ABCs of Budgeting Basic Budgeting

What is a Budget  An itemized summary of expenditures  Total sum of money allocated  A collection of funds with limits  A statement of the financial position of an organization  A plan for spending money  Futuristic in terms of projecting

Characteristics of a budget  A well thought out plan  Detailed  Contain estimated expenditures  Include revenue  Include appropriate subtotals and totals  Concern a defined length of time  Explanation of activities

Working definition for non-profits A budget is the plan from a financial view point. It contains detailed itemized estimates of all expenditures and contributions from all sources of revenue AND Also includes the amount and distribution of funds needed to perform the project activities over their allotted time spans.

Why a budget a “Good Thing” Controlled Spending Spend Cautiously Honor the trust placed by donors Critical Part of program planning, grant writing and evaluation Sustainability and ensuring financial stability

Having a Plan  Balanced budget  No one right model  Healthy budget shows multiple funding sources  Cash Reserves  Show all in-kind contributions  Start up costs

Example of a budget Two Key Sections Income Expenses

Project vs Organizational Budget  Project budget that supports one project or a specific program within your organization.  Organizational Budget provides information on more than one project or program – with each program detailing its own specific needs.

Budget (Active Document)  Spread sheets of Budgets include Annual budget Year to date income and expenses Current month’s budget (1/12 of the annual budget) Current month’s income and expenses

Cash Flow Subdocument of your budget that estimates not joust how much money you will receive and spend over the course of a year, but when you will receive it and spend it.

Financial Statement  It is about history  These are prepared at least once a year (end of fiscal year)  Monthly and Quarterly versions are often created in non-profits  Preparing and interpreting financial statements require an Accountant’s knowledge and skill level

Managing Financial Systems  Security  Back up (save a copy) all financial documents  Require two signatures on checks over a certain amount  Keep all supporting documents/receipts  Keep an itemized list of any equipment or furniture (and value)

Best Practices in Managing Funds  Budget is driven by the mission  Keep good records  Always use funds as they are budgeted  Follow budget as closely as possible  Learn to diversify funds  Don’t use a signature stamp to endorse checks  If you can’t spend the money for what it is intended, give it back.