-even analysis

HR and the budget process

• Organisation charts
• Manpower planning
• The direct labour and indirect labour budget
• Employee benefits
• Employee records
• Payroll administration
• Redundancy costs
• Health and safety
• Employee appraisal
• Succession planning

The HR budget

• HR staff costs
• HR overhead costs
• HR overhead cost allocations
• Employment or outsourcing
• Training and employee development
• Preparation of the HR budget
• Your organisation’s HR budget

Measuring HR performance

• Why we measure HR
• How to measure hiring and staffing
• How to measure training and development
• How to measure employee relations and staff retention

Budgetary control

• Organisational and accounting control systems
• Standard costing
• Flexed budgets
• Variance analysis
• Types of variances and the reasons they occur
• Planning and operational variances
• Controllable and uncontrollable costs
• Responsibility for HR budget variances

Capital investment appraisal

• Methods for evaluating capital projects
• Payback
• Net present value
• Internal rate of return
• Discounted payback

Capital budgeting

• Capital rationing
• Ranking of investment projects
• Inflation and investment
• Using expected values and standard deviations to make decisio