Budgeting Essentialsat GE

December 13, 2012
Budgeting Essentials
Developing a Winning Operating Plan for 2013 and Beyond
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December 13, 2012
Budgeting Essentials
Developing a Winning Operating Plan for 2013 and Beyond
Todays Presenter:
David Genet
Income Statement Manager
GE Home & Business Solutions
Disclaimer
Disclaimer: This webcast is for information purposes only and is not intended as an offer,
solicitation, or recommendation for the purchase or sale of a financial instrument or to
effect a transaction. The information contained within this webcast has been obtained
from and is based upon sources believed to be reliable. General Electric Capital Corporation
and any of its affiliates (collectively GECC) do not guarantee the accuracy or completeness
of the information and make no express or implied representations, but reasonable steps
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3
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12/13/2012
Agenda
Budgeting at GE
Strategic Outlook budget process
Step 1: Functional bottoms up
Step 2: FP&A top down
Assumptions in budgeting
Step 3: Reconciliation and revision
Pitching your budget
Step 4: Finalization and game plan
Summary
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12/13/2012
Budgeting at GE
Budgeting is
Budgeting is not
crucial to driving business strategy and

initiatives
a finance only process or an operations only

process
a basis for evaluating performance and

reaching goals
a rigid process with a right and wrong way

to perform each step
3 Year Outlook
1 Year Strategic Est .
OP Plan
Growth Playbook . April-May
Session II October-December
December-January
Strategic 3 year outlook

focusing on industry &
macro environment
Lay outline for next fiscal

year driven by business
imperatives and strategy
Drives more detail around

timing of SII and any
changes/challenges
Sets the basis for annual

planning sessions
Most important planning

period plan by qtr
OP Plan becomes final

budget
5
12/13/2012
Strategic Outlook budget process

1
Functional
bottoms up
Reconciliation &
revision
Finalize budget &

drive ownership
FP&A top down
1. Functions conduct individual bottoms up forecasts and estimates focusing on their own
specific metrics and areas of emphasis (cost, capacity, backlogs)
2. FP&A simultaneously executes on a top down forecast echoing leaderships
expectations and considering macro/industry trends
3. Function specific and FP&A budgets are reconciled together to make note variances,
metrics, and areas of consistency/inconsistency in emphasis
4. Finalize budget, clearly communicate the focus of the plan, and operationalize ways to
ensure accountability and ownership function by function
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12/13/2012
Functional bottoms up
Process
Use management direction and historical

performance as baseline
HR
Supply
Chain
Tech
FP&A
Sales, supply chain, marketing, etc. teams

independently complete budget
Teams focus on their specific metrics and

major points of emphasis
Proposals/cutting of programs, headcount,
and resources
Submission of budget into ERP system
Product
Mgmt
Sales
Mktg
Critical to Quality
2-3 week timeline with hard stop (pencils down)
Little to no communication with FP&A team to
drive intuitive assumptions
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12/13/2012
FP&A top down

Process
Financials and key points of interest based

on leadership directives, macro and
industry, company wide trends and goals
FP&A puts together tops down of how
entire business should look
HR
Supply
Chain
Tech
FP&A
Product
Mgmt
Sales
Mktg
Anticipate based on functional behavior the

budgets and proposals to come
Critical to Quality
Drive metric consistency material

inflation needs to be offset with price
2-3 week timeline with flexible models built

to track changes made in reconciliation step
Finalized budget should be theoretical

Profit & Loss no system interaction
Guidance and communication to functions

should be at a minimum
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12/13/2012
Assumptions in budgeting
Controllable
Non-controllable
Headcount and people cost
Macro environment
A business controls its organization and

employees but must plan appropriately
How does the pending fiscal cliff impact

consumer spending? Globally, do we need to
redirect efforts in Europe or wait for a rebound?
2X11 C&B $
EOP
2X12 C&B $
$100,000
3.5%
$103,500
Price/volume/mix
The business strategy should make
assumptions around the impact of price
volume and mix of products
Industry
What is our competition planning for new
products in the next year? How will this impact
our price/volume/mix equation?
New product introductions and investment

NPIs and investment into product lines should
be based on market demand and trends, but
also supply chain costs and profitability
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12/13/2012
Reconciliation and revision

Process
FP&A reconciles functional budget with the

top down expectation
HR
Supply
Chain
Tech
FP&A
Differences and variances in financials,

metrics, headcount, etc. eliminated
Function(s) adjustment to correct
Product
Mgmt
Sales
Mktg
FP&A adjust/hedge business in total
Ensure that financials and metrics tie out

with leadership directed strategy
End result of reconciliation and revision
should be pitch for leadership
Critical to Quality
~1 week time period for completion
Communication between FP&A and functions
regular and important
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12/13/2012
Pitching your budget

Key Contents
Current year total and recap focus story

on financials and major wins & losses
Next year financial outlook for total

business steer from individual P&L detail
Touch on cash flow early to help set tone of

true business profitability
Competitive environment and industry

outlook to help justify strategy
Individual P&Ls highlighting new products

and investment into product line
Summary page to drive home outlook
Critical to Quality
Stay high level and drive focus of the pitch
towards one or two key points
FP&A should control the deck with inputs
from functions as needed
Hard pencils down 2 days prior to pitch to
leadership
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12/13/2012
Finalization and game plan

Process
Budget is revised and finalized upon review

with leadership
HR
Supply
Chain
Tech
FP&A
Communication of budget is communicated

via CFO staff and in ERP tool as final version
financials and strategy
Product
Mgmt
Sales
Mktg
Control mechanisms put in place to ensure

accountability and ownership
Critical to Quality
Weekly risks and opportunities pulsed

Weekly roll-up of business projections
Monthly/quarterly close schedules

defined
Track functions on where they project vs

where they end up to learn behavior
Accountability two-way street FP&A driven,

but functional teams must own their number
12
12/13/2012
Summary of budget process

1
Functional
bottoms up
Reconciliation &
revision
Finalize budget &

drive ownership
FP&A top down
1. Functions conduct individual bottoms up forecasts and estimates focusing on their own
specific metrics and areas of emphasis (cost, capacity, backlogs)
2. FP&A simultaneously executes on a top down forecast echoing leaderships
expectations and considering macro/industry trends
3. Function specific and FP&A budgets are reconciled together to make note variances,
metrics, and areas of consistency/inconsistency in emphasis
4. Finalize budget, clearly communicate the focus of the plan, and operationalize ways to
ensure accountability and ownership function by function
13
12/13/2012
Questions?
David Genet
Income Statement Manager
GE Home & Business Solutions

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December 13, 2012

Thanks for joining us!

December 13, 2012

Strategic Outlook budget process

Step 1: Functional bottoms up

Step 2: FP&A top down

Step 3: Reconciliation and revision

Pitching your budget

Step 4: Finalization and game plan

crucial to driving business strategy and

a finance only process or an operations only

a basis for evaluating performance and

a rigid process with a right and wrong way

1 Year Strategic Est .

Growth Playbook . April-May

Strategic 3 year outlook

Lay outline for next fiscal

Drives more detail around

Sets the basis for annual

Most important planning

OP Plan becomes final

Strategic Outlook budget process

Finalize budget &

FP&A top down

Use management direction and historical

Sales, supply chain, marketing, etc. teams

Teams focus on their specific metrics and

Submission of budget into ERP system

FP&A top down

Financials and key points of interest based

Anticipate based on functional behavior the

Drive metric consistency material

2-3 week timeline with flexible models built

Finalized budget should be theoretical

Guidance and communication to functions

Headcount and people cost

A business controls its organization and

How does the pending fiscal cliff impact

New product introductions and investment

Reconciliation and revision

FP&A reconciles functional budget with the

Differences and variances in financials,

FP&A adjust/hedge business in total

Ensure that financials and metrics tie out

Pitching your budget

Current year total and recap focus story

Next year financial outlook for total

Touch on cash flow early to help set tone of

Competitive environment and industry

Individual P&Ls highlighting new products

Finalization and game plan

Budget is revised and finalized upon review

Communication of budget is communicated

Control mechanisms put in place to ensure

Weekly risks and opportunities pulsed

Monthly/quarterly close schedules

Track functions on where they project vs

Accountability two-way street FP&A driven,

Summary of budget process