# Presentation: 103203

## Budgeting and Accounting with Strategic Planning in Mind

- Bruce Hanni, Controller Fluor Daniel Hanford

- IMA Education Seminar

- December 1, 1999

## Topics

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

- IMA Education Seminar

- December 1, 1999

## Basic Premises

- The single common denominator of any enterprise is financial data
- We (Finance) own the data
- We see things executive management doesn’t
- We can be key players in the planning process

- IMA Education Seminar

- December 1, 1999

## Role of the Financial Professional

- Look at the data
- Understand what the data is telling you
- Look beyond the data to the driver(s)
- Don’t be timid
- Remember, the data tells the story
- Think like an executive
- Know their strategic thinking

- IMA Education Seminar

- December 1, 1999

## 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)

- IMA Education Seminar

- December 1, 1999

## Strategic Planning

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

- IMA Education Seminar

- December 1, 1999

## Practical Example - Overtime

- IMA Education Seminar

- December 1, 1999

## Practical Example - Overtime

***Before***
- 11% of total payroll
- ~$27 million/year
- >17,000 hours/week
- Controller approved all extended workweek requests
- ~60 requests/week w/~12 workers/ request

- IMA Education Seminar

- December 1, 1999

## Practical Example - Overtime

***Action***
- Collect/graph weekly overtime

- IMA Education Seminar

- December 1, 1999

## Practical Example - Overtime

- IMA Education Seminar

- December 1, 1999

## Practical Example - Overtime

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

- IMA Education Seminar

- December 1, 1999

## Practical Example - Overtime

- IMA Education Seminar

- December 1, 1999

## Practical Example - Overtime

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

- IMA Education Seminar

- December 1, 1999

## Practical Example - Overtime

- IMA Education Seminar

- December 1, 1999

## Practical Example - Overtime

***After (6 months)***
- 4.5% of total payroll
- ~$14 million/year
- <8,500 hours/week
- Line mgmt. approved all overtime
- Sr. Mgmt. established clear expectations

- IMA Education Seminar

- December 1, 1999

## Practical Example - Banking

- IMA Education Seminar

- December 1, 1999

## Practical Example - Banking

***Action***
- Analyze the financial statements

- IMA Education Seminar

- December 1, 1999

## Practical Example - Banking

- IMA Education Seminar

- December 1, 1999

## Practical Example - Banking

***Before***
- Bank Accounts
- 1200+
- Annual fees $5+ million
- Driven by:
- Historical standard contract terms and conditions
- Local customs

- IMA Education Seminar

- December 1, 1999

## Practical Example - Banking

***Action***
- Present data w/recommendations to  Sr. Mgmt.
- Close inactive accounts
- Modify T’s & C’s
- Educate business development/marketing groups

- IMA Education Seminar

- December 1, 1999

## Practical Example - Banking

***After (1 year)***
- Bank Accounts
- <500
- Annual fees <$2.5 million
- Modified T’s & C’s - all new proposals

- IMA Education Seminar

- December 1, 1999

## Practical Example - Taxes

- IMA Education Seminar

- December 1, 1999

## Practical Example - Taxes

***Action***
- Analyze the financial statements

- IMA Education Seminar

- December 1, 1999

## Practical Example - Taxes

- IMA Education Seminar

- December 1, 1999

## Practical Example - Taxes

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

- IMA Education Seminar

- December 1, 1999

## Practical Example - Taxes

***Action***
- Present data w/recommendations to  Sr. Mgmt.
- Examine international tax laws
- Deploy work to optimize tax treatment
- Exploit technology
- Modify T’s & C’s
- Educate business development/marketing groups

- IMA Education Seminar

- December 1, 1999

## Practical Example - Taxes

***After***
- Effective tax rate reduced to 32%

- IMA Education Seminar

- December 1, 1999

## Practical Example - Taxes

- IMA Education Seminar

- December 1, 1999

## Practical Example - Pricing

- IMA Education Seminar

- December 1, 1999

## Practical Example - Pricing

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

- IMA Education Seminar

- December 1, 1999

## Practical Example - Pricing

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

- IMA Education Seminar

- December 1, 1999

## Practical Example - Pricing

- IMA Education Seminar

- December 1, 1999

## 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 G&A to ensure consistency
- Apply resulting rates

- IMA Education Seminar

- December 1, 1999

## Practical Example - Pricing

- IMA Education Seminar

- December 1, 1999

## Practical Example - Pricing

***After***
- Pricing strategy consistent with Strategic objective

- IMA Education Seminar

- December 1, 1999

## Summary

- Look at the data
- Understand what the data is telling you
- Look beyond the data to the driver(s)
- Don’t be timid
- Remember, the data tells the story
- Think like an executive
- Know their strategic thinking
- MAKE A DIFFERENCE!

- IMA Education Seminar

- December 1, 1999