Financial Bootcamp – Module 4 Affiliate Budgeting

Objectives Introduce and explain the annual budgeting process Identify the key aspects of an annual budget Recommend good budgeting procedures

Budget Timeline Since the affiliate fiscal year is typically July 1 to June 30… Board members, bookkeepers, managers, etc. should coordinate to develop the budget as early as possible Start working on a budget by April of each year The Board of Directors should have a budget approved by the end of May

Budget Components There are two primary components of any affiliate budget: income and expenses Income – Expenses = Net Profit If income is greater than expenses, the affiliate has a surplus. If income is less than expenses, the affiliate has a deficit.

Income All monies received by the affiliate during the fiscal year All donated properties and materials by the affiliate during the fiscal year Anything received that is of monetary value is considered an asset, and is a part of the affiliate’s income

Expenses All monies spent by the affiliate during the fiscal year Includes salaries and compensation, house costs, fundraising event costs, etc. Includes all overhead costs such as rent, utilities, office supplies, etc.

Contingencies A contingency is an unforeseen circumstance wherein an affiliate experience an unexpected expense Affiliates are wise to maintain a financial reserve and/or budget for contingencies every year It is most likely that, at least once during the year, an unexpected expense will occur

Budget Basics Projected incomes should never be less than projected expenses Ideally, projected income should be at least 20% higher than projected expenses to account for unexpected expenses and/or unexpected shortfalls in income Income should determine expenses

Building a Budget Begin by reviewing the previous year’s budget with actual income and actual expenses. Evaluate discrepancies and ask: What income / expenses were higher or lower than projected? What caused these to be higher or lower than projected? Were these causes isolated, or did we make an error?

Building a Budget Use the previous year’s budget as a basis for establishing the next year’s budget Include any income or expenses you may not have expected / overlooked in the previous year’s budget Remove any income or expenses you had projected, but not received and do not reasonably expect to receive in the coming year

Building a Budget Do not simply copy the previous year’s budget Always project for an increase in income and an increase in expenses Economic factors outside your control almost guarantee next year’s expenses will be higher than last year’s expenses

Building a Budget Challenge yourself to raise more money than the previous year Expect to have to spend more money than the previous year Be realistic, but also be optimistic

Realistic Budgeting A budget should be founded in reality, using real numbers and realistic expectations If you only raised $30,000 in Year 1, do not expect to suddenly raise $60,000 in Year 2—that is an unrealistic goal If your expenses were $100,000 in Year 1, do not expect them to be $50,000 in Year 2—that is an unrealistic expectation

Budget Review After approving a budget, Board member should review financials each month to see if the affiliate is on-target to meet budget expectations A regular analysis of the budget and actual incomes and expenses will help the organization curtail any shortfalls and make strategic adjustments as necessary

Conclusion Board and staff should work together to craft a detailed, accurate budget for each fiscal year The budget should be realistic and based on previously-verified information The annual budget should be reviewed on a regular basis to ensure the affiliate is meeting its goals and not experiencing unnecessary expenses