Financial Management Financial Management and Budgetingand Budgeting

““SHOW ME THE MONEY!”SHOW ME THE MONEY!”

What is a budget?What is a budget? A budget can be a helpful method of A budget can be a helpful method of

keeping track of group funds.keeping track of group funds. It is a tool for planning and controlling It is a tool for planning and controlling

organizational funds.organizational funds. It is a formal written guideline describing It is a formal written guideline describing

your organization’s future goals expressed your organization’s future goals expressed in financial terms within a set period of in financial terms within a set period of time.time.

A detailed statement of estimated income A detailed statement of estimated income and expenses.and expenses.

A historical record of the organization’s A historical record of the organization’s activities during a given period.activities during a given period.

What can a budget What can a budget accomplish?accomplish?

It can help refine goals based on realistic It can help refine goals based on realistic resources.resources.

It can compel members of the It can compel members of the organizations to use funds efficiently.organizations to use funds efficiently.

It can provide accurate information to It can provide accurate information to adjust, analyze, and evaluate programs adjust, analyze, and evaluate programs and activities.and activities.

It can provide a historical reference to be It can provide a historical reference to be used for future planning.used for future planning.

It can be an aid in decision making.It can be an aid in decision making.

Steps to Develop a budgetSteps to Develop a budget

Step 1: Step 1: Begin preparations a month or Begin preparations a month or more prior to the close of the current more prior to the close of the current year (end of spring semester).year (end of spring semester). This will allow for the new administration This will allow for the new administration

to easily transition without worrying to easily transition without worrying about approving their budget for the about approving their budget for the next year.next year.

Steps to Develop a budget, cont’dSteps to Develop a budget, cont’d

Step 2: Step 2: Prepare an outline of the organization’s Prepare an outline of the organization’s planned activities for the upcoming year.planned activities for the upcoming year. This allows your organization to determine what plans This allows your organization to determine what plans

you wish to do for the upcoming year (take a trip, have a you wish to do for the upcoming year (take a trip, have a dinner, publish a newsletter, show movies, etc.)dinner, publish a newsletter, show movies, etc.)

Many times committee chairs, executive officers, and Many times committee chairs, executive officers, and sometimes group members will make proposals for the sometimes group members will make proposals for the activities might be considered during the organization’s activities might be considered during the organization’s fiscal year.fiscal year.

These proposals are presented to the budget committee, These proposals are presented to the budget committee, which might be a separate group chaired by the treasurer which might be a separate group chaired by the treasurer or other organization member in the case of a larger group, or other organization member in the case of a larger group, or the executive committee in the case of a smaller group.or the executive committee in the case of a smaller group.

This step is very important since programs require This step is very important since programs require money, and to a great extent they drive the budget.money, and to a great extent they drive the budget.

Steps to Develop a budget, cont’dSteps to Develop a budget, cont’d Step 3: Step 3: Determine available funds (carry over Determine available funds (carry over

balance from previous years, cash on hand and balance from previous years, cash on hand and funds in the bank, interest, etc.)funds in the bank, interest, etc.)

Step 4: Step 4: Do careful studies of funding sources, Do careful studies of funding sources, costs, estimated and probable fundraisers.costs, estimated and probable fundraisers.

Step 5: Step 5: Estimate expected income and when it is Estimate expected income and when it is expected to be available (dues, t-shirts, sales, etc.) expected to be available (dues, t-shirts, sales, etc.)

Step 6: Step 6: Define needed expenses Define needed expenses (advertising/printing, supplies, etc.)(advertising/printing, supplies, etc.)

Step 7: Step 7: Get price quotations on certain Get price quotations on certain expenditures, delegate certain responsibilities to expenditures, delegate certain responsibilities to members.members.

Steps to Develop a budget, cont’dSteps to Develop a budget, cont’d

Step 8: Step 8: Rank the order of expenditures by their Rank the order of expenditures by their importance.importance. When doing this step the organization needs to consider which When doing this step the organization needs to consider which

activities are the wisest expenditure of funds.activities are the wisest expenditure of funds. Step 9: Step 9: Negotiate, as necessary, eliminate less essential Negotiate, as necessary, eliminate less essential

expenditures or limit expenditures.expenditures or limit expenditures. Step 10: Step 10: Revise, review, coordinate, cross-reference, and Revise, review, coordinate, cross-reference, and

then assemble into a final budget; the budget must be then assemble into a final budget; the budget must be flexible to anticipate conditions which might have been flexible to anticipate conditions which might have been overlooked during the planning process. overlooked during the planning process. This allows the organization to project their revenues and This allows the organization to project their revenues and

expenditures for the next fiscal year.expenditures for the next fiscal year. Many times once the revenues and expenditures are projected Many times once the revenues and expenditures are projected

they are presented to the executive group for initial review. they are presented to the executive group for initial review. Changes to the budget can be made based on recommendations of Changes to the budget can be made based on recommendations of

the officers.the officers. Assuming that the revised budget is approved, it is then presented Assuming that the revised budget is approved, it is then presented

to the organization’s members for adoption.to the organization’s members for adoption.

Keys to managing a budgetKeys to managing a budget Once approved, adopted and prepared, it Once approved, adopted and prepared, it

should be closely managed.should be closely managed. The budget is the organization’s financial road The budget is the organization’s financial road

map for the year.map for the year. It can be changed if circumstances dictate, but It can be changed if circumstances dictate, but

it would require a vote according to the it would require a vote according to the process prescribed in the organization’s process prescribed in the organization’s constitution or by-laws. constitution or by-laws.

Set and maintain a minimum cash Set and maintain a minimum cash balance.balance.

Formulate general policies and procedures Formulate general policies and procedures needed to achieve objectives.needed to achieve objectives.

Keys to managing a budget, cont’dKeys to managing a budget, cont’d

Keep an accurate log of financial Keep an accurate log of financial transactions (income and expenses): transactions (income and expenses): maintain your organization record book maintain your organization record book (check and balance records periodically).(check and balance records periodically). Contemplate on having the treasurer preparing Contemplate on having the treasurer preparing

periodic reports related to the budget and periodic reports related to the budget and presents them to the executive officers and presents them to the executive officers and members.members.

Keys to managing a budget, cont’dKeys to managing a budget, cont’d

The treasurer should produce monthly The treasurer should produce monthly operating statements.operating statements.

In the report all transactions that have occurred since In the report all transactions that have occurred since the previous statement should be included.the previous statement should be included.

At the end of each statement a balance should be At the end of each statement a balance should be reported by the treasurer.reported by the treasurer.

The monthly statement should be reconciled with the The monthly statement should be reconciled with the year-to-date activity of the organization so that a year-to-date activity of the organization so that a clear picture of the organization’s financial position clear picture of the organization’s financial position can be established.can be established.

A review of the statement will provide the income of A review of the statement will provide the income of the organization, its expenses, and the organization’s the organization, its expenses, and the organization’s cash balance.cash balance.

Keys to managing a budget, cont’dKeys to managing a budget, cont’d

Control cost – allow only approved Control cost – allow only approved expenditures.expenditures.

Assess budget at any given point of time Assess budget at any given point of time during the budgeted period.during the budgeted period.

After the budget period has elapsed, After the budget period has elapsed, determine the outcome of each expense determine the outcome of each expense and revenue.and revenue.

Judge and review actual cost in order to Judge and review actual cost in order to establish priorities for the next budget establish priorities for the next budget period.period.

““We’re In the Money”We’re In the Money” Managing the budget and being Managing the budget and being

successful in balancing the spending successful in balancing the spending will allow your organization to will allow your organization to transition easily.transition easily.

Having a correct budget and knowing Having a correct budget and knowing how much monies your organization is how much monies your organization is able to work with will allow for your able to work with will allow for your organization to have less stress and organization to have less stress and more fun.more fun.

Example Budget

Previous Year Current YearRevenue Dues and activity fees ____________ ____________ Student government allocation ____________ ____________ Services rendered ____________ ____________ Commissions from machines ____________ ____________

Sales ____________ ____________Fundraisers ____________ ____________Program receipts ____________ ____________Other receipts ____________ ____________Prior year carried forward ____________ ____________

TOTAL REVENUE ____________ ____________Expenses Personnel services ____________ ____________

Salaries ____________ ____________Hourly wages ____________ ____________Fringe benefits ____________ ____________ Workers compensation ____________ ____________ Social Security ____________ ____________ Insurance ____________ ____________

Operating expenses ____________ ____________Telephone line charge ____________ ____________Long distance ____________ ____________Other communications ____________ ____________

Office supplies ____________ ____________ Printing ____________ ____________ Postage ____________ ____________ Equipment rental ____________ ____________ Equipment repair ____________ ____________ Program expenses (Develop budget for each program)

Newsletter ____________ ____________Speakers ____________ ____________

Travel ____________ ____________ Outstanding debt ____________ ____________ Miscellaneous expenses ____________ ____________Capital List by item ____________ ____________Contingency ____________ ____________TOTAL EXPENSES ____________ ____________BALANCE ____________ ____________

Sample Balance Sheet

Date: ___________________

AmountAssets

Cash on hand ____________Accounts receivable ____________Savings accounts (by number) ________ ____________

________ ____________Equipment (fair market value) ____________ _______________________________ ____________ _______________________________ ____________Other property ____________ _______________________________ ____________ _______________________________ ____________

TOTAL ASSETS

LiabilitiesAccounts Payable ____________Long-term debts _____________________________________________ ____________

_________________________________ ____________

TOTAL LIABILITIES ____________NET Value of Organization ____________