Your Budget Breakdown
Budgets, budgets are no fun. But budgets, budgets are for everyone! Sorry for the bad start, but how do you really start a piece on budgeting? Money is a stressful thing to think about but creating a budget will help reduce stress in the long-term. By taking the time to create a solid budget, both in your personal life and in your business, you have a chance to think about how and when you want to spend your money. Then, when the time comes to spend or make a decision about spending you already have a plan and the process becomes so much easier!
Cliff Notes Version:
To create a budget, you dig into your income sources and predict how much you expect to make (revenue). Then you dig in to your expense items and predict how much you expect to spend (expense). Then you layout a plan so you know how much money you have to spend on each expense category (line item) and make sure you spend less than you plan to bring in. Viola. Budget done.
Wuthering Heights Version:
How do you even know where to start? Budgeting can’t be that simple, right? Well, at the core, it is that simple. It’s all the leg work and digging and researching and predicting that makes it an imperfect science. But with some dedication, you can get pretty close.
Start by laying out your required expenses. Do you pay monthly rent? Do you have utility bills? Do you pay an annual fee to you school? Be thorough. Think about all expenses that are non-negotiable. Remember to account for the things that are only once or twice a year like insurance premiums, annual business registration costs, international dues, annual tax filing fees, or annual club fees. About that legwork and research…it’s always a good idea to reach out to your vendors ask about price changes for the next year. Most items go up 3-5% each year which can be significant when you’re working on a tight budget.
Once you’ve written down all of the required expenses, take a look at your anticipated income. Some will be fixed (i.e. dues) and others may be flexible (i.e. fundraisers). Use prior year’s numbers to estimate what you’ll bring in this year and drill down as close as you can. How many active sisters do you have? How many NMC’s do you bring in each fall? Each spring? How many of your actives will be graduating and when? Create a list of how many women you think will be on your active roster and NMC roster each semester and you can get a pretty good idea of how much dues revenue you’ll collect. Then you just have to take a look at revenue from previous fundraisers to get an idea of what you bring in with each event (and which were most successful!).
The simplest way to plan your budget is to use a spreadsheet. Label the first column “Category,” the second “Projected Revenue,” and the third “Actual Revenue,” the fourth “Projected Expense,” and the fifth “Actual Expense.” Then, under each heading fill in the information you came up with when you plotted it all out. (Hint – I like to add comments to the cells so I remember how I came up with the numbers.)
Total it all up at the bottom of each column and see how you did. Your goal is to make sure you are planning to spend less than you will bring in.
If it turns out that your fixed expenses are MORE than your projected income, you need to figure out how to bring in more money. Increase fundraisers, increase local dues, solicit donations.
If it turns out that your fixed expenses are LESS than your projected income, great! Now you can make a decision to save that extra income for the future. Or you can decide the extra income will be used on an optional expense, like a senior sendoff or an extra ticket to Konvention.
Remember, for tax reasons, you need to be able to show were every penny came from and where every penny went. So in addition to creating a budget, you also need to keep a running list (ledger) that tracks ALL of your income and ALL of your spending as an organization. Another benefit of a ledger is that it allows you to see how close you are to your projected numbers and make some real-time decisions. Do you really have any more money to spend on decorations for recruitment? Do you need to push for a last-minute fundraiser to bring in more money
So there you have it. Budgeting 101. Obviously, budgets become much more involved as they encompass more work and more categories. Even so, the basic principles apply – plan your income, plan your spending, and spend less than you make!
Happy holidays and happy budgeting, y’all!