Top tips on the budgeting process
A budget is a useful guide that can help a charity to plan. Here are our top tips to help you facilitate an effective budgeting process:
- Start with a blank page
As daunting as it sounds, starting with a blank page can transform the charity’s budgeting process. It is a highly effective way to shake the process up, allow for increased accuracy of both income and expenditure, as well as removing historical data that is no longer relevant or accurate.
- Involve different departments
It is crucial for a charity to have buy-in and acceptance of the budget from the entire organisation. Involving different departments can provide increased accuracy and depth to the budget figures, as well as providing responsibility and ownership to those involved.
- Check your formulas
As simple as this sounds, you wouldn’t believe how many errors we find when recalculating budgets for our clients. This simple check ensures your bottom-line results are correct and are easily updated for any amendments made.
- Link the headings
It makes for much easier reading and decision making if the budget is linked to the layout, format and headings used in the management accounts/reports generated from the accounting system. It allows actual figures to be compared to those budgeted instantly, without having to manipulate the data to reveal the variances.
- Revise accordingly
The budget should be revised for any known significant changes as they occur throughout the year, if a budget is not revised for such changes, the document ceases to function as the comparisons being made will no longer be valid.
- Stress test
You can’t plan for every eventuality, but stress testing your budget can add significant insight and value to the process. If the funding you applied for isn’t received, what impact would this have? If you can only operate at 70% capacity, are your overheads covered? Stress testing allows you to see instantly the impact of such instances.
- Report the unrestricted and restricted position
This is crucial, and the split should be shown on all budgets. This allows for sound decision making to be made as you can track the predicted impact on the charity’s free reserves.
Download issue three of our 'Revive, Refocus, Rebuild – The journey back to better' guide here to find out more…
Would you like to know more?
If you have any queries regarding what we cover in our guide, please get in touch with your usual contact or email charities@azets.co.uk.
