Financial Management and Budgeting

1. Financial Management and Budgeting The Details

2. 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.

3. 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.

4. 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!

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

10. 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.

11. 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?

12. 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.

13. 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.

14. 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?

15. 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.

16. 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.

17. 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.

18. Example Budget Part 1 Previous Current Year Year Revenue Tuition ______ ______ State payments ______ ______ Enrollment fees ______ ______ Field trip fees______ ______ Otherincome ______ ______ Prior year carried forward ______ ______

19. Example Budget Part 2 Previous Year Current Year Expenses Personnel Expenses Salaries ______________ Hourly wages ______________ Fringe benefits ______________ Workers compensation ______________ Social Security ______________ Total Personnel Costs _______ _______

20. 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 ____________

21. Example Budget Part 4 Previous Year Current Year Capital Purchases List by item _______ _______ _____________ _______ _______ _____________ _______ _______ _____________ _______ _______ _____________ _______ _______ Contingency______________ TOTAL EXPENSES ______________

22. Sample Balance Sheet Part 1 Date: _________ Assets Amount Cash on hand __________ Accounts receivable__________ Savings account__________ Equipment (fair market value) ____________________ ________________________________________ Other property ______________________________ ______________________________ TOTAL ASSETS __________

23. Sample Balance Sheet Part 2 Liabilities Accounts Payable __________ Long-term debts __________ __________________________________________________________ TOTAL LIABILITIES __________ NET Value of Organization __________