Effective Financial Management for HR Personnel in the Public Sector

Course Overview:

The planning and budgeting process in most organizations starts with the human resources (HR) department. At the same time as the sales and marketing professionals are assessing product and service mix and making short and long-term forecasts of sales demand and prices, the HR department is assessing its current level of resources and the likely level of resources required both in the short and longer-term. The HR function plays an integral role in the budgeting of costs for the whole organization. It is also responsible for the preparation and management of its departmental budget and is accountable for the achievement of that budget. Financial awareness is therefore an essential requirement for every role at every level within the HR departments of modern business organizations.

Companies are increasingly integrating all their business processes using systems like ERP (enterprise resource planning). Each business function should therefore understand, and be able to communicate accounting and financial (and non-financial) information. This course provides the required level of financial awareness and practical application for HR practitioners to appreciate accounting and finance in the broader context, and the HR function’s involvement in the organization’s budgeting and budgetary control processes, and participate in the decision-making process. It also includes the techniques required to prepare a detailed budget for the HR department itself, and the management of the HR department’s actual budget performance.

Course Objectives:

At the end of this course, the participants will be able to:

Appreciate the significant importance of cash flow (rather than profit) and discounted cash flow (DCF) in creating value for optimal decision-making to maximize shareholder wealth.
Analyze the income statement (or profit and loss account), balance sheet, and cash flow statement, and use ratios to interpret the financial statements and be aware of their limitations.
Appreciate the key role played by the HR department in the organization’s budget process and preparation of the master budget, and the use of techniques like activity-based budgeting (ABB).
Use the techniques of break-even analysis, budgetary control, capital investment appraisal, capital budgeting, and variance analysis for budgetary control.
Identify each of the costs required to manage a modern HR department to be able to prepare its annual budget and manage its actual performance.
Use their financial knowledge for improved planning and management decision-making
Communicate with finance professionals, within and external to their organization, to be able to become a more effective manager of the business
Liaise more effectively with other departments on financial matters
Share their financial knowledge within their department and with other departments within your organization
Identify and quantify each of the areas in your organization’s budget for which the HR function has indirect responsibility
Identify and quantify each of the areas for which your HR function has direct responsibility to be able to prepare a comprehensive HR department budget
Measure HR performance

Course Coverage:

Topic 1: Company Objectives and Financial Statements:

Measuring company performance
Value creation and the primary objective of maximization of wealth
Income statement (profit and loss account)
Balance sheet
Cash flow statement

Topic 2: Reading and Interpreting Financial Statements:

Measurement of operating performance
Measures of financial performance and financial position
Risk measurement
Limitations of ratio analysis

Topic 3: Discounted Cash Flow (DCF)

The importance of the timing of cash flows
Future values
Present values
Discounted cash flow (DCF)

Topic 4: Costing:

Fixed costs, variable costs, and overheads
Overhead allocation, absorption, and the use of activity-based costing (ABC)
Expenses versus inventory (stock valuation)
Contribution compared with a profit

Topic 5: Decision-Making:

Relevant costs
Shut-down versus continuation
Make versus buy
Product mix and limited resources
Decision trees

Topic 6: Budgeting:

Purposes of budgeting
The budget process
Activity-based budgeting (ABB)
Uncertainty and risk
Motivation and the behavioural aspects of Budgeting
Problems in budgeting
Non-financial performance measures

Topic 7: Cost/Volume/Profit (CVP) Analysis:

Cost, volume, and profit relationships
Break-even analysis
The impact of cost structure changes
Limitations of break-even analysis

Topic 8: HR and the Budget Process:

Organization charts
Manpower planning
The direct labour and indirect labour budget
Employee benefits
Employee records
Payroll administration
Redundancy costs
Health and safety
Employee appraisal
Succession planning

Topic 9: The HR Budget:

HR staff costs
HR overhead costs
HR overhead cost allocations
Employment or outsourcing
Training and employee development
Preparation of the HR budget
Your organization’s HR budget

Topic 10: Measuring HR Performance:

Why we measure HR
How to measure hiring and staffing
How to measure training and development
How to measure employee relations and staff retention

Topic 11: Budgetary Control:

Organizational and accounting control systems
Standard costing
Flexed budgets
Variance analysis
Types of variances and the reasons they occur
Planning and operational variances
Controllable and uncontrollable costs
Responsibility for HR budget variances

Topic 12: Capital Investment Appraisal:

Methods for evaluating capital projects
Payback
Net present value
Internal rate of return
Discounted payback

Topic 13: Capital Budgeting:

Capital rationing
Ranking of investment projects
Inflation and investment
Using expected values and standard deviations to make decisions

Targeted Groups:

HR Managers
HR Supervisors
HR Professionals who want to develop their financial skills
Individuals who want to gain great skills to improve their career