Without a budget an association has no financial guideposts, but even as important as a budget is, creating one doesn’t have to be intimidating or involve rocket science.  The style may vary a little, based on the size and needs of the organization in question, but the basics are the same.

            First, does your association already have a budget that just needs to be updated for a new year?  If so, your first task should be to review each line item for relevance.  Associations that have been around for a while often have items listed that haven’t been used for years.  New ones may need to be added; the easiest time to both weed out old, irrelevant items and add new, pertinent ones, is before you start crunching the numbers.

            Secondly, do you have historical data, and is there a budget comparison report that shows it?  If you have the information, but not the report, create one.  It doesn’t have to be particularly pretty or fancy – you’re not going to be publishing it, at least not this version. This one is just for you to work with.  You’ll want to have at least three year’s worth of actual information, in a spread sheet with variances to show what goes up and what goes down and when.  This can be done by year, quarter or month, as needed. Something like this:

 

Inc Item

2007A

2007B

% Var

2008A

2008B

% Var

2009 A

2009 B

% Var

Meeting

12500

13000

-4.0

22000

13390

64.3

21500

22440

4.2

Dues

25700

24000

7.1

31200

24700

26.3

26000

25400

2.4

Magazn

5700

6000

5.0

6250

6200

0.8

6150

6500

-5.4

 

            A quick review shows you that past budgets have consistently underestimated income from meeting registrations and dues, but sales of the annual journal are fairly steady.  Keep those kinds of trends in mind as you plan your budget for the coming year.

            The key to budgeting is being realistic.  What can the association actually achieve in terms of cost-cutting or income generating?  Not what would be nice or what do we wish, but what is actually likely to be do-able?  Give that kind of realistic appraisal to each line item. Once the budget is approved by the board, it is graven in stone and should not be changed.  If the association wishes and the bylaws allow, you can create projections that can be tweaked, to use as a roadmap, but the budget itself should not be altered. 

            You should also avoid ever budgeting a loss.  Break even or make money, but if you’re planning ahead to lose money, you have bigger problems that need to be addressed – now!  Not much point in playing the game if you arrive at the stadium planning to lose it.  Look for places you can cut expenses, or new ways to generate revenue, until you at least reach a $0 bottom line.  A carefully crafted budget is your best guideline to a stable financial future for your association.