1. Give yourself enough time
The budget process should begin early enough to ensure ample time to present the completed budget to the board of directors for their approval. Sufficient time should be allotted for questions and changes after that presentation to the board prior to submission for final approval. Usually, three months is enough to prepare and obtain approval of a budget for the next fiscal year.
2. Check previous budgets
The first step in preparing a budget is to review the current year’s budget to actual results to gain an overall understanding of the finances of the association. If no budget was prepared in previous years, then a good starting point would be to use actual income and expense categories that have occurred in the prior fiscal year.
3. Gather all your info
Prepare a reasonable revenue budget. Determine the revenues to be collected from dues, registration fees, contracted fees, etc. Remember to plan for the loss of contracts which have expired and may not be renewed. Additionally, project the anticipated number of members for the coming year and the resulting dues from those members.
4. Prepare a wish list
Usually the most time consuming process is budgeting the planned expenses for the association. Begin by preparing a wish list which encompasses the expenditures required to meet the goals and objectives of the association. At that juncture, it is appropriate to take the “pie in the sky” attitude.
5. Get a reality check
That’s when it comes time to bring yourself back to reality and begin to cost out the wish list items, which can be done with the use of incremental budgeting, zero-based budgeting or a combination of the two. Incremental budgeting leans heavily on information contained in the previous year and adding a percentage increment for inflation. Zero-based budgeting requires that each line item be calculated anew. Budget line items would be considered zero unless full justification can be provided for some other figure. Some combination of those two is desirable in the budgeting process.
6. Time to balance
Compare budgeted revenues to budgeted expenses. The budget must be in balance. Establish priorities and realities and begin the process of eliminating the activities which are not central to the organization goals and objectives.
7. Rubber stamp it
Upon completion of a balanced budget, submit the budget to the board of directors for review and approval. That is more than a mere formality. The board executes its fiduciary responsibility when setting financial limits and boundaries for the staff. The board is also implicitly agreeing to meet the projected revenues and expenditures.
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