Preparing a Budget

Setting Targets and Measuring Results

Student organizations should become familiar with preparation of financial plans, budgets, and the benefits of using a budget as a management tool. There are three primary purposes for developing a budget:

• To put the group's plans into monetary terms
• To provide a means of allocating limited resources among the organization's activities
• To aid in tracking the organization's actual revenues and expenditures against its goals

Student organizations should budget their operations annually. The proper management of funds is important, especially when dealing with limited financial resources. Also, the more complex the group's objectives, such as managing multiple programs with different activities and funding sources, the more important the budget process becomes. If a group has both restricted funds and unrestricted generated funds, the use of budgets to identify expenditures provides the necessary means for tracking the two fund types.

Developing a Budget

If your organization has been in operation for a fair amount of time, the easiest way to prepare a budget is to start by recording your last two or three years of actual financial data by year. A schedule thus prepared will allow you to compare trends and identify major expense centers. It will also point out areas where your group is growing or declining and indicate areas where reductions and cost savings might be possible.

This historical information can then be used as a basis for preparing a current year budget forecast. The budget forecast is adjusted and modified from the historical data for projected major changes in revenues, programs, or expenditures. Obtain historical data from your organization's records to assist you in this process. If your organization does not have these records, begin creating a system now that can be used in the future.

Choosing a Format

You can choose among several methods of preparing and monitoring budgets. They can be organized by program and cost item, fund type, or solely by program.

The most common format uses program and cost item formatting. This method provides a sufficient level of detail for analyzing the individual budgeted items and identifying cost item variances by categories, plus overall program variances.

Summary

While preparing a budget may seem excessive and cumbersome, any student organization that operates without a formal budgeting process cannot effectively manage or plan its operations. A properly prepared budget allows even small organizations to identify potential problems and to take corrective action before they become major issues.

Adapted from: The University of North Carolina at Chapel Hill's Student Organization Handbook (2003). http://carolinaunion.unc.edu/activities_orgs/handbook/funding.html