Does your association develop a budget each year? It’s an essential part of running a successful officials association. Whether you’re setting up a budget for the first time or looking for some suggestions on doing it the right way, it all starts with gathering the numbers.
The first step in preparing a budget is to compare 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.
Step 1 — Give yourself enough time. The budget process should begin early enough to ensure the treasurer or budget committee has 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 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.
Step 2 — Gather all your info. Pull out last year’s budget if you have it. Have your numbers related to fees, dues, contracts and membership numbers available. With that information, develop a revenue budget.
Step 3 — Figure out what you want and what you can have. The next step, and usually the most time consuming, is budgeting the expenses for the association. Figure out what you want to do for meetings, training, banquets, etc. Determine your wish list to meet the objectives of the association. Then 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.
Step 4 — Balance it. Compare budgeted revenues to budgeted expenses. The budget must be in balance. If needed, begin the process of eliminating the activities that are not central to the organization goals and objectives.
Step 5 — Get approval. Upon completion of a balanced budget, submit the budget to the board of directors for review and approval. 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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