This is the time of the year that most associations start sharpening their pencils. Obviously some of us run on a Fiscal Calendar Year (FCY). In rare cases, the fiscal ends the last day of March but most associations end their fiscal year on June 30th this keeps everything on schedule for 990 filing. Regardless, I will explain what works best for most organizations. This includes a timeline and post-script.
It’s been my experience that creating a budget is the easiest task of any association executive. Let me be clear, getting enough revenue to support the association budget is a harder task but assuming your association is running on all cylinders then putting a budget draft together should be pretty simple exercise. Unfortunately too many people often over-complicate it and make the task more difficult then it should be.
Nobody knows your budget more than your Executive Director and perhaps your Controller, if you are lucky enough to have one. The first thing you should do is have an agreed timeline and share it with your Board Treasurer. This way, they are in on the process.
Let’s assume your fiscal year starts on July 1st. I would begin the budgeting process in late March/ Early April. It is best to break things down into categories and delegate accordingly. For example, you and your Controller, should pencil in figures for operational costs (rent, salaries, supplies, utilities, etc). These figures derive from both historical-driven data and substantiated facts looking forward. For example, you should know if rent is going up or if certain staff members are due for raises or insurance is increasing.
In this same time, you should offer a very simple worksheet to your department heads (Professional Development, Marketing, Membership, Conferences/Events, Technology, etc). Tell them what their current actuals/ projections are for the year and offer them some historical context to help them make informed decisions on what they should be penciling in for revenue/ expenses for the upcoming year.
In Mid-April, set up a time to meet with department heads to discuss their filled out worksheets. Carefully review to make sure everyone is aligned with figures. It’s possible there may be some disagreements. It’s important to make rational and informed decisions that are in the best interest of the association. Everyone wants more for pet projects. If you have any figures, you disagree with, then make a notation and reserve a meeting with your Board Treasurer to mediate or make best call on behalf of the association.
In Late April, you should meet one-one on one with your Board Treasurer. Others may want to get involved (ala other Board Members). I would advise against this as they will have a chance to offer insights at a later meeting. By plugging in your projected operational costs and plugging in the figures agreed upon your department heads, you are creating an environment where you are PREPARED. You are in a position where you not only have a drafted document to share with your Treasurer but you avoid any sort of embarrassment when he or she asks “Did you meet with the ___department head?”
At this juncture, your Treasurer is like the dentist after you get your teeth cleaned. They are just ensuring all your teeth are accounted for and there are no cavities. They can also be the mediator for budget requests that cannot be agreed upon between you and department heads. The Treasurer should help the Association Executive bring this budget to the table of the Finance Committee. In that essence, the budget should be near complete, the Treasurer is there to simply put a final touch on things.
You may sometimes get an over-zealous Treasurer who wants to be overly involved in every step of the budget. To that I will offer the following advice:
The Treasurer is often a Board Member. We work at the discretion of the board. Thus we allow them to be involved if they want but set ground rules.
The Treasurer can get their hands dirty as long as the end goal is to pass a budget on time. If what they are asking you to prevent a budget from passing on time then they are welching on their primary role as a Board Member in ensuring the fiduciary stability of the organization.
If you made it this far in the process then you can graduate to the introduction of the proposed budget for the Budget and Finance Committee in . To give them their glory, I often prefer the Treasurer summarize the budget. In most cases, the Budget and Finance Committee will bless the budget then take you out for a beer afterwards. Every so often, they have a question or point out an error.
The budget then goes to your . Chances are many are department heads and it’s more of a procedural thing to help move this thing along.
The next and biggest step is . If they approve it then it’s a miracle but if they don’t approve then you have a month to self-correct. It’s been my experience that 1-2 board members will ask you to refocus on certain items. It should be the Treasurers responsibility to identify how reasonable these requests are.
The month of June should be reserved for tweaking and changes. If everyone does their role correctly then you should be able to get a full budget approval in the June Board Meeting. This is great since the new fiscal year begins on July 1st.
***Obviously I used the July fiscal year as an example. If your fiscal year ends on December 31st then begin budgeting in September. If your budget year ends on April 1st then begin in January. If everyone works together for the betterment of the organization + if there are actuals/ activity from years past then this entire budgeting process shall be seamless and simple.