Financial Management and Budgeting

The Details

What Is a Budget? A useful tool for keeping track of

funds. A basis for planning and managing

money. A written guide describing your

future goals in financial terms for a set time.

A detailed statement of estimated income and expenses.

An historical record of the activities during a given period.

What Can a Budget Accomplish?

Help refine goals based on realistic resources.

Serve as a guide to use funds efficiently.

Provide accurate information to analyze, and evaluate programs and activities.

Serve as a reference for planning. Aid decision making.

Steps to Develop a Budget

Step 1: Begin preparations a month or more before the close of your current fiscal year. If you don’t have a budget, start

now and plan for the rest of the year.

Your budget is your roadmap—If you don’t know where you’re going, you won’t know how to get there!

Steps to Develop a Budget, cont’d

Step 2: Prepare an outline of planned activities for the upcoming year to: determine what you wish to do

for the upcoming year (add a classroom, purchase equipment, implement raises, etc.)

Plan for any activities that require money, which to a great extent will drive the budget.

Steps to Develop a Budget, cont’d

Step 3: Determine available funds (balance from previous years, cash on hand, funds in the bank, etc.)

Step 4: Carefully study income: parent fees, state payments, estimated costs, and possible fundraisers.

Step 5: Evaluate your enrollment and possible vacancies since parent fees are likely your major source of income.

Steps to Develop a Budget, cont’d

Step 6: Estimate expected income and when it will be available (enrollment fees, weekly or monthly payments, etc.)

Step 7: Determine necessary expenses: salaries, facility costs, taxes, supplies, etc.

Step 8: Get information on changes that affect expenses such as tax or insurance increases.

Steps to Develop a budget, cont’d

Step 9: Get price estimates or quotations on large expenditures.

Step 10: Rank the order of expense by their importance to consider which are the wisest expenditure of funds.

Step 11: Compare your income to your planned expenses. Remember to allow for unexpected expenses and for vacancies that reduce income.

Steps to Develop a Budget, cont’d

Step 12: If your budget does not balance, consider other sources of income: Can you implement a supply fee? What about an increase in field trip fees? Should you increase rates? Eliminate less-essential expenditures or reduce those expenditures.

Revise, review, and then assemble into a final budget.

Keys to Managing Your Budget

Once developed, the budget should be closely monitored frequently.

The budget is the financial road map for the year.

Changes must be considered as they affect other expenses.

Set and maintain a minimum cash balance for keeping expenses current.

Keys to Managing Your Budget, cont’d

Formulate general policies and procedures needed to achieve the objectives you have set.

Plan for cash flow: How will you cover expenses if the check from the state is late? What if parents don’t pay on time?

Keys to Managing Your Budget, cont’d

Keep accurate records of all income and expenses, evaluating them regularly.

Compile financial reports at least monthly. Include all transactions that have occurred since the previous report.

At the end of each statement, a balance of cash on hand for operating expenses should be compiled and reviewed.

Keys to Managing Your Budget, cont’d

Reconcile the monthly statement with the year-to-date activity to provide a clear picture of your financial position: the income, expenses, the cash balance, and funds due.

Act quickly to address shortages in income. Reduce expenses by paying bills on time.

Keys to Managing Your Budget, cont’d

Look at percentages: If 3 months have elapsed in your budget period, are your expenses and income about 25% of what you predicted? If expenses are more, is there a reason such as insurance has been paid for the full year? If income is less than expected, are parents behind in payments?

Keys to Managing Your Budget, cont’d

Control cost – Use your budget as a guide and always compare prices of items and services; balance durability, convenience, and expertise with value.

Watch income – Make sure parent fees are current and that all state income is received.

Keys to Managing Your Budget, cont’d

Assess your budget at least monthly during the budget period.

At the end of the budget period, determine the outcome of each expense and revenue category.

Evaluate and review actual costs in order to establish priorities for the next budget period.

We’re In the Money Managing the budget and

successfully balancing the spending will permit your organization to function in good financial health.

Operating with a carefully planned budget will mean less stress and more security for you and your staff.

Example Budget Part 1

Previous Current Year Year

Revenue Tuition ______ ______ State payments ______ ______ Enrollment fees ______ ______ Field trip fees ______ ______ Other income ______ ______ Prior year carriedforward ______ ______

Example Budget Part 2

Previous Year Current Year Expenses Personnel Expenses

Salaries _______ _______Hourly wages _______ _______Fringe benefits _______ _______Workers compensation _______ _______Social Security _______ _______

Total Personnel Costs _______ _______

Example Budget Part 3 Previous Year Current Year

Rent/mortgage ______ ______ Utilities ______ ______ Insurance ______ ______ Telephone/Internet ______ ______ Educational supplies ______ ______ Office supplies/postage ______ ______ Cleaning/janitorial ______ ______ Training costs ______ ______ Equipment purchase ______ ______ Equipment repair ______ ______ Outstanding debt ______ ______ Miscellaneous expenses ______ ______

Example Budget Part 4 Previous Year Current Year

Capital Purchases List by item _______ _______ _____________ _______ _______ _____________ _______ _______ _____________ _______ _______ _____________ _______ _______

Contingency _______ _______

TOTAL EXPENSES _______ _______

Sample Balance Sheet Part 1Date: _________

Assets AmountCash on hand __________Accounts receivable __________Savings account __________Equipment (fair market value)

____________________ ______________________________ __________

Other property ____________________ __________

____________________ __________

TOTAL ASSETS __________

Sample Balance Sheet Part 2

LiabilitiesAccounts Payable __________Long-term debts _____________________________ _____________________________ __________

TOTAL LIABILITIES __________

NET Value of Organization __________