Creating a Budget
A budget is an estimate of future events. It also establishes objectives which serve as measures for future performance.
Steps in creating a budget include:
- Connecting the budget to your association’s business plan – After your chapter has developed a business plan and identified its activities for the year, it’s time to create the budget. Each budgeted item should tie to the association’s mission and areas of focus. As the budget is developed, review each budget item and ask, “How does this tie to our association’s purpose?”
- Determining the cost of each expense item. Use the previous year’s activities for comparison. For new events and projects, consider all possible expenses. There are variable costs (vary in direct proportion to changes in the association’s activities). An example is event expenses. Fixed costs remain fairly stable regardless of whether the activity increases or decreases. Examples of fixed costs are insurance and taxes.
If you are planning a new event, check with the golf facility, hotel or other location regarding rental, food and beverage costs and other expenses. Estimate what the costs will be per person and project the number of people who will attend.
- Anticipating revenue – Consider the different sources of revenue. Use last year’s income for comparison. Keep in mind factors such as the economy that can impact the level of member and industry support for dues, association fees and sponsorships.
- Comparing total expected income to anticipated revenue – You may need to prioritize the programs, services and resources offered to members and constituents
- Submitting the proposed budget to the board for review – Provide the board with copies of the previous year’s budget, actual expense and income reports and year-to-date reports for reference.
Types of Budgets
There are several types of budgets. They include:
- Operating budget – If you choose this option, you forecast the earnings of the chapter into a future period. There are often sub-budgets tied to this (examples: advertising, administration).
- Cash budget – If you choose this option, you forecast the use of the chapter’s cash resources. Project anticipated cash and expenditures and income for a specified future period. A cash budget relies heavily on being able to project sales.
- Incremental budget – If you choose this option, you can make adjustments during the fiscal or calendar year. Scheduled and controlled adjustments can help your chapter react to a changing environment and be flexible.
- Zero-based budgeting – This type of budget assumes a starting point of zero on every budget item. It requires detailed justification for every dollar requested.
What should be included in the budget?
Again, every activity, program or service tied to your association’s purpose should be included in the budget. Please refer to this sample budget (available in Excel and PDF formats) for guidelines in the types of items to include in the budget.
Source: Managing Chapter Funds by Susan S. Vowell, CPA and Association Law Handbook Third Edition by Jerald A. Jacobs.