11. Budget Workshop

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Finan ce & Acc ou nt ing M anu al Planning & Budgeting

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PLANNING AND BUDGETING 1. Introduction & Definitions 2. Types of Budget 3. The Master Plan 4. The Revenue Budget 5. The Capital Expenditure Programme 6. The Human Resource Budget 7. The Non-project Capital Budget 8. The Expenditure Budget 9. Review and approval 10. Budgeting Timelines 11. Budgetary Controls 12.Feedback and Questions 3

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Introduction Planning: Looking into the future with a view to  Foresee in advance the possible external and internal forces that will affect the strength and performance of the company.  Allocate necessary physical and financial resources in advance to re-track the company on the path as envisioned in the company vision and mission statement and as management desires.  Integrate the efforts of different functions for directing their efforts towards the company’s common Goal. Budgeting: An effective tool of planning and control exercised in the Company to help management get the desired goals of stakeholders’ value enhancement. 4

Introduction • Since last few years, Finance department is struggling to improve the Budget system by involving the relevant offices which practically execute the Budget. • The ongoing ERP implementation will further help in the systematic process of budgeting and its implementation at all level of zones, regions, Profit and cost centres. • The Chapter on Planning & Budgeting in Accounting and Finance Manual is a systematic attempt to • harmonize the thought of the players in the timely preparation of budget and its execution, • gauging performance, • assisting in fixing accountability • removing hurdles causing delay in the activities. 5

DEFINITIONS MASTER PLAN

The company’s long term plan which consists of strategic plans along with financial impact for a period of five years, to be reviewed annually according to prevailing threat & opportunities and management strategies. ANNUAL CORPORATE BUDGET

The Annual Corporate Budget is the company’s short term budget, to be prepared annually in consistency with the target set in the Master Plan. The annual Corporate Budget will be the sum of: • Revenue Budget • Capital Expenditure Budget • Human Resource Budget • Non-Project Capital expenditure (Admn) Budget • Operating expenditure budget 6

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DEFINITIONS BUDGETARY CONTROL

A mechanism through which company will match budget with actuals and accordingly hold accountable the department/ locations/ individuals. The company shall establish transaction level controls and other periodic controls to monitor its revenue and expenditure, the progress on developments projects etc.

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Long Term Vs Short term Planning

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TYPES OF BUDGET a) Master Plan b) Revenue Budget c) Capital Expenditure Budget d) Human Resource Budget; e) Non-Project Capital expenditure f) Operating Expenditure Budget.

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MASTER PLAN  Master Plan aims to bridge the gap between the long term aspirations of the company and what the Business zones expect to achieve within the context of a potentially changing business environment.  It gives the management early sight of key issues which may require goals to be adjusted.  It relies on strategic thinking, business awareness and a commercial understanding.  It is prepared for the five years and shall be used to allocate resources within the company based on broad assumptions and goals set by the BoD and management committee. 10

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MASTER PLAN Company Vision and Mission Statement The Basis Strategic directives From BoD, PCEO and HoDs

Preparation

Strategic Plan (EVP Corp. Str.)

Review

SEVP CA

Approval

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Audit Committee

HoDs (Working out 5Y Fin Impact

Financial impact (EVP Fin. Pl. & Tr.) to workout opex and Proj P&L, B/S

SEVP Fin Board Of Directors

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REVENUE BUDGET The Revenue Budget shall contain:  Stream wise Revenue of existing and planned products.  Profit Centre-wise capacity and number of existing and planned customers  Present and planned capacity  Assumptions and basis of the projected forecast.  Month and Head wise break up of the forecast.  Traffic analysis and trends.  Projected tariff structure.

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REVENUE BUDGET Revenue Budget shall be sub-divided into: 

Core Business Revenue, (which is further divided into):



i.

Domestic Revenue

ii.

International Revenue

Non-core Business Revenue (Other Revenue)

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THE DOMESTIC REVENUE BUDGET EVP CS – Master Plan EVP FPT - guidelines

The Basis

GM Business Intelligence- Instructions and guideline Preparation

GM Sales P&F/GM IC

Analysis

GM Finance At Zones

Consolidation

GM Business Intelligence (based on projected tariff)

Review

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EVP Comm Plg and Support

Consolidation into ACB SEVP Commercial

SEVP Finance

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THE INTL REVENUE BUDGET EVP CS – Master Plan The Basis

Preparation

Review

EVP FPT - guidelines

o o o

GM International Carriers Relations Expected Traffic Projected Tariff Revenue Forecast based on above EVP IBR

SEVP CA SEVP Fin

Consolidation into ACB

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THE NON-CORE REVENUE BUDGET EVP CS – Master Plan The Basis

Preparation

Review

EVP FPT - guidelines

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EVP Business Zones Gain on disposal of assets

EVP Fin. Planning & Treasury • Return on deposits • Return on investments • etc.

SEVP Finance Consolidation into ACB

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CONSOLIDATION OF REVENUE BUDGET  SM Operating Budget will receive reviewed Domestic Revenue Budget, International Revenue Budget and Noncore Revenue Budget from Commercial, Corporate Affairs and Finance Departments respectively.  These budgets will be consolidated to the company Corporate Revenue Budget.  The consolidated Corporate Revenue Budget will be reviewed by GM BC, EVP FPT to ensure conformity with Master plan.

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CAPITAL EXPENDITURE PROGRAMME Capital Expenditure Program is the budgeted capital expenditure of the company to be incurred on planned capital projects to be undertaken in the coming fiscal year and shall also include expenditure to be incurred on the carryover capital projects not completed in previous years.

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CAPITAL EXPENDITURE PROGRAMME The Basis

Guidelines/ financial parameters From EVP FP & T (In-line with the Master Plan)

Instructions for preparing & completion of CEP from EVP Tech. & SP

Expenditure requirements entered by SE at locations (after financial eval. by SM Fin) into Inv. Man. Module

Allocation needs for carry over projects GM Dev. at locations

GM Development at locations categorize the sub-projects identified

EVP Business Zones identify subprojects proposed to be carried out.

Sub-projects > 500 M, or for new products/ technology or of special strategic nature approved by PAC

Consolidation of sub-projects into projects GM Strategy & Plans

EVP T & SP and EVP FP & T review the CEP, and check conformity with master plan

Review of consolidated CEP SEVP Technical

The start date of the projects / sub-projects in the budget shall take into account the procurement lead time, wherever applicable. 19

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HUMAN RESOURCE BUDGET The Human Resource Budget provides for the following key elements along with estimated financial impact.:     

Projected number of manpower identifying existing staff levels. Expected staff retirements Promotions and up gradations Recruitment targets. Increments’ Plan

HR Budget will be split into months.

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HUMAN RESOURCE BUDGET The Basis

Guidelines/ financial parameters From EVP FP & T (In-line with the Master Plan)

Instructions for preparing & completion of HR Budget from EVP HR

Existing HR data is already available in HCM module

Cost Centre head provide requirements to SM HR at locations duly approved from HOD

SM HR at locations compile staff requirements with financial impact. Data is input in HCM Module

GM HR & A & EVP BZ review the budget and submit to H/Q

Reviewed and consolidated location wise by EVP HR H/Qs

HR Budget reviewed by SEVP HR & Admin

Board HR Committee

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NON-PROJECT CAPITAL BUDGET Non-Project Capital Budget includes those assets that    

are planned to be acquired within the coming fiscal year may or may not be related to capital projects are for administrative use rather than operational use do not form part of the Capital Expenditure Program.

Non-Project Capital Budget shall be prepared month wise Any item due to be purchased in a specific quarter shall not be purchased before that quarter. Purchase may be delayed to any quarter subsequent to the original quarter, if required.

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NON-PROJECT CAPITAL BUDGET

The Basis

Guidelines/ financial parameters From EVP FP & T (In-line with the Master Plan)

Instructions for preparing & completion of non-project capital budget From EVP Admin

Non-project capital expenditure requirements communicated to SM Administration at location

SM Administrations compiles requirements alongwith estimated cost

Preparation

Entry of requirements into Investment Management module by SM Admins

Review

Review by GM at location for consistency and reasonableness

Review by EVP Administration

The existing non-project capital assets at locations be assessed against new requirement

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EXPENDITURE BUDGET The Expenditure Budget provides the management of the company a detailed projection of the operating expenditure for the coming fiscal year which can be used to measure the performance of the company. The Expenditure Budget shall include operating expenses and shall not include items that form part of the Capital Expenditure Program and the Non-Project Capital Budget. The Expenditure Budget shall be prepared month wise.

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EXPENDITURE BUDGET The Basis

Instructions for preparing & completion of non-project capital budget From EVP FP & T Operating expenditure requirements communicated to SM Finance at location

Financial evaluation of requirements by SM Finance at location and review by regional GM

Preparation

Evaluation and consolidation by SM (operating Budget)

Review

GM (Budgetary Controls) EVP Financial Planning & Treasury

SEVP Finance

The Expenditure Budget shall be in conformity with the overall expansion in networks and growth targets as planned for in the Capital Expenditure Programme and Revenue/ HR Budgets recommended for approval. 25

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REVIEW AND APPROVAL  Annual Corporate Budget is prepared by Finance Department by consolidating all budgets.  Review/ recommendation by SEVP Finance in conformity with Master Plan.  Review/ recommendation by Audit Committee  Reviewed/ recommended Master Plan & Annual Corporate Budget presented to BoD for approval.  Any adjustments / amendments that are proposed and agreed by any of the reviewers shall be made in each budget location wise.  Approved Adjusted Corporate Budget shall be broken location wise and forwarded to each location through its respective Head of Department for control purposes 26

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BUDGET TIMELINES DESCRIPTION Master Plan – Strategic goals Master Plan – Financial Impact Revenue Budget Capital Expenditure Program Human Resource Budget Non-project Capital Budget Expenditure Budget Corporate Budget 27

START FINISH RESPONSIBILITY Novemb Decemb Corporate Affairs er er Department Decemb Respective January er Departments Commercial/ Decemb Februar Corporate Affairs/ er y Finance Department Decemb Februar Technical Department er y Cost Centres/ Decemb Februar HR & Admin er y Department Cost Centres/ Decemb Februar HR & Admin er y Department Decemb Februar Cost Centres/ er y Finance Department Februar Finance March y Department/Mgmt. 27

BUDGETARY CONTROLS PERIODIC CONTROLS

 Monthly variance reports  Variance analysis by departments and report to EVP Financial Planning & Treasury.  Budget Utilization Report.  Development & Project Coordination committee (DPC)

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BUDGETARY CONTROLS TRANSACTION LEVEL CONTROLS

 Sub-project Control Number (SCN)  Expenditure subject to approval as per authority matrix  Approval of re-appropriations  Unforeseen non-project capital expenditure  Expenses above Petty Cash limit to be incurred against approved Purchase Requisition (PR)  Budget availability check through SAP 29

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Finan ce & Acc ou nt ing M anu al Cash Management

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Cash Management 1. Introduction & Definitions 2. Petty Cash Management 3. Cash Management, Forecasting & Reporting 4. Funds Investment 5. Foreign Currency management 6. Reconciliation statement 7. Management reports 8.Feedback and Questions

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Introduction Cash is the very essence of any commercial business. The business strength and weakness is gauged by the volume of cash it own. The business efficiency is measured by the stability, consistency and growth of the cash flow the business generates. Unlike other asset, Cash is very vulnerable asset and requires strict managment from its originating point till its ultimate consumption, due to its inherent weakness of low volume, easy portability and title transfer on delivery.

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Introduction The Chapter on Cash Management in Accounting and Finance Manual is a systematic attempt to: • harmonize the thought of the players in the timely and effective handling of cash, • gauging performance, • guide key players when and how to execute cash activity • assisting in fixing accountability • removing hurdles causing delay in the activities.

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Definition Collection Account Banks account used for collecting revenue from subscribers. Collection account is not used for payment. Drawing Account Banks account used for disbursing payment to payees. These account are usually limit accounts where physically cash is not available. The payment through these accounts are replenished on actual payment from main NBP account.

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Definition Credit Ceiling The amount of credit limit authorized by PTCL treasury for a bank account for a DDO/Cost centre or Budgeting unit. The ceiling is maintained in the NBP branch where the DDOs maintain their bank account. Investment The short term investment by PTCL treasury to generate extra mark up from surplus funds.

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Definition Cash Imprest A cash float created for use in miscellaneous urgent or unplanned expenditure of minor nature.

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Petty Cash Imprest • Imprest will be allowed within limit (i.e Rs 50,000 Hqs & Rs 25,000 Region) as approved by Headquarters. • New or revision to imprest limit will be recommended by SM Finance and regional GM for approval of EVP FPT. • The system will prompt cashier when the petty cash limit drop below replenishment level i.e Rs 10,000 & 5,000. • Cashier will be responsible to maintain the balance of physical cash available reconciled with the system balance. • There will be surprise cash checking and counting by an officer of DDO office to ensure accurate cash balance.

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Annual Ceiling management • The ceiling limit will be within the provision of the annual approved budget for operating and capital expenditure. • The SM Opex and SM Capex will generate annual requirement for Opex & Capex for approval of GM PT based on approved budget. • The system will check the regions monthly ceiling requirement against the annual approved limit. • Any revision to ceiling limit will be initiated by the region for the approval of GM BC. 38

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Ceiling management • The System will prompt zonal SMF when the ceiling limit touches replenishment level i.e 25%. • SMF will generate ceiling requisition, to approved by Zonal GM for SM Treasury H/Qs • SMT will instruct NBP to increase the ceiling limit of requisitioning region/zone. • Cheque will be issued strictly within the limit of availing ceiling limit.

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Finan ce & Acc ou nt ing M anu al Questions

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Is Annual Corporate Budget a long term plan? Yes No No, Annual Corporate Budget is the company’s short term budget, to be prepared annually in consistency with the target set in the Master Plan.

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What are names of budgets that are annually prepared to form Annual corporate Budget?

Following budget are prepared annually to form integral part of Annual Corporate Budget: • Revenue Budget • Capital Expenditure Budget • Human Resource Budget • Non-Project Capital expenditure (Admn) Budget • Operating expenditure budget

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Can any item of Non Project Capital Budget be purchased before projected quarter? No: Any item due to be purchased in a specific quarter shall not be purchased before that quarter. However, purchase may be delayed to any quarter subsequent to the original quarter, if required.

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Which Department (SEVP) at HQs will consolidate the Annual Revenue Budget of the Company?

SEVP Commercial.

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Which Department (SEVP) at HQs will consolidate the Annual HR Budget of the Company?

SEVP HRA

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Which Department (SEVP) at HQs will consolidate the Annual Capex Budget of the Company?

SEVP Technical

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Can the collection account be used for payment?

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No. Collection account is used for revenue collection and not for payment.

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What is the limit of petty cash imprest?

Rs. 25,000/- at region. Rs. 50,000/- at HQs

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What is the replenishment of cash imprest?

When the balance reaches Rs. 5,000/- at region & Rs. 10,000/at HQs

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When should region initiate demand for ceiling?

At month end or when the region’s ceiling is utilized upto 75%

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