There is no point in planning your budget and in gathering the information if you do not use it. You should keep simple spreadsheets of actual expenditure and income and actual cash flow if you do not have a bookkeeper/accountant do this for you. Have a review each month of your own numbers, even if you have an accountant to prepare quarterly management accounts only. Keep a very close eye on the cash balance, but also on the numbers generally – are they up or down on expectations in the budget – why? If they are very far off, either from an income or expenditure point of view, you may need to revisit the budget assumptions and revise the budget to make it more realistic.
You may need to make further cuts as a result or make other changes in your operations...
You may need to make further cuts as a result or make other changes in your operations. If the variations are minor, stay with the initial budget and just show the variations and understand why they have happened. Next year this information will enable you to get your budget more accurate.
If you know exactly what your cash position is and can see that your forecasts are proving reasonable, you will be able to spend with confidence up to the limits of your budget. You will be better able to plan your forthcoming activities and to adjust as need be. While there is a bit of work involved in getting the material set up as described in this note, it is not very time consuming to monitor it, and the benefits to you and your organisation will outweigh the effort involved.
After the end of the year, you or your accountant will need to prepare a balance sheet, a financial photograph of your organisation. We have already looked at cash, debtors (accounts receivable), creditors (amounts payable) and reserves are covered here
. The other items are tangible assets (everything from property to furniture to computers and stocks of stationery etc) which the community and voluntary organisation has to operate, and perhaps long term loans or special funds.
You should ask your accountant to discuss with you the comparison of your results for this year as compared with the previous year. Allowing for any change in the scale of your operations represented by the total turnover of the organisation, are your accounts receivable (debtors) rising or falling? What has happened with your creditors? How satisfactory is your cash position and reserves given the scale of the business and the market conditions it faces? It would also be valuable to compare your results with other similar organisations of a similar size. This should give you a good insight into the effectiveness of your management of the organisation in financial terms. It will get you thinking about further measures which you might take to enable you to deliver more services and/or mitigate the effects of the recession.