I have a little secret I want to let you in on. Budgeting for your association isn't rocket science and it doesn't have to be an overwhelming task. Unless you have major initiatives planned (i.e., development of a new website or huge event), budgets usually don’t change too dramatically year after year. Here are some tips you can use to help streamline your process.
1. Start with the end in mind
The first question you should answer before you start to look at numbers is: Do you want this to be a money-making year, a break-even year or a year that you are investing back into your members?
Some things to look at when answering this question: What are your current reserves and how do they align with your reserve policy? When was the last time you intentionally gave something back to your members?
Remember, just because you are a nonprofit doesn't mean you can’t make a profit. It is reasonable to make a profit to help build your reserves to a comfortable place or to fund a planned initiative in the future. It is reasonable to break even if you have sufficient reserves in place. Finally, it is reasonable to budget a loss if you have reserves that will support giving back to your members.
2. Start with what you know
Once you know what your end goal is, start with what you know. I like to use a budget template that has the past two years' budget and actual numbers on it as a reference and starting point. Unless you have a major new initiative that has new revenue or expenses tied to it, you can use the past year as a starting point. Don’t start with a clean slate; it isn't necessary in most cases.
3. Follow the trends
Use the trends from the past two years as you are going through the line items to determine if numbers need to increase, decrease or stay the same. This is where you should use your strategic plan as a guide. For example, if you have a goal set to increase membership by 5 percent, your membership dues revenue should reflect that increase.
4. Focus on the big things
Don’t get caught up on the small stuff. Not that the small stuff isn't important, but I would encourage you to spend more time talking about the large revenue sources and large expenses. I have experienced one too many budget committees that get caught up on $25 here or there instead of focusing on the stuff that really matters.
5. Stay conscious of adjustments
As you are going through the first draft of your budget, pay attention to areas where you think adjustments could be made. This will make changes easier if you need to adjust the bottom line later on in the process. One example of an adjustment could be adjusting a catering line item by changing the type of food you serve at an event.
6. Be reasonable and use your best judgment
Don’t inflate numbers because you think they should look different than they do. You may think that the association should be able to double the sponsorship revenue because there are a lot of missed opportunities, but unless there is a plan in place to bring in additional sponsors, don’t double the number in the budget.
7. Take notes
If you are using Excel, just add a column that serves this purpose. Most people are not going to remember how you came to a decision about the numbers in the budget three or six months down the road. Provide enough details so it is helpful. For example, a catering line item in the budget for the board of directors might have a note like this.
$5,700 budget
6 x $200 — lunch for bimonthly board meetings
2 x $1,000 — breakfast/lunch/dinner for biannual retreat
10 x $50 — board check in meetings (board chair and individual board members)
8. Pay attention afterward
Once the budget is approved, pay attention to it. If you are a board member, it is your legal responsibility at the end of the day to know and understand the budget and track the actual numbers to the budget. You are probably not an accountant, but that is not an excuse. Make sure you are asking questions until you know the finances.
