The budget is simply a plan that’s been expressed in money terms. It is usually prepared for one year in advance but can be set for longer or shorter periods of time.
What does the budget show?
- How much income your club expects to receive during the next financial year
- How much your club expects to spend in the next financial year
- The predicted surplus (profit) or deficit (loss) for the budget period
It is really important that you consider your reserves policy before drafting your budget. If your reserves policy shows that your reserves are too low, then you will probably want to prepare a budget which leaves a surplus so that your reserves are increased.
Of course, if your reserves policy shows that you are carrying too much in reserves, you might want to prepare a deficit budget - this just means that the club’s expenditure is focussed on your club’s strategic objectives.
Keeping track of the club’s finances is critical to the ongoing success of the club and a budget is a great tool to make this happen. You’ll be able to compare and review actual results against a benchmark.
Who should be responsible for setting your club’s budget?
The role of the treasurer should take the lead but it will require input from others, for example: coaches, trainers, general manager, facilities manager, bar manager, and committee members.
While the prospect of preparing a budget can be daunting, getting the right people involved from the start will help.
Points to consider when preparing your budget:
The easiest way to prepare your budget is by basing it on the income and expenditure of the previous year. This is called Incremental Budgeting.
Here are some points to think about:
Review last year’s income and consider any changes in income for the current year:
- Is your income level expected to be similar?
- Is income reducing or are there new income streams?
- Be careful in budgeting excessively for income that may not happen!
Review last year’s expenditure and consider any changes in costs for the current year:
- Is expenditure increasing through activity, inflation or necessity – for example, repairs?
- Are there new costs to account for this year? For example, there are new regulations around pensions
- Are there any savings to be made or costs no longer relevant?
- After drafting your budget, consider how risky it is! Have you been too optimistic in setting income levels e.g. increased membership fees? Or not enough room for unexpected costs?
- Consider which items are essential (overheads such as wages, rent, rates and utility payments) and those which may be desirable extras (such as new equipment, events, facility improvements). Look through these items to see if there’s anything you can do without, should you need to cut back.
- Have you factored in your reserves policy? If you have low reserves, you should try and budget for a surplus.
- Make sure the budget links to the club’s objectives and strategy so that you’re making the best use of your money.
A spreadsheet is a good tool for developing a budget. Download a budget template here.
