Income & Expenditure Stmnt_budget Sample

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What is a budget? A budget is a projection (forecast) of financial outcomes on the basis of certain events, strategies and decision made. This is something we all do from time to time. For example, if you plan to buy a new car with a bank loan (the decision), you may calculate whether you will be able to pay the loan repayment instalments (one of the financial outcomes). Another example might be if a Recreation organisation runs a particular event will there be any resultant profit? These questions cannot be answered unless someone does some financial calculations. These calculations will involve working out our likely revenues (income) and our likely expenditures. By comparing revenues and expenditures the answer to the question "Can I afford the car?" or "Will we make a profit from the event?" will be answered. Budgets are more than just a few calculations that we throw away when the questions are answered. In a business context, a budget, once constructed, becomes an essential tool for the financial management of the business. In fact operating a business without a budget is very bad management. In order to make sound financial decisions it is necessary to review the budget to determine whether a proposed course of action fits within our planned financial strategies or not. If the answer is in the affirmative, i.e. the item is "budgeted", then there is a great deal of confidence about continuing to pursue the strategy, provided the item is kept "within budget". If the answer is in the negative, then there is an understanding that continuing to pursue that strategy has a higher degree of risk. That does not mean, however, that any departure from the set budget is inadvisable. It may be that "unbudgeted" strategy or event has obvious financial benefits. Furthermore it may also be the case that the budget itself was incomplete.

The purpose of budgeting In the context of business management, budgeting has three different purposes: • • •

A forecast of income and expenditure (and thereby profitability) A tool for decision making A means to monitor business performance

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Forecast of income and expenditure Budgeting is a critically important part of the business planning process. Business owners and managers need to be able to predict whether a business will make a profit or not. A budget is basically a model of how the business might perform, financially speaking, if certain strategies, events, plans are carried out.

In constructing a Business Plan, the manager attempts to forecast Income and Expenditure, and thereby profitability.

Tool for decision making Once the budget has been set, the budget provides a financial framework for the decision making process i.e. is the proposed course action something we have planned for or not. Monitoring business performance Once a budget is in place, it enables the actual financial operation of the business to be measured against

In managing a business responsibly, expenditure must be tightly controlled. When the budget for advertising has been fully expended, the decision on "can we spend money on advertising" is likely to be "no".

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Budgeting Principles 1

Principle of Conservatism Don't budget on the basis that everything will turn out as expected. Build in a safety factor by tending to underestimate your income and overestimate your expenses.

2

Principle of Involvement One person may be responsible for the compilation of the budget but one person should not be responsible for all the work involved. Budgeting requires teamwork. The task of budget should split and allocated among those individuals who have the best chance of knowing what expenditure is likely to be needed and what income is reasonable to expect. Involvement by many people in budgeting might slow the process down, but the answer is far more likely to be accurate and dependable.

3

Principle of Retraceability Budgeting is not an activity that is completed in a few hours. A good budget may be worked on for several weeks if not months, adding and changing figures as new information comes to light. It is very important that the author of the budget can retrace his/her steps. It would be much less efficient if budget calculations were difficult to understand and figures impossible to find out from where they came. All figures should be clearly labelled.

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The budgeting process Let's suppose you have just been assigned a new role as Competition Director for next year's State Championship which your club is hosting. The event is 12 months from now. One of your first and most important tasks is to develop a budget. You cannot really organise such an event without a budget. It would be like planning a holiday and not knowing how much it would cost! So, the question is how are you going to develop a budget? No need to worry, really, it is basically a common-sense process. You should never imagine that you are on your own in this task. Budgeting is very much a task shared among work colleagues. So talk to people, talk to colleagues! The budgeting process starts immediately when planning an event. It's a case of making a start somehow, anyhow, by getting some rough estimates down on paper. Then day by day, week by week, your task is to refine your rough estimates by seeking information through a number of ways by researching and talking to staff, contractors, and stakeholders. As time goes by, and more information comes to hand, your budget will hopefully become increasingly accurate. Probably a good place to start is to consider where the money is coming from to pay the costs of the event. Typically, the principle sources of event income are: • • • • •

Government Funding Sponsorship Money paid by event participants (e.g. registration fees) Money paid by event spectators (e.g. entry fees, food/drink sales) Money paid by a parent organisation (e.g. state association)

Let us suppose that the starting point is that you know that the State Association guarantees funding of $1,000 towards the cost of staging the event. In discussions with the state association you also find out that there will be 100 competitors and each will pay a $20 registration fee to enter the event. Participants will therefore contribute $2,000 in

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event income. The total of expected income is, at this early stage, $3,000.

Now you need to take a look at what costs the event will incur. Again, if you are not sure what types of expense will occur then ask people! You can probably think of some things yourself but not necessarily everything.

Okay, so you have done some talking, some probing and you have identified at this early stage that the major costs will include advertising, officials, equipment, programmes, trophies and catering and maybe some costs associated with the venue. You now need to get some costings. Make some telephone calls!

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• • • •

•

Call the newspaper and gets some quotes on advertising space. How many programmes do you need, do you want colour? Call the printer and gets some quotes How many officials will you need to provide accommodation? Call some local motels and get some quotes Do you need to provide any catering (e.g. finger food and drinks) for the dignitaries and officials for after the opening ceremony? Call some caterers and get some prices. How many trophies do you think will be needed? Call the trophy shop and get some idea of prices.

As you obtain quotes, a picture of costs begins to emerge. Nothing will accurate at this stage. You are just getting a basic idea of some of the important elements in your budget.

You have a first look budget for expenditure! Put all this information (income and expenditure) together and what have you got?

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Answer - A deficit! Costs are greater than income by $5,700. This is a fairly typical situation, and it must be rectified. An event budget must at least show a break-even situation. Well, you have 12 months to sort the problem out! At least you have made a start. You have some rough estimates to work with and to discuss with colleagues. The process from hereon in is simply one of refinement.

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Sources of Information The following diagram illustrates where information comes from in the process of constructing a budget.

This diagram created using Inspiration® 7.5b by Inspiration Software®, Inc.

Acknowledgement This diagram was constructed with the help of Erin Smith

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Developing a budget from a business plan Some understanding of a Business Plan is helpful here. A business plan generally contains strategies that have been formulated to achieve the goals and objectives that have been set by the management of the organisation. Click on the link below to download a spreadsheet that provides an example of how a budget may be developed by costing these strategies.

Important information sources #1 Look up historical information In creating a budget for next year, your first step is to have a look at last year's financial statements and budget (if one exists). Unless there is a change in the number of people employed, or the location and type of business, the overheads of the business for last year will be a good indicator of next year's overheads. Costs such as electricity, rent, rates, administration costs, leasing and audit fees are overeheads, and they will largely remain the same from year to year. However a small increase should be planned due to inflation. If your organisation has been in operation at least one year, there should be plenty of historical financial data to help you predict next year's income and expenditure.

Historical Information Bills

Financial Statements

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#2 Look at the business plan

The Business Plan

All businesses should develop a business plan. The purpose of developing a business plan is to set the goals and objectives of the business, and to determine what strategies and actions are required to achieve these objectives. Although historical data helps to predict income and expenditure for next year, the business plan may contain new strategies that will radically change the pattern of income and expenditure. Formulating a budget is tehrefore a major part of the developing the business plan. Business plans inseparable.

and

budgeting

are

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Costing Programs and Services Your job, as an administrator of a sport or recreation organisation, is to: •

•

Plan, organise and deliver services, events, programs and facilities to meet the needs of your membership / customer base within the limits of funding achievable. Ensure that the funds required by your organisation are obtained and expended appropriately, and as planned.

In order to carry out the above two tasks it is essential that you calculate how much funding your organisation needs to provide the desired services, events, programs and facilities. This is a very complex budgeting problem and there really is no short cut. Every expense incurred by your organisation will either be: 1. A direct cost - a cost that is directly attributable to a service, event, program or other activity carried out by the organisation 2. An overhead - a cost that cannot be directly attributed to a service, event, program or other activity. Direct Costs During the budgeting process you will have to look closely at every event, program and service that you intend to provide and work out every direct cost Examples of direct costs include: • •

Trophies Hire of staff specifically for an event

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Click on the link below to download a spreadsheet that provides an example of how to set out a program budget with income and expenditure shown.

State Championships 2000 Income and Expenditure Forecast Income Fees

$ 3,200.00

Merchandising

$

Sponsorship

$ 4,910.00

Total Income

$ 8,510.00

400.00

Expenses Referees

$

900.00

Venue and Equipment

$ 1,230.00

Telephone and postage

$

150.00

Newspaper Advertising

$

450.00

Event Insurance

$ 1,100.00

Catering

$ 3,300.00

Printing

$

875.00

Trophies

$

480.00

Total Expenses

$ 8,485.00

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Cashflow Forecasting Many business, during the course of a year, will fluctuate between positive and negative bank balances. The chart below depicts a business that has a positive bank balance in January, April, May, June, October, November and December. It also has a negative bank balance in February, March, July, August and September. So how can a business have a negative bank balance? What does this mean? The answer is that a business can have a negative bank balance if it has an Overdraft. An Overdraft is a facility whereby a bank allows a business to continue to draw funds even when it has exhausted all the funds in its account. In such a situation, where the business's bank account goes below zero, the business is in fact using the bank's money to pay its bills. Usually a bank imposes an Overdraft Limit, that is a limit to how much the business goes below zero in its bank account. If the overdraft limit is set to $10,000, then the business must not go beyond a negative $10,000 bank balance. A bank is in business to make a profit, and so businesses that want to set up an overdraft are usually charged a fee by the bank for this priviledge.

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The main purpose of cashflow forecasting is to predict what will happen to the bank balance. It is important for a business to know when it is likely to run out of funds in its bank account, and by how much. If the business knows (by creating a cashflow forecast) when it will run out of funds, arrangements for an overdraft facility can be made in a timely fashion. Generally, a bank will not create an overdraft facility unless it feels that the business has the capacity to repay the borrowed money. Therefore the cashflow forecast has two main benefits: 1. It predicts when the business will need an overdraft 2. It helps to assure the bank manager that the business will recover to a positive bank balance. In the illustration above, the business slips into a negative bank balance at the end of June, but recovers and moves back to a psotive bank balance in October.

Cashflow Budget

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The table below is the typical way that a Cashflow Budget is set out. There are 13 columns and the first column is a Year Total column. It is important to note at the outset that in each row the Total column equals the sum of all the months. If you look at Sponsorship, the total is $9,000 for the year, and this comes all in the month of April. Similarly, the Total for Athlete Development is $5,000 and this comes in two months, February ($3000) and April ($2000). Salaries on the otherhand is $3,000 every month, and since there are 12 months, the Total for the year is $36,000. Look in the left column and you will see 'Opening Balance', 'Total Income', 'Total Expenses' and 'Closing Balance'. These are the main components that enable a calculation that predicts what the Bank Balance will be at the end of each month. In easy English terms the calculation can be stated: Opening Balance (what you have in bank at the start) plus Total Income (what money comes in) minus Total Expenses (what money goes out) equals Closing Balance (what money you have left).

Page 16 of 31 Total

Jan

Feb

Mar

Apr

May

Balance

1,000

1,000

6,182

8,654

9,931

24,000 9,000 10,000 7,200 12,000 20,000 82,200

3,429

ip s ising ome hip Fees ome

3,429 9,000

5,000 1,440 1,000 2,000 9,440

Jun

Jul

Aug

Sep

Oct

Nov

D

18,769 12,246

17,084

16,921

16,399

15,236

13,418

9

3,429

3,429

3,429

3,429

1 1 2

3,429 5,000

2,880 1,000 6,000 9,880

1,440 1,000 3,000 8,869

1,000 3,000 16,429

1,000 2,000 6,429

1,000 1,000 10,429

1,000 1,000 5,429

1,000 1,000 5,429

1,000

1,440 1,000

1,000

4,429

2,440

1,000

3,000 500 127

3,000 500 127

3,000 500 127

3,000 500 127

120

71 100 1,543 120

71 100 1,543 120

71 100

120

71 100 1,543 120

3,000 500 400 360 300 100

3 5 1

71 100 1,543 120

3,000 500 127 360 71 100 1,543 120

3,000 500 127

71 2,100 1,543 120

3,000 500 127 360 71 100 1,543 120 7,000

3,000 500 127

71 100

3,000 500 127 360 71 100

120

120

1

210 100 30 4,258

210 100 30 5,120

2 1 3 4

7

36,000 6,000 ying 1,800 1,440 1,080 g 3,200 on Costs 10,800 1,440 ding 7,000 evelopment 5,000 Renewals 840 e 1,200 rges 360 enses 76,160

3,000 500 127

210 100 30 4,258

100 30 7,408

100 30 7,591

100 30 7,591

7,040

6,182

8,654

9,931

18,769 12,246 17,084 16,921 16,399 15,236 13,418 9,298

alance

3,000

7 1

2,000 100 100 30 30 12,951 5,591

100 30 5,591

100 30 5,951

January Balance

Opening The Opening Balance is the amount of cash at the beginning of the month (1st day of month).

January Balance

Closing The Closing Balance is the amount of cash at the end of the month (last day of month). The Closing Balance is calculated by the following equation: Closing Balance = Opening Balance add Total of Income less Total of

100 30 5,591

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Expenditure. February Opening The Opening Balance of February will Balance be the same as the Closing Balance for January. The Opening Balance of any month will always be the same as the Closing Balance of the previous month. Events Income

In a Cash Flow forecast the Total column will equal the sum of all of the months. In the situation of Events Income, this organisation plans to obtain $3,429 per month for seven (7) months. The other months there is no Events Income. Therefore the Total of Events Income for the year is $24,000. How does the organisation know or guess what income it will achieve in any one month. Well, the organisation will need to work out what events it will stage each month and calculate the likely income it will receive.

Sponsorship

In the case of Sponsorship Income, the organisation believes it has a sponsor who will pay up $9,000 in April.

Other Income

The Cash Flow forecast shows an amount of $1,000 per month for "Other Income". When preparing a Cash Flow forecast it is not always possible to have an idea of how much income will be received in any month. Therefore it is simpler to divide the Total by the number of months and every month has the same figure.

* Note: The concepts and principles that apply to Income (as above) also apply to Expenditure.

Break-Even Analysis

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Joe is a voluntary club administrator and he has the responsibility to organise a sporting event. This event requires the expenditure of the following amounts: Venue Hire

$400.00

Advertising and Promotion Costs

$300.00

Trophies

$200.00

Telephone, Postage and Stationery

$100.00

Total Fixed Costs

$1,000.00

These amounts will be spent no matter how many people turn up to the event, and therefore they are called Fixed Costs. At event, however, there will be other costs which will be dependant upon the number of people who turn up and participate. These costs are as follows: Each competitor will receive

each

Food and drink

$10.00

Hat

$5.00

Variable Costs per Competitor

$15.00

These costs are referred to as variable costs because the amount of cost will vary with the number of competitors. Joe is worried about how many competitors he needs to break-even if he charges a competition entry price of $20.00 per participant. He wants to calculate the minimum number of participants he needs so that the event does not lose money. The term break-even means that all event costs will just be covered by all event income. This problem is an every-day problem for businesses of all types but fortunately it is not a difficult one. In solving this type of problem it is necessary to distinguish between fixed and variable costs (as above). This is how Joe calculates the solution:

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Competition Entry Fee

$20.00

less Variable Costs per Competitor

$15.00

Contribution of each towards Fixed Costs

$5.00

Competitor

Total Fixed Costs

$1,000

divided by Contribution

$5.00

No of competitors required is 1000/5 = 200

The answer is 200 competitors!

The above a solution is a commonsense way of putting it but if you would like a formula this one is an easy one to remember: Formula for Even Point

Break-

Fixed Costs Price - Variable Costs

Don't forget that (Price - Variable Costs) = Contribution

Variance Report The purpose of a "Variance Report" as shown below is to identify differences between the planned financial outcomes (the Budget) and the actual financial outcomes (The Actual). The difference between Budget and Actual is called the 'Variance". The Variance is depicted below in dollar ($) and percent (%) terms. Calculating the variance in percent (%) is useful as it gives the relative size of the variance. When calculating the Variance in percent (%) - divide the Variance in dollars ($) by the Budget (and not by the Actual).

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Budget Actual Variance 1 Jan to 30 Apr 1 Jan to 30 Apr $

Variance %

Govt Grant

$

15,000.00

$

20,000.00

$

5,000.00

33%

Sponsorship

$

3,500.00

$

3,750.00

$

250.00

7%

Membership Fees

$

2,800.00

$

2,650.00

-$

Events Income

$

4,200.00

$

7,735.00

$

Profits from Trading

$

14,800.00

$

12,900.00

-$

1,900.00 -13%

Other Income

$

280.00

$

570.00

$

290.00

104%

Total

$

40,580.00

$

47,605.00

$

7,025.00

17%

Advertising & Promotion

$

1,500.00

$

200.00

$

1,300.00 87%

Athlete Development

$

1,650.00

$

4,700.00

-$

3,050.00 -185%

Bank Charges

$

160.00

$

400.00

-$

240.00 -150%

Competition Costs

$

1,000.00

$

2,100.00

-$

1,100.00 -110%

Management Committee

$

160.00

$

230.00

-$

70.00 -44%

Photocopying & Printing

$

430.00

$

570.00

-$

140.00 -33%

Postage

$

650.00

$

1,150.00

-$

500.00 -77%

Rent

$

1,300.00

$

1,000.00

$

300.00

23%

Repairs & Renewals

$

300.00

$

225.00

$

75.00

25%

Salaries

$

18,300.00

$

18,300.00

$

Stationery & Computer

$

500.00

$

630.00

-$

130.00 -26%

Team Funding to Nationals

$

1,650.00

$

$

1,650.00 100%

Telephone

$

1,000.00

$

1,665.00

-$

665.00 -67%

Total

$

28,600.00

$

31,170.00

-$

Surplus/Deficit

$

11,980.00

$

16,435.00

$

Income

150.00 -5% 3,535.00

84%

Expenditure

-

-

0%

2,570.00 -9%

4,455.00

37%

Community organisations and insolvency

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Reason 1 Directors, committee members and managers have insufficient training in accounting and finance. They may not be able to: 1. Engage in appropriate budgeting processes that result in reliable predictions of future income, expenditure and profit. 2. Identify threats to sources of income 3. Detect over and unplanned expenditures 4. Monitor variances between planned and actual financial outcomes 5. Ensure full compliance with tax, gaming and other laws and as a result incur financial penalties for their organisations. Reason 2 Failure to manage risks and suffer financial losses as a result of: 1. Fraud and embezzlement by employees 2. Thefts and fires which should have been covered by insurance 3. Litigation for negligence Reason 3 Failure to identify and monitor the effect of changes in the business environment such as: 1. Unfavourable long-term demographic changes that reduce the customer base i.e. the number of people joining as members 2. Activities by competitor organisations that change market share i.e. offering new programs, improving facilities, engaging in promotion. 3. Changes in legislation or government programs i.e. changes to important government funding sources.

A Soccer Club In Financial Difficulty

Page 22 of 31 A True Story by Leo Isaac In this story, the real name of the soccer club has been replaced with Black Stump Soccer Club, a fictitious club/

THE TRAUMA In April 2003 it became widely known that Black Stump Soccer Club was in very bad financial shape. There were a spate of resignations on the committee, and a virtually new committee took over. The extent of the financial disaster took everyone by surprise. All concerned were overwhelmed. • • •

The club was heading for $200,000 projected loss for financial year The cash position had plummeted from +$70,000 to -$30,000 in one year The club’s debts were over $100,000 including unpaid taxation and superannuation

Needless to say, the internal politicking in the club at this time was very destructive. Factors that contributed to the club’s financial situation were: • • • •

A lack of simple, easy to understand financial statements presented at committee meetings. The profit and loss statement at this time was 6 pages long. A lack of expertise in managing funds by the committee and the manager A failure to develop a budget. Making major financial decisions in a context of insufficient understanding of the club’s financial performance.

THE FIX Turning the club’s financial position around took approximately 18 months. Harsh, unpopular, politically difficult decisions had to be made. Internal politicking was rife within the club at this time. The important actions that were taken include: Strategy

Raised

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Commencing a “save the club campaign”. Members were invited to loan money to the club.

$3,000

Savings by retrenching staff (Manager, Bar Staff, Cleaner)

$100,000

Payments to players were stopped

$10,000

Fundraising dinner, successfully organised

$10,000

Requested a return of the fees paid to the Auditor, and he obliged!

$4,000

Sponsorship gathered

$20,000

Total Positives

$147,000

Actions Having a Negative Loss of bar and gaming income due to shorter trading hours

-$22,000

Cost of hiring a Management Consultant

-$18,000

Total Negatives

-$40,000

NETT IMPROVEMENT IN FINANCIAL POSITION

$107,000

CREDITORS The club had two types of creditors: Trade creditors Former employees Making arrangements with trade creditors and former employes (those who had just been retrenched) was extremely important. Generally, creditors will allow extra time to pay if it means they are more likely to get their money back. However, you have to make a point of calling them, explaining the situation, and making an appointment to see them. Provided you keep good communication, creditors will often provide the necessary lifeline.

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Simple financial control strategies Rule 1 Engage in proper budgeting processes every year: 1. Collect and store data that can be used to predict next years income and expenditure 2. Consult widely within organisation and obtain views from organisation personnel as to probable changes in programs in next financial year 3. Develop a detailed forecast of income and expenditure for next financial year 4. Produce a forecast of the cash balance (bank balance) for each month of the next financial year Rule 2 Develop a reporting procedures that provide the management committee with key financial data on a regular basis (i.e. at least monthly). Key data could include: 1. Cash balance 2. Total wages costs and hours worked 3. Key sources of income e.g. gaming machines, bar sales, canteen sales 4. Unusual or above budget expenditures Rule 3 Develop cash management practises: 1. Set a limit to the amount of money that can be spent without full committee approval 2. Suppliers invoices should be signed and approved by the person who ordered the good or services in the first place. 3. Petty cash should be disbursed only on receipt of teax invoice or receipt. 4. Ensure cheques require two signatures before funds can be drawn from the bank account.

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Rule 4 Develop asset management procedures: 1. Ensure stock is counted and recorded at the end of each month 2. Record the movement of physical assets from one location to another e.g. have a sign out book for items that are borrowed. 3. Depreciate the value of assets to reflect true market value

Credit Control and Debt Recovery Credit control is about keeping your debtors, people who owe you money, under control and recovering debts. The process should start before you enter into a trading relationship i.e. before you sell something to someone on credit. Credit Checks The first aspect of credit control is to perform credit checks on any entity, person or organisation, that wishes to obtain goods and services from you without paying at the time of the transaction. A credit check is a process of asking the potential customer to supply several credit references and possibly a bank reference also. The entails the customer supplying you with names and addresses of a number of businesses with whom they have purchased goods on credit. Your task is to call these referees and ask whether your potential customer has paid promptly, stayed within the agreed terms of trading and has, in general, conducted business honourably. It is commonplace for all businesses to have a “Credit Account Application Form”, the purpose of which is to ensure that referees are supplied, to make a note of the results of your credit checks and to standardise procedures in setting up a credit account. It is important to consider that such credit checks are not fool proof. Often a customer will supply you with only the names of businesses that have had no problems with the customer. The customer will not disclose the names of businesses where they have failed to pay debts on time.

Page 26 of 31 Debt Recovery When debtors look like they are having difficulty with paying their debts to you, the sooner you act the more likely you are to recover your monies. We are often able to recover the debt without ever going to court, but if we do issue court proceedings, the costs and time involved are much less than you think. The actions you can take are as follows: •

Send a reminder

• Telephone and/and write to the debtor asking for payment (you can also get in your car and go around to them) •

Put the customers unpaid account in the hands of a debt collector

•

Sue for payment in a court of law

When dealing with a debtor that cannot or will not pay it is necessary to consider whether it is worthwhile to pursue the matter. It is often the case that the costs of recovering the money through debt collectors and/or law courts outweighs the possible benefits you might gain if the debtor pays up finally. It is necessary to use tact when dealing with debtors and to know when they are lying about that “cheque in the mail”.

Preventing Customer Fraud The story of Suzanne Tuck Suzanne Tuck , the wife of the Treasurer of the Ravenswood Over 50's Club (Ravenswood is in Launceston, Tasmania), was convicted of stealing approximately $53,000 in cash between 1st July 1993 and 30th August 1994. The club conducted bingo sessions virtually every Thursday and Sunday nights throughout the year. The takings from this activity, along with other takings from raffles and other games of chance, were entrusted to Suzanne Tuck and her husband and taken by them to their home for banking in the club's account the following day. Prior to leaving for home, Tuck and her husband each night counted the notes, while other club members counted the coins, but no record of the actual takings appears to have been made before the Tucks removed them for banking.

Page 27 of 31 After August 1994, club officials commissioned an audit and by comparison with the takings for previous years, the auditors expressed the opinion that there was a probable deficiency of $40,000 - $50,000 for the year ending 30 June 1994. Suzanne Tuck was interviewed by the police and made a number of admissions. She admitted that she regularly went to the Launceston Casino on Thursday and Sunday nights after returning home with the evening's takings from the club and extracting there from, on average, $1,000 per night in the first twelve months, which sums she invested in gambling. She admitted to losing a large amount of the money. How could this have been prevented? Strategies that coould have been implemented: 1. Committee members should have insisted on the keeping of records of cash counted. Instead, no record of actual takings was made before the Tucks went home each night. 2. A monthly income and expenditure statement should be tabled at every committee meeting. The statement should provide details of total income in the month, including the amounts raised from Bingo sessions. Committee members should read and take an interest in the financial statements of the organisation. Any significant changes in Bingo income should be noticed. 3. A cashflow budget should be produced each year. This would enable committee members to predict what should happen to the bank balance each month. If the actual bank balance is significantly worse than the prediction, then committee members should ask questions why. 4. If someone new comes into the midst and offers themselves as Treasurer, or is involved with cash collection, it may be prudent to ask for personal referees. Moral of the Story Nobody likes to think that a friend or colleague in a club or association would ever embezzle money from the organisation. However, embezzlement (the fraudulent misappropriation of money by a person who was trusted to handle the money) is much more common in non-proft organisations than people would suspect. Committees have a duty to ensure that the procedures for the collection of cash and the managment of funds in an organisation are rigorous enough to desuade people form embezzlement. People who volunteer should not be put at risk of breaking the law in this way.

Budget Basics using a Spreadsheet Compiling a budget, if it is to be a worthwhile, is a very complex process requiring considerable research, the involvement of many people and very many calculations.

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Spreadsheets, such as Microsoft Excel, are an invaluable tool for the construction of budgets because in the hands of the experienced operator they allow: a) Modifications to any budget figures yield instant results (i.e. calculations are performed instantly) b) Information to be laid out, formatted and rearranged for maximum readability with great ease Calculations to be stored and viewed for future reference and amended if necessary Advanced spreadsheets such as MS Excel allow the user to create as many "worksheets" as required. Figure 1 portrays a sheet for "Rent", a sheet for "Salaries" and one for "Office Expenses". There is also a summary sheet. The first important technique in using a spreadsheet is to store information about various components of the budget on separate sheets. If there is information and calculations to be stored about Travel expenses then a new worksheet called "Travel" should be created. Similarly information about promotion expenses would not be stored in Office Expenses but would deserve a worksheet of its own. With MS Figure 1 Excel it is possible to create as many worksheets as is needed. In reality, for a recreation organisation, about 30 worksheets will be sufficient to create a budget. The second important technique is to link each worksheet with the summary sheet so that any changes to any of the worksheets will be immediately reflected in the summary sheet. If this does not happen there is potential for errors. The summary sheet is in fact the Income and Expenditure Budget - the document that is finally published. It would be embarrassing to publish a budget that when questioned did not relate to stored information and calculations.

Page 29 of 31 A

B

1

C

D

E

Weeks Hrs/wk Rate/hr Salary

2

F

G

SGL

Total Cost

7%

3 4

Executive Director

5 6 7 8

Activities Manager Administrative Assistant Activities Assistant

9

Total

52 52

20 38

$ 13.00 $ 15.00

$ 35,000.00

$ 2,450.00

$ 37,450.00

$ 30,000.00 $ 13,520.00 $ 29,640.00

$ 2,100.00 $ 946.40 $ 2,074.80

$ 32,100.00 $ 14,466.40 $ 31,714.80

$ 108,160.00

$ 7,571.20

$ 115,731.20

Figure 2 Before discussing the technique of linking worksheets it might be prudent to give an example of the information and calculations that are store on worksheets. In figure 2, the worksheet for salaries, the information stored is the job titles, their respective salaries or wage rates. The calculations include working out the Superannuation Guarantee Levy for all employees, the annual cost of employment for each employee and the total cost of all employees. The total of $115,731.20 is the amount to be transferred (and linked) to the summary sheet. The summary worksheet should be linked to each and every worksheet for individual items appearing in the summary. You should pay particular attention to not “embedding” figures in any worksheet. For example if you need to find out the total of membership fees by multiplying 200 members by $20 fees each: •

You should not enter the formula in a cell =200 * 20

But instead use relative references of cells containing figures you wish to multiply. "A2" is an example of a relative reference. 1 2

A Members 200

B Fees $20

C Total =A2 * B2

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Linking figures on the summary sheet to their respective worksheets is a simple process. On the summary sheet in the cell where the total of salaries is to appear, type an equal sign i.e. type "=". All formulas must begin with = . Then, when you have typed the "=" sign, point with your mouse to worksheet containing the answer and the cell where the answer can be found. In figure 2, the answer for salaries can be found in cell G9. As a result of this simple procedure the formula that should appear in the cell for total Salaries on the Summary sheet is "=Salaries!G9". This formula denotes a link to cell G9 on the Salaries worksheet. Armed with these two techniques, spreadsheet users can prepare a budget workbook much more quickly than can be produced by working with pencil and paper alone. Of course, the really important aspect of budgeting is that the figures are well researched, informed, reliable and accurate. No budget will be able to accurately predict the future, but the more work that goes into research and preparation, the more accurate it is likely to be. Finally, spreadsheet users should make an effort to format each worksheet to give a professional appearance. The following formatting features should be employed where possible: Label columns appropriately as in Figure 2. Abbreviate column headings so that the heading does not make the column unnecessarily wide. Headings, subtotals and totals should be made bold Cells containing a total should have a border above and below , for example Do not type currency characters i.e. $ instead use the currency button on the format toolbar of MS Excel to format all cells with currency. Change the width of columns to suit the contents. In Figure 2, there are seven (7) columns each of different width. If a worksheet is too wide to print on an A4 page change the page orientation from "Portrait" to "Landscape"

Budgeting Exercises The menu on the right provides you with ten (10) budgeting exercises that have been developed to illustrate typical scenarios in a sport and recreation situation.

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You should endeavour to use Microsoft Excel to prepare your answers to these exercises as Excel is the tool of choice for most people in budgeting.

Interactive Quizzes

1

Budgeting Terminology Quiz

2

General Quiz on Terminology

3

Break-Even Analysis Challenge