BUDGET BUILDERS: HOW TO MANAGE YOUR FUNDS

Budget Builders: How to Manage Your Funds BUDGET BUILDERS: HOW TO MANAGE YOUR FUNDS Presenter: Virginia Kilmer October 23 26, 2014 1

What is budgefng? BudgeFng is: A. A waste of Fme because I can only spend money when I get money anyhow. B. Something I hate, but my boss (board) makes me do it. C. A way to plan for the amount of money needed to support the programs or services we want to do. Answers q A q B q C q A & B q B & C October 23 26, 2014 2

Why budget? To esfmate what you can afford to do for a future Fme period (usually the upcoming year) So that you do not overspend what funds you have when funds are limited In order to qualify for grant funds To show to potenfal donors To track how well you are doing and see how much you have improved To help you stay focused on your goals To help with cash management Because it makes you stop and think and plan ahead! Types of budgets Methods 1. TradiFonal department budget process: Line item format 2. Program or acfvity- based budget process 3. Project/grant budgefng 4. Zero- based budget process Categories 1. StaFsFcal budget: Intake #s, adopfons, # of spay/neuter surgeries, etc. 2. OperaFng budget: Revenues and expenses or receipts and disbursements 3. Capital budget: Major movable (vehicles, etc.), buildings, fixed equipment Type 1. StaFc 2. Variable October 23 26, 2014 3

Budget process for an organizafon Start budgefng at least three months before the upcoming fiscal year All budgets start with a strategic plan Set goals for the upcoming year Decide on your budgefng method: Type and soeware Create a budget Fmeline Establish a budget commifee of the board of directors (finance commifee) Determine your financial target (usually annual): Profit or loss, income goal, etc. Communicate the budget plan/calendar to department heads and/or staff Gather historical data to use as a baseline (one year historical minimum) Create and document budget assumpfons (revenue and expenses, inflafon, wage increases, etc.) Use board commifees to budget fundraising if a fundraising board Review and revise budgets with all parfcipants Present professional budget package to budget commifee and/or board of directors First basic decision AccounFng method 1. Cash basis: Recognizes revenue (receipts) when received and expenses (disbursements) when paid. BudgeFng = Cash management 2. Accrual basis: Recognizes revenue when earned and expenses when incurred. (Expenses are incurred when goods or services are received or an invoice is received and posted. This does not mean it has been paid!) October 23 26, 2014 4

Basic terms: Income statement Income statements reflect a period of Fme Revenue = Cash receipts, donafons, adopfon fees, membership fees, etc. Expense = Disbursements, bills, invoices, debt revenue expense = income (net assets) Income statement Cash basis Accrual basis Revenue $25,000 $45,000 $45,000 Expenses $20,000 $20,000 $25,000 Net income $ 5,000 $25,000 $20,000 October 23 26, 2014 5

Charitable organizafons use fund accounfng Any income (profit) a charitable organizafon makes goes back into the organizafon i.e., the fund balance (net assets). If someone donates funds for a specific purpose, you must track the use of the funds and cannot use them for any other purpose (i.e., restricted funds permanent or temporary). Fund balance (net asset) categories: Unrestricted funds: Can be used at our discrefon Temporarily restricted funds: Funds are restricted by donor unfl spent Permanently restricted funds: Funds always restricted but income can be used as requested by donor Balance sheet Assets Cash $10,000 Investments $ 5,000 Total Assets $15,000 Liabili5es Accounts Payable $ 0 Total LiabiliFes $ 0 Net Assets/Fund Balance Unrestricted Funds $10,000 Temporarily Restricted Funds $ 5,000 Permanently Restricted Funds $ 0 Total Net Assets $15,000 Total Liabili5es & Net Assets $15,000 October 23 26, 2014 6

Where do I start? If in operafon now: Track intake, adopfons, surgeries Save checks and invoices by month Enter checks and invoices into QuickBooks Enter checks and invoices in Excel spreadsheets If not currently in operafon: EsFmate number of animals Home- based rescue: Set limit for each locafon Number of foster homes and LOS Number of adopfons Number of spay/neuter surgeries Shelter: Annual intake Annual adopfons October 23 26, 2014 7

Revenue budget (receipts) The average donafon in animal welfare is $55 to $89. Remember, fundraising is funds raised minus costs of fundraising. Remember to include interest income from bank accounts. AdopFon fees. Grant funds: To budget or not? Grant period vs. fiscal year. Expense budgets (disbursements) Historical or average annual medical care of cats/dogs, etc. Historical or average other cost of care for cats/dogs, etc. Other expenses: Use historical costs/bills or ask for esfmates October 23 26, 2014 8

BudgeFng salaries The basis for salaries is people, but how do you count people? Count hours worked The hours worked are usually converted and expressed in FTEs FTEs = Full- Time Equivalents 1 full- Fme employee = 2,080 hours/year = 1.0 FTE 1 part- Fme employee at ½ Fme (20 hours/week) =.5 FTE = 1,040 hours Worked hours plus PTO (paid Fme off) hours = Paid hours Hourly rate (plus rate increase projected) x hours paid = Salary BudgeFng other expenses (non- salary expenses) What other expenses would I have and how do I know what they are? Use historical expenses Plan your acfvifes, categorize the expenses and esfmate amounts Budget the total needed in a period of Fme that is easy for you Some expenses are fixed, such as rent, insurance, etc. Some expenses vary based on number of animals for example, animal food, medical care, etc. October 23 26, 2014 9

Capital vs. expense Expense = Purchases of goods or services that are consumed within a year Capital = RenovaFon projects, equipment, vehicles, and other items that cost more than $5,000 AND have a useful life of two years or more. (Check with accounfng.) Sample budget income statement ORGANIZATION NAME BUDGETED STATEMENT OF ACTIVITIES MONTH/YR TO MONTH/YR Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD Revenue (Receipts) Contributions 100.00 425.00 0.00 200.00 200.00 100.00 0.00 65.00 50.00 550.00 1,000.00 200.00 2,890.00 Adoption Fees 250.00 150.00 200.00 150.00 250.00 100.00 200.00 150.00 100.00 200.00 100.00 100.00 1,950.00 Fundraising Events 500.00 0.00 0.00 0.00 1,268.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1,768.00 Grant Funds 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Interest Income 0.00 0.00 0.00 52.00 0.00 0.00 0.00 64.00 0.00 0.00 68.00 0.00 184.00 Total Income $850.00 $575.00 $200.00 $402.00 $1,718.00 $200.00 $200.00 $279.00 $150.00 $750.00 $1,168.00 $300.00 $6,792.00 SA Expenses (Disbursements) Professional Fees 0.00 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00 License/Reg Fees 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00 Medical Care 249.00 125.00 0.00 150.00 65.00 0.00 0.00 0.00 0.00 280.00 847.75 0.00 1,716.75 Animal Care Supplies 352.00 228.00 236.00 165.00 350.00 167.00 0.00 0.00 0.00 0.00 0.00 0.00 1,498.00 Education Materials 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Spay/Neuter Program 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Software 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 240.00 Conferences 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Bank Fees 25.00 0.00 0.00 34.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 59.00 Brochures/Printing 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total Expense $746.00 $473.00 $256.00 $369.00 $435.00 $187.00 $20.00 $20.00 $20.00 $300.00 $867.75 $20.00 $3,713.75 Revenues in Excess of Expenses $104.00 $102.00 ($56.00) $33.00 $1,283.00 $13.00 $180.00 $259.00 $130.00 $450.00 $300.25 $280.00 $3,078.25 October 23 26, 2014 10

How to stop living hand to mouth! Two choices Bring in more money Spend less money October 23 26, 2014 11

Plan, budget, set specific goals Set goals to either bring in more money or spend less money Be clear on your mission and stay focused with goals that match your mission Be realisfc about mission goals: Set limits and sfck to them Set deadlines and require follow- up reporfng Know how much money you plan to make on fundraisers (budget) and compare and report how much money you actually make Key areas of focus to stop the hand- to- mouth cycle 1. Board representafon: Fundraising commifee/chairperson Finance commifee/treasurer Lawyer Strategic planning commifee 2. Volunteers, staff, contract: Fundraising Public relafons Website build/maintenance Social media Newslefer AdopFons coordinator Volunteer recruiter/coordinator Bookkeeper October 23 26, 2014 12

Bring in more money Fundraising: Look for minimal cost/manpower opfons Newslefer / ask lefer Email campaign Crowdfunding Strut Your Muf Grants / community foundafons Local news stories Corporate / business support Interest- earning bank accounts AdopFon agreements that include opfon for addifonal donafon Spend less money NegoFate discounts: Vets, grocery stores, building supply stores Get as much donated as possible: Time, supplies Don t pay bills too quickly: Net 30 days Post needs lists on website Recruit volunteers October 23 26, 2014 13

How to manage your funds How much should we save and how much should we spend? Nonprofit standard = 3-6 months of expenses in savings Investments: Set up at least one interest- earning account Budget a surplus and then plan what to do with it ahead of Fme Create an investment policy QuesFons? October 23 26, 2014 14