Some charities operate on a shoestring budget. Budgeting for charity operations is tricky, as expenses keep changing every month which compels organizations to launch fundraising campaigns. They need to find ways of calculating expenses accurately without losing sight of other direct costs. All in all, when costs are not paid on time, programs will come to a complete standstill. Where does that leave dependants of charity programs?
Steps to follow to calculate charity expenses effectively:
Tweet this: Gather all records of payments processed in the previous year.
Use last year’s records
Gather all records of payments processed in the previous year. These costs will not only give you an idea of how funds were spent but also how you should budget for the current year. Of course, expenses will vary from one organization to another. Here are some common costs to use in your budget planning:
- Salaries
- Rent
- Insurance
- Utilities
- Telephone bills
- Fundraising costs
- Licensing fees
- Legal costs
- Purchases
List monthly charity costs
The second step is to take the above-mentioned costs and categorize them. You can do this by prioritizing costs. Your first priority is costs like rent, mortgage bond, utilities, and insurance.
Follow through with the second priority costs which include: telephone bills, petrol bills and rental car fees. List your monthly costs on a spreadsheet.
List your quarterly costs
Institutions like banks and insurance companies increase their rates at different times. They may do this because the central bank has decided to increase interest rates, or the inflation forces them to. Typically, they will increase rates in the first quarter of the year. The increase in electricity rates and insurance premiums also happen around this time. Make sure that you include the various percentages of rates reflecting increases.
Yearly expenses
To get an overall idea of your expenses throughout the year, list your once-off costs separately. If you only purchase office equipment, vehicles or furniture annually then list all these as one-off expenses. This will help you to have a good idea of when once-off purchases are made.
Once you are done with the above steps, you’ll be in a great position to:
- Forecast your cost effectively
- Plan your fundraising campaigns well
- And draft a budget that will help you to spend responsibly
What should you know about budgets?
Barely a day goes by without charity organizations purchasing something. Sometimes staff members process these purchases without considering the budget. As a leader, the buck stops with you. You are expected to explain to donors why funds were not spent responsibly.
So how can you ensure budgets are adhered to??
According to Humentum, these are the hallmarks of a great budgeting process:
- correct goods or services are purchased all the time,
- the best value for money is achieved,
- the process presents little fraud risks,
- the process is fast enough to meet program needs.
You’ll achieve more when your organization uses a purchase order system that helps you monitor how staff spends donated funds. Good software to help you do this is Procurementexpress.com.
UNICEF uses Procurementexpress.com to manage their expenses. Things like duplication of invoices are addressed in real-time and their CFOs and COOs have total control over budget spend. Find out how UNICEF achieved this.
