Drawing Up a Budget
Your committee or board will need to budget ahead and estimate (as accurately as possible) how much it will cost to carry out the group’s planned activities for the forthcoming financial year. This is part of the committee's responsibility for managing and developing the group on behalf of the members.
Having prepared a cash flow forecast, your committee or board should begin drawing up a budget sheet. This will typically show income and expenditure for an agreed 12 month period (usually your group’s financial year). Your budget sheet – whether you do this on paper or on a spreadsheet on the computer - should be divided into two columns : Income and Expenditure.
You will need to include two types of expenditure:
capital expenditure - ‘one-off’ payments for things like equipment or building costs
revenue expenditure - running costs for things like phone bills, heating and lighting (where applicable) postage costs etc
Breakdown your Income and Expenditure into logical categories or budget headings. If you have prepared a cash flow forecast you will already have a good idea of these. Ideally, you will be able to base this on experience from previous years.
If your group is new, start with the things you already know, adding further items which your group may need to allow for over the coming year:
the people involved in your group – salaries/ wages, advertising and recruiting, training, insurance, travel expenses
the premises (if you have one) - rent, rates, insurance, electricity, repair and maintenance
operational or running costs costs, that is equipment, stationery, office supplies, vehicles, phone, internet etc.
marketing and publicity costs
any other business related costs such as interest on loans, VAT
Make your budget sheet as detailed as possible, with a breakdown of items, number of items, cost per item, under sub headings as necessary. Indicate which items are accurate costings and which are estimates. Always obtain, in writing, more than one quote (fixed cost and binding) or estimate.
Consider adding in amounts to cover inflation, rises in salary and employer costs. If you are not sure about salary scales and suitable pay rises, consider basing them on Local Authority pay scales. Also include an amount in reserve for unforeseen costs.
Add up all your income and expenditure to give you totals and then subtract your expenditure total from your income total:
if your income and expenditure are the same your budget is ‘balanced’ or 'break-even'
if your expenditure is greater than your income you will end up with a deficit, shortfall or negative variance. You can indicate this as a negative or bracketed figure. In this case your group will need to consider how you plan to meet the shortfall. You may want to consider drawing up a fundraising plan for this purpose
a surplus or positive variance is where the income exceeds expenditure. This can be indicated simply with the total figure itself or with a plus sign
Monitoring your budget
Your budget sheet will give your committee or board a working tool for monitoring your group’s financial progress.
The task of financial record keeping on a day to day basis will often be delegated to the Treasurer on a committee but it is important that the committee as a whole is kept informed and that they are involved in reviewing the budget on a regular basis (ideally every month).
The committee should be able to compare actual figures with budgeted ones (cash flow statements help you do this). If this reveals that the group is overspending or under spending the committee will need to identify why and if necessary revise the budget and/or the group’s activities.
If your committee makes changes to the original budget, they should add a note/comment and the date each time.