Financial Management and Budgeting The Details

What Is a Budget? A useful tool for keeping track of funds. A useful tool for keeping track of funds. A basis for planning and managing money. A basis for planning and managing money. A written guide describing your future goals in financial terms for a set time. A written guide describing your future goals in financial terms for a set time. A detailed statement of estimated income and expenses. A detailed statement of estimated income and expenses. An historical record of the activities during a given period. An historical record of the activities during a given period.

What Can a Budget Accomplish? Help refine goals based on realistic resources. Help refine goals based on realistic resources. Serve as a guide to use funds efficiently. Serve as a guide to use funds efficiently. Provide accurate information to analyze, and evaluate programs and activities. Provide accurate information to analyze, and evaluate programs and activities. Serve as a reference for planning. Serve as a reference for planning. Aid decision making. Aid decision making.

Steps to Develop a Budget Step 1: Begin preparations a month or more before the close of your current fiscal year. If you don’t have a budget, start now and plan for the rest of the year. If you don’t have a budget, start now and plan for the rest of the year. Your budget is your roadmap—If you don’t know where you’re going, you won’t know how to get there! Your budget is your roadmap—If you don’t know where you’re going, you won’t know how to get there!

Steps to Develop a Budget, cont’d Step 2: Prepare an outline of planned activities for the upcoming year to: determine what you wish to do for the upcoming year (add a classroom, purchase equipment, implement raises, etc.) determine what you wish to do for the upcoming year (add a classroom, purchase equipment, implement raises, etc.) Plan for any activities that require money, which to a great extent will drive the budget. Plan for any activities that require money, which to a great extent will drive the budget.

Steps to Develop a Budget, cont’d Step 3: Determine available funds (balance from previous years, cash on hand, funds in the bank, etc.) Step 3: Determine available funds (balance from previous years, cash on hand, funds in the bank, etc.) Step 4: Carefully study income: parent fees, state payments, estimated costs, and possible fundraisers. Step 4: Carefully study income: parent fees, state payments, estimated costs, and possible fundraisers. Step 5: Evaluate your enrollment and possible vacancies since parent fees are likely your major source of income. Step 5: Evaluate your enrollment and possible vacancies since parent fees are likely your major source of income.

Steps to Develop a Budget, cont’d Step 6: Estimate expected income and when it will be available (enrollment fees, weekly or monthly payments, etc.) Step 6: Estimate expected income and when it will be available (enrollment fees, weekly or monthly payments, etc.) Step 7: Determine necessary expenses: salaries, facility costs, taxes, supplies, etc. Step 7: Determine necessary expenses: salaries, facility costs, taxes, supplies, etc. Step 8: Get information on changes that affect expenses such as tax or insurance increases. Step 8: Get information on changes that affect expenses such as tax or insurance increases.

Steps to Develop a budget, cont’d Step 9: Get price estimates or quotations on large expenditures. Step 9: Get price estimates or quotations on large expenditures. Step 10: Rank the order of expense by their importance to consider which are the wisest expenditure of funds. Step 10: Rank the order of expense by their importance to consider which are the wisest expenditure of funds. Step 11: Compare your income to your planned expenses. Remember to allow for unexpected expenses and for vacancies that reduce income. Step 11: Compare your income to your planned expenses. Remember to allow for unexpected expenses and for vacancies that reduce income.

Steps to Develop a Budget, cont’d Step 12: If your budget does not balance, consider other sources of income: Can you implement a supply fee? What about an increase in field trip fees? Should you increase rates? Eliminate less-essential expenditures or reduce those expenditures. Step 12: If your budget does not balance, consider other sources of income: Can you implement a supply fee? What about an increase in field trip fees? Should you increase rates? Eliminate less-essential expenditures or reduce those expenditures. Revise, review, and then assemble into a final budget. Revise, review, and then assemble into a final budget.

Keys to Managing Your Budget Once developed, the budget should be closely monitored frequently. Once developed, the budget should be closely monitored frequently. The budget is the financial road map for the year. The budget is the financial road map for the year. Changes must be considered as they affect other expenses. Changes must be considered as they affect other expenses. Set and maintain a minimum cash balance for keeping expenses current. Set and maintain a minimum cash balance for keeping expenses current.

Keys to Managing Your Budget, cont’d Formulate general policies and procedures needed to achieve the objectives you have set. Formulate general policies and procedures needed to achieve the objectives you have set. Plan for cash flow: How will you cover expenses if the check from the state is late? What if parents don’t pay on time? Plan for cash flow: How will you cover expenses if the check from the state is late? What if parents don’t pay on time?

Keys to Managing Your Budget, cont’d Keep accurate records of all income and expenses, evaluating them regularly. Keep accurate records of all income and expenses, evaluating them regularly. Compile financial reports at least monthly. Include all transactions that have occurred since the previous report. Compile financial reports at least monthly. Include all transactions that have occurred since the previous report. At the end of each statement, a balance of cash on hand for operating expenses should be compiled and reviewed. At the end of each statement, a balance of cash on hand for operating expenses should be compiled and reviewed.

Keys to Managing Your Budget, cont’d Reconcile the monthly statement with the year-to-date activity to provide a clear picture of your financial position: the income, expenses, the cash balance, and funds due. Reconcile the monthly statement with the year-to-date activity to provide a clear picture of your financial position: the income, expenses, the cash balance, and funds due. Act quickly to address shortages in income. Reduce expenses by paying bills on time. Act quickly to address shortages in income. Reduce expenses by paying bills on time.

Keys to Managing Your Budget, cont’d Look at percentages: If 3 months have elapsed in your budget period, are your expenses and income about 25% of what you predicted? If expenses are more, is there a reason such as insurance has been paid for the full year? If income is less than expected, are parents behind in payments? Look at percentages: If 3 months have elapsed in your budget period, are your expenses and income about 25% of what you predicted? If expenses are more, is there a reason such as insurance has been paid for the full year? If income is less than expected, are parents behind in payments?

Keys to Managing Your Budget, cont’d Control cost – Use your budget as a guide and always compare prices of items and services; balance durability, convenience, and expertise with value. Control cost – Use your budget as a guide and always compare prices of items and services; balance durability, convenience, and expertise with value. Watch income – Make sure parent fees are current and that all state income is received. Watch income – Make sure parent fees are current and that all state income is received.

Keys to Managing Your Budget, cont’d Assess your budget at least monthly during the budget period. Assess your budget at least monthly during the budget period. At the end of the budget period, determine the outcome of each expense and revenue category. At the end of the budget period, determine the outcome of each expense and revenue category. Evaluate and review actual costs in order to establish priorities for the next budget period. Evaluate and review actual costs in order to establish priorities for the next budget period.

We’re In the Money Managing the budget and successfully balancing the spending will permit your organization to function in good financial health. Managing the budget and successfully balancing the spending will permit your organization to function in good financial health. Operating with a carefully planned budget will mean less stress and more security for you and your staff. Operating with a carefully planned budget will mean less stress and more security for you and your staff.

Example Budget Part 1 Previous Current Year Year Revenue Tuition ______ ______ State payments______ ______ Enrollment fees ______ ______ Field trip fees______ ______ Otherincome______ ______ Prior year carried forward______ ______

Example Budget Part 2 Previous Year Current Year Expenses Personnel Expenses Salaries ______________ Hourly wages ______________ Fringe benefits ______________ Workers compensation ______________ Social Security ______________ Total Personnel Costs ______________

Example Budget Part 3 Previous Year Current Year Rent/mortgage____________ Utilities____________ Insurance____________ Telephone/Internet____________ Educational supplies____________ Office supplies/postage____________ Cleaning/janitorial____________ Trainingcosts____________ Equipment purchase____________ Equipment repair____________ Outstanding debt____________ Miscellaneous expenses____________

Example Budget Part 4 Previous Year Current Year Capital Purchases List by item______________ ___________________________ Contingency______________ TOTAL EXPENSES______________

Sample Balance Sheet Part 1 Date: _________ Assets Amount Cash on hand__________ Accounts receivable__________ Savings account__________ Equipment (fair market value) ____________________ __________ ______________________________ Other property ______________________________ ______________________________ TOTAL ASSETS__________

Sample Balance Sheet Part 2 Liabilities Accounts Payable__________ Long-term debts__________ _____________________________ TOTAL LIABILITIES__________ NET Value of Organization_________ _