From “Zero Based” Program Budgeting to Easily Understood Financial Reporting Jim Peters, RCE, CAE, e-PRO

Why Program Budgeting? Most Effective Management Tool Most Effective Management Tool Keeps your Directors informed Keeps your Directors informed Tells Members where their money is going Tells Members where their money is going Helps to Prioritize programs and Services Helps to Prioritize programs and Services Helps get rid of Sacred Cows Helps get rid of Sacred Cows

What If? Failure to manage finances effectively - Failure to manage finances effectively - A major reason AEs/EVPs/CEOs get fired A major reason AEs/EVPs/CEOs get fired

What is Program Budgeting? Assigning True costs to all Programs Assigning True costs to all Programs Includes Direct costs and Staff costs Includes Direct costs and Staff costs

First Things First - “A”, “B” & “B1” Cash Budgets More Easily Understood Cash Budgets More Easily Understood Develop Timeline – See Exhibit “A” Develop Timeline – See Exhibit “A” Prepare Line Item Budget – Exhibit “B” Prepare Line Item Budget – Exhibit “B” Budget conservatively for 2008 and 2009 Budget conservatively for 2008 and 2009 Assign Allocations to each Line Item “B1” Assign Allocations to each Line Item “B1” Break out non-Program Line Items “B1” Break out non-Program Line Items “B1” Determine General Administration Program Costs “B1” Determine General Administration Program Costs “B1” Establish Fixed Expenses “B1” Establish Fixed Expenses “B1” Determine Administrative Overhead“B1” Determine Administrative Overhead“B1”

Ex. “A” Budgeting Sample Timeline

Tracking Staff Time - Ex. “C” List all Programs and Services List all Programs and Services Prepare Basic Staff Time Tracking Sheet Prepare Basic Staff Time Tracking Sheet For first year - Estimate hours for each Program For first year - Estimate hours for each Program Begin tracking staff time on a weekly basis Begin tracking staff time on a weekly basis Computer tracking most effective - Computer tracking most effective - –Excel Spreadsheet Program

Ex. C1

Ex. C2

Determining Staff Hourly Costs Ex. “B2” Add General Administrative & Fixed Expenses Add General Administrative & Fixed Expenses Add Total Staff Hours Add Total Staff Hours –Use 2,000 hours per year per staff member Divide Expenses by Number Staff Hours Divide Expenses by Number Staff Hours = Cost per hour per Staff Member = Cost per hour per Staff Member –Usually $30 - $50 per hour per staff member, depending on location

Preparing the Program Budget Ex. “D” Programs/Activities Programs/Activities Show non-Program Income and Expense Show non-Program Income and Expense Columns for: Columns for: All Programs/Activities All Programs/Activities –Direct Cost –Staff Cost & Overhead –Total Cost

Preparing the Program Budget Ex. “D” Columns for: (Continued) Columns for: (Continued) Income Net profit or (Loss) Cost per member of Dues $$ Program/Activity

Using the Program Budget Helps Prioritize Programs and Services Helps Prioritize Programs and Services Tool to Get Rid of Sacred Cows Tool to Get Rid of Sacred Cows Keeps Members informed Keeps Members informed Helps determine what to include in Base Dues Helps determine what to include in Base Dues Justifies the Value of Programs/Services Justifies the Value of Programs/Services Open Communication to all Open Communication to all

Questionable Ex. “E” Programs/Services To get rid of “Sacred Cows” Use Program Analysis Form Use Program Analysis Form Leadership to Decide Leadership to Decide Dues Based or Fee Based Dues Based or Fee Based Or Eliminate Or Eliminate

Ex. “E”

Directors Have a Hard Time Understanding Financial Statements Recognize that we are in a time of transition after 5 – 6 spectacular years Recognize that we are in a time of transition after 5 – 6 spectacular years Budget Numbers may be Growing or Shrinking – relate directly to membership numbers Budget Numbers may be Growing or Shrinking – relate directly to membership numbers AE needs to have finger on the pulse AE needs to have finger on the pulse Easily understandable Financials make it easy for Directors to make quick decisions Easily understandable Financials make it easy for Directors to make quick decisions You need to be prepared to cut back when income figures are not on track You need to be prepared to cut back when income figures are not on track

Statement of Financial Position Exhibit “F” Keep it Simple Keep it Simple Take Figures from Accounting Program, ie Quickbooks/Peachtree Take Figures from Accounting Program, ie Quickbooks/Peachtree Compare month end figures to month end figures for same month the previous year Compare month end figures to month end figures for same month the previous year Are total Assets up or down? Are total Assets up or down?

Statement of Financial Position Exhibit “F”

Preparing Monthly Budget Reports Use Your Monthly Accounting Report and Budget to prepare month end reports Use Your Monthly Accounting Report and Budget to prepare month end reports Prepare using Excel Spreadsheet Prepare using Excel Spreadsheet Track Income and Expense Track Income and Expense Critical columns to include are: Critical columns to include are: –Budget Breakout –Total for each Category –Year to Date Breakout –Total Year to Date for each category –% of budget collected or spent –Comparison $ with same period previous year

Monthly Budget Report and Comparison Exhibit “G”

More Help with Program Budgeting See article “Better Budgets” in 2003 Spring issue of “REALTOR® Association Executive “ magazine. All Excel templates can be found at /budgetshttp:// /budgets (Revised) /budgets

Questions