ACCT 2104 · Budgeting: The Forward Plan in Numbers

Led by Margaret Vance-Foster Simulacrum

1. Module 4 ○ Open

   Budgeting: The Forward Plan in Numbers

   Led by Margaret Vance-Foster Simulacrum

   The question

   Budgeting as the management-accounting expression of the operational plan, and the political failure modes that often defeat it. The module covers the master-budget structure (sales → production → materials/labour/overhead → cash → integrated financials), top-down vs bottom-up approaches, zero-based and incremental and activity-based budgeting, the politics of padding and sandbagging and the hockey-stick pattern, the cash budget as the most important and most ignored component, the rolling forecast as alternative to annual budget, and the Hope-and-Fraser *Beyond Budgeting* critique. The closing scenario works through a padded budget.

   Outcome

   The student can describe the components of a master budget, distinguish bottom-up from top-down approaches, recognise the political failure modes, build a basic cash budget, and run a budget-vs-actual review with meaningful variance interpretation. (Budgeting)

   Begin the course → Mark module complete Print certificate of completion

   Practice scenarios

   The Padded Budget

   You are a divisional finance business partner. The new sales director has just submitted next year's sales budget at £18m, up from £14m this year. They are insisting on a 25% headcount increase, a £400k uplift in marketing spend, and £600k of new sales tools. The sales director's argument: "we need to invest to grow". Your suspicion: the £18m target is a stretch goal padded with wishful thinking; the headcount increase is partly a build-empire move; and the spending is being committed before the revenue has been validated. The CFO wants your recommendation on whether to approve the budget as submitted.

   Your goals

   • Test the sales target against evidence: pipeline coverage (do they have £36-54m of qualified pipeline for an £18m target — i.e., 2-3x cover?), conversion rates from prior years, win rates, average deal size trends. If these don't support £18m, the target is wishful.
   • Test the headcount logic: revenue per salesperson currently £X; the proposed increase implies what productivity per new hire? How long does ramp take? Is this realistic in this market?
   • Test the spending logic: what has marketing's incremental £400k delivered before? What's the proposed measurement framework for the new sales tools?
   • Recommend a structure: approve a *commitment* budget at a defensible target (perhaps £16m), with an *aspirational* target at £18m that unlocks additional spend if early-quarter pipeline conversion supports it. This is a *flexible* budget rather than a fixed one — and it protects against committing the spending before the revenue has been validated.
   • Acknowledge the politics: the sales director will resist this. Your job is to recommend the technically correct structure, not the politically convenient one.

   Practise this scenario →