 In this presentation, we will take a look at budgetary controls and reporting. In a prior course, in prior presentations, we took a look at the creation of the master budget, a static budget, and the components of the master budget. First a word from our sponsor. Yeah, actually we're sponsoring ourselves on this one because apparently the merchandisers they don't want to be seen with us. But that's okay whatever. Star merchandise is better than their stupid stuff anyways. Like our Accounting Rocks product line. If you're not crunching cords using Excel, you're doing it wrong. A must-have product because the fact as everyone knows of accounting being one of the highest forms of artistic expression means accountants have a requirement, the obligation, a duty to share the tools necessary to properly channel the creative muse. And the muse, she rarely speaks more clearly than through the beautiful symmetry of spreadsheets. So get the shirt because the creative muse, she could use a new pair of shoes. If you would like a commercial free experience, consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com. Here we're going to be focusing more on the flexible budget, but we want to review some of the components of the budgeting process and then go into those components more in depth concentrating on the flexible budget. So the budgeting process will start off with the creation of the budget. We're going to have to compare the actual numbers to the budgeted numbers. So we're going to create the budget of course, then we'll have the actual period. We'll run by the time period, the month, the year, then we'll do the comparison. What did we expect to happen in the budget? What actually happened? What are the actual numbers? We'll do that comparison. Then we'll analyze the differences and then we'll strategize. We'll look at the differences, of course, the variances, and then we'll strategize based on those make changes based on those. And then of course, implement another budget. We're going to revise the objectives for the new budget. And then we're going to create, of course, the new budget again. This is going to be the standard cycle that we will be going through within the budgeting process. Of course, we plan, we budget, we project out with that budget. Then the time period passes. We compare what happened to what our projection was. We look at the differences and then we make changes based on those differences. Budget report timing, typically as we saw in prior course in prior presentations when just looking at the static master budget, we're considering a budgeting for a year's time period. And then we could break that down into quarters and then often into months. That would be the standard types of budgeting process that we would have. We'd say, hey, I'm going to budget this out into a year. We want to break that out into quarters so that we can then review each quarter and possibly break that out into months so that we can have a review each month comparing budgeted numbers to actual numbers on that basis. The budget promotes future focus, analysis, thought and direction. So remember that when we're considering the budget, we're focusing out into the future and we're getting that kind of vision statement out. Well, the vision is going to be the long term focus. The budget really takes that long term vision and puts it into digestible chunks, actionable chunks, yearly chunks, quarterly chunks, monthly chunks. And it allows everybody in the organization then to be kind of focused towards that immediate goal. So our operations from a day to day standpoint, then as we make day to day decisions, we can align to the immediate goal and have all of our conversations basically within the decision making process on a day to day basis in alignment with those future objectives. Communicate the plans to the organization. Once we have the budget put together, remember that that's going to be our communication tool. That's going to be our roadmap type tool that we're going to use to communicate to the organization. And that's the better the budget is put together, the more clear that roadmap should be. And again, it should be those actionable steps that we can kind of go to and help us to get to the long term vision. We'll have the long term vision and then be able to communicate what our action plan is in the short term in the next year, the next month in order to achieve the objectives that go towards that long term vision. Makes long term strategy plans into short term financial plans. So remember that we do have again, that long term type of vision. What we're trying to do is take that long term vision, which is something that's going to be seem like it's not obtainable really in the immediate presence, of course, because it's a long term vision. We need to break that down into immediate strategies, financial strategies because financial strategies are those that we can measure easily. And so we want to break down those long term vision into the strategies that people can then focus in on work towards within a specific time period within the framework of the long term vision provides a benchmark for evaluation. So of course, we're going to take the budgeted numbers and then we're going to run the process and look at the actual numbers and we'll have the comparison of the budgeted numbers to the actual numbers. We need to have that benchmark because if we do not have that benchmark, then people don't have anything really to shoot for. There's no way to evaluate how well people did. As we put that benchmark in place, of course, we need to be careful that we don't make the benchmark too low, too easy for people to clear, not too high so that it kind of discourages people. We want to basically set the appropriate type of benchmark that's enough that it's challenging, but hopefully achievable and therefore that will inspire people. And of course, then once the actual numbers happen, once the time period has passed, we'll do that comparison. We'll do that evaluation. Motivates employees through participation. Remember that the budgeting process should be a bottom-up type process, especially more and more for larger types of companies given the fact that we're going to have to get the numbers, the data, from the departments. So the departments are going to have to provide that information logistically. And it's also going to be a great opportunity for us to communicate with other people in the organization if we have more communication in the process of the creation of the budget, focusing in on the process when we're aligning and leading the budgeting process, meaning the focus isn't so much from the leaders on making the actual decision themselves, but in making sure that the process is in alignment so that the decision can be made well so that everybody communicates within that decision. Once the budget has then been created then, that process of the creation and the decision-making is basically done at that point and now the budget is over. It's a roadmap now. Now the communication is going to be there to communicate what the goals and objectives that have been decided on are through the budget. So remember that the budget-wide budget, the process is going to be promote future focus analysis, thought and direction for the organization, communicates the plan to the organization, makes long-term strategic plans into short-term financial plans, provides benchmark for evaluation and motivates employees through participation.