Download Budgets and Financial Reporting

What is a Budget?
A Budget is a “realistic” plan expressed in dollar
amounts that acts as a road map to carry out the
Chapter’s objectives, strategies, and assumptions.
Preparing a budget is a responsibility of the
Treasurer
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Why Prepare a Budget?
• to help you identify all expenses of the Chapter
(program, operational, fixed, discretionary)
• to see how much money you need to meet all
of your expenses – to make the budget balance
• to show what your cash flow (timing) situation
will look like
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What Time Period Does the
Budget Cover?
The Budget is prepared for the next year and can
be detailed by quarter and/or month.
The Budget is a guide. It cannot be so rigid that it
prevents timely action when needed. In rare
circumstances it might be revised, but only when
the environment has radically changed.
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What are the Budget Planning
Steps?
DO NOT PLUNGE INTO THE BUDGET PROCESS –
ENGAGE IN A STRATEGIC PLANNING BUDGETING
PROCESS
1. Know your Chapter’s goals and objectives
• Talk to your President , Program Chairs and
Fundraising Chairs
• Ask them for a projection for next year
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Budget Planning Steps – con’t
2. Get Executive Board and member buy-in
• encourage timeliness, completeness, and
accuracy
3. De-centralize the budget process
•
every member/committee who has
responsibility should be involved in its
creation
•
understanding the rational fore their budget
enables them to “own” it
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Budget Planning Steps – Gather
Info
4. Gather information
• Prepare a request that contains 2 years worth of
information and year to date numbers
• Ask them for a budget request and an
explanation
• Give them a deadline that is at least a week
before you are meeting
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Now that you have gathered
information- Create a Budget
1.
2.
3.
Calculate the Chapter’s Income –
general (donations, memorials, dues),
fundraising activities/events, grants,
investments (interest, dividends)
Create a list of necessary expenses –
these are the bills that you must pay
each month. For example: rent,
insurance, utilities
Create a list of discretionary expenses
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Steps to Create a Budget – con’t
4. Add the fixed and discretionary expenses
5. Compare the total expenses to total income
If expenditures exceed income, you will need to
make some changes. If income exceeds expenditures
– Congratulations! Budget your savings.
6. Cut discretionary expenses – these should be the
first and the easiest to cut.
7. Trim the fixed expenses - fixed costs are harder to
cut.
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Steps to Create a Budget – con’t
8. Set savings priorities – once income is higher than
expenses, decide what goals you want to save for.
Divide your savings into different accounts dedicated to
each goal. To sustain your Chapter, you need to build
reserves – best practice is to include planning for an
annual surplus, even if it is a minimal amount.
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Food for Thought on Budgets
The Finance Committee should
• provide guidelines on how changes to the budget are
made and approved
• how expenditures that exceed budgeted amounts are
approved
• Monthly/quarterly review actual versus budget
reports and cash flow projections
• Build a flex budget policy – if the Chapter reaches
certain financial goals during the year, it can do more!
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Cash Flow Considerations
•
•
•
•
Goal – Not to run out of cash
Manage it with care and attention
Know the Chapter’s Checkbook Balance now
Don’t manage from the bank balance
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Financial Reporting
Financial Statements are reports that
• show how income and expenses have affected
the Chapter as a whole
• provide a snapshot of the current financial
standing of the Chapter
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Types of Financial Statements
The three basic, essential financial statements are:
•
Balance Sheet
Summarizes the assets, liabilities, and net worth of the
Chapter on a particular date
• Income Statement (Budget Variance Report)
Shows the profit and loss for the Chapter over a specific
period of time, typically monthly, quarterly, or annually
• Cash Flow Statement
An accounting statement that forcasts cash receipts and
disbursements for a specified period
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Board Reporting
Are you reporting reliable, accurate financial
information to the Board?
Timing of Reports
Types of Reports – see examples
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Session 3
Watch for the invite next week.
If you are interested in a make up call for Session
1 please let us know.
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