Budgeting and Accounting with Strategic Planning in Mind

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Budgeting and Accounting with Strategic Planning
in Mind

• Bruce Hanni, Controller Fluor Daniel Hanford

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Topics

• Some basic premises
• The role of the financial professional
• Strategic planning process
• Practical examples

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Basic Premises

• The single common denominator of any enterprise
  is financial data
• We (Finance) own the data
• We see things executive management doesnt
• We can be key players in the planning process

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Role of the Financial Professional

• Look at the data
• Understand what the data is telling you
• Look beyond the data to the driver(s)
• Dont be timid
• Remember, the data tells the story
• Think like an executive
• Know their strategic thinking

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Strategic Planning

• Establish goals and objectives
• Sustained increase in shareholder value
• Identify critical measures
• Net Operating Profit (growth over time)
• Earnings Per Share (growth over time)
• Revenues (growth over time)

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Strategic Planning

• Develop strategies to meet those goals and
  objectives
• Cost containment
• Market expansion
• Acquisition
• Divestiture

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Practical Example - Overtime
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Practical Example - Overtime

• Before
• 11 of total payroll
• 27 million/year
• gt17,000 hours/week
• Controller approved all extended workweek
  requests
• 60 requests/week w/12 workers/ request

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Practical Example - Overtime

• Action
• Collect/graph weekly overtime

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Practical Example - Overtime
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Practical Example - Overtime

• Action
• Collect/graph weekly overtime
• Present data w/recommendations to Sr. Mgmt.

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Practical Example - Overtime
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Practical Example - Overtime

• Action
• Collect/graph weekly overtime
• Present data w/recommendations to Sr. Mgmt
• Establish weekly reporting capability

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Practical Example - Overtime
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Practical Example - Overtime

• After (6 months)
• 4.5 of total payroll
• 14 million/year
• lt8,500 hours/week
• Line mgmt. approved all overtime
• Sr. Mgmt. established clear expectations

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Practical Example - Banking
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Practical Example - Banking

• Action
• Analyze the financial statements

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Practical Example - Banking
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Practical Example - Banking

• Before
• Bank Accounts
• 1200
• Annual fees 5 million
• Driven by
• Historical standard contract terms and conditions
• Local customs

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Practical Example - Banking

• Action
• Present data w/recommendations to Sr. Mgmt.
• Close inactive accounts
• Modify Ts Cs
• Educate business development/marketing groups

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Practical Example - Banking

• After (1 year)
• Bank Accounts
• lt500
• Annual fees lt2.5 million
• Modified Ts Cs - all new proposals

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Practical Example - Taxes
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Practical Example - Taxes

• Action
• Analyze the financial statements

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Practical Example - Taxes
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Practical Example - Taxes

• Before
• Work performed at corporate or in country of
  construction
• International tax laws not considered

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Practical Example - Taxes

• Action
• Present data w/recommendations to Sr. Mgmt.
• Examine international tax laws
• Deploy work to optimize tax treatment
• Exploit technology
• Modify Ts Cs
• Educate business development/marketing groups

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Practical Example - Taxes

• After
• Effective tax rate reduced to 32

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Practical Example - Taxes
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Practical Example - Pricing
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Practical Example - Pricing

• Strategic Objective
• Identify in-roads to increasing work with the
  National Labs

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Practical Example - Pricing

• Before
• Cost/pricing model charged all infrastructure
  burdens regardless of where work was performed

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Practical Example - Pricing
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Practical Example - Pricing

• Action
• Revise cost model to more precisely align
  allocations with cost drivers
• Stratify infrastructure to only those benefiting
  cost objectives
• Realign cost elements between infrastructure and
  GA to ensure consistency
• Apply resulting rates

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Practical Example - Pricing
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Practical Example - Pricing

• After
• Pricing strategy consistent with Strategic
  objective

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Summary

• Look at the data
• Understand what the data is telling you
• Look beyond the data to the driver(s)
• Dont be timid
• Remember, the data tells the story
• Think like an executive
• Know their strategic thinking
• MAKE A DIFFERENCE!