By: Rachel Luoma, CAE
For me, January brings a fantastic time of year – new, fresh budgets! Budgeting is one of my favorite times of the year as it allows me to take an in-depth look at the financial operations of the association and better understand the story that the numbers are telling.
- Did we hit our projected income this year? If not, why? What needs to be adjusted or done differently next year?
- Did we stay within our budgeted expenses? If not, why? What needs to be adjusted or done differently next year?
- What was our net profit for operational income/expense? Did we meet budget? Why or why not?
A strong association professional should be able to answer all of these questions if asked by volunteer leadership and pinpoint specific reasons why the numbers are the way they are. Going beyond that, it is important to make suggestions to volunteer leadership on ways to increase your revenue and decrease your expenses.
Below are a few things that I consider as I work through creating a budget that may help you as you navigate your own numbers.
Have a Strategy
When budgeting, it is best to be strategic. My strategy is to budget 
conservatively for income and liberally for expenses. However, these numbers have to be reasonable and tied to operational and strategic initiatives.
Ask each department (e.g. membership, meetings, etc.) to come up with their plan for the year and tie each action back to the budget. With this information, you can glean a variety of activities that may impact your budget and plan accordingly.
Also, do you have specific initiatives scheduled in the strategic plan? If so, then the corresponding income or expense activities should be reflected somewhere in the budget.
Review Historical Data
It is extremely important during the budgeting process to examine what has happened within the association financials in the last 3 – 5 years for every single line item.
- Have the numbers fluctuated?
- Have the numbers stayed consistent?
- Why or why not?
Take the opportunity to identify baselines, trends and anomalies. This will provide you with a great deal of insight into what the numbers have done and help to project what the numbers will do going forward.
Perform an Environmental Scan
Now that you know what is going on within the organization, you should look at what is going on external to the organization to determine if it will impact your financials.
- What is taking place in the news and how might it impact your organization?
- Check out 2016 Trend Hunter Video to see some of the new trends. For example, we are continuing to see an increase in massive open online courses (MOOC), such as Coursera. Could something like this have an effect on your association?
- Is there another event that may compete with your association meeting (i.e. similar time, location, attendee or exhibit pool)? If so, maybe the income line item(s) should be adjusted?
Create Buy-In
Ultimately, the board has final say on the budget and it is important along the way to create buy-in amongst staff and volunteer leaders.
- Get your budget and finance committee or executive committee involved in the budgeting process.
- Do you have a volunteer leader that loves the details or asks a lot of questions? Contact them in advance and ask if you can walk them through the draft budget.
- Present the draft budget to staff members or a peer. What questions or concerns do they have?
Monitor Regularly
It’s not enough to look at your budget and analyze it once a year.
It has to be continuously revisited. Look at your financials at least once a month to be able to make mid-year adjustments based on the numbers.
It is also important to be able to have benchmarks from other associations and non-profits so that staff and leadership can see where they are relative to other associations. This is where statewide associations, such as the Florida Society of Association Executives; national associations, such as the American Society of Association Executives; or for association management companies, the AMC Institute, bring tremendous value.
Regardless, the bottom line is that your budget has to make sense (dollars and cents) and needs to adequately express the financial operations for the upcoming year. For more tips on monitoring your financials and gaining a better understanding regarding financial statements, check out Fun with Financials.
Got any other budgeting tips or have a budgeting question? Feel free to post it in the comments.
Happy budgeting!
