Building the budget helps your management committee understand club expenses and be clear on how much (and when) money can be used to meet the club’s objectives.
It also gives the management committee an accurate picture of whether the club may make a profit or a loss during the budget period (remembering that it’s fine to make a loss as long as it is short term and doesn’t impact on the viability of the club, it helps the club reach a strategic objective by capitalising on a new opportunity and its planned and not the unexpected result of poor financial management).
Good budgets always prioritise the delivery of strategic outcomes (i.e. money is spent with a clear purpose) and are achievable (perhaps at a stretch) rather than unrealistic. You should always aim to set a budget and then beat it rather than fall short!
Here are six tips to help create a successful budgeting process for your club.
Use the best information available
The budget should be developed through combining the best information from the management committee, any key staff and relevant subcommittee members. This approach helps ensure that the budget is based on realistic assumptions, accounts for all expected sources of revenue and expenses and drives the club’s strategic objectives.
Be conservative and realistic
Ideally, your club will generate enough revenue to cover all your expenses and have a surplus left over, remembering that it is wise to be conservative when estimating your income and realistic when estimating your expenditure.
Your budget should always aim to achieve a profit, or surplus, by having more income than expenses. This doesn’t mean not spending anything or not delivering any services – your members will walk if you don’t keep working for them. It does mean not wasting money which could be used for unforeseen expenses like equipment repairs, or for building a stronger club in the future.
If the budget process predicts an unacceptable loss, the management committee will have to find ways to either generate more revenue or reduce expenses.
Contribute to a sinking fund
Be aware of your tenure obligations (e.g. through your lease) and make regular contributions to your sinking fund to cover the future expenses that you are responsible for.
Did you know? A sinking fund is a long-term savings initiative to cover significant future expenses. For example, a sinking fund could cover replacement of your floodlights, refurbishment of the clubhouse or replacement of assets that reach the end of their serviceable lives.
Clubs that rely upon grants or hope that UQ will come to the rescue are failing to plan for their long-term sustainability.
Maximise income potential
Budgets aren’t solely about containing expenses – they also should identify income streams that can be worked to increase cash flow. How can you boost income? The section: Planning on fundraising and Sponsorship will help in this regard.
Establish the budget early
The budgeting process should be completed well in advance of the start of your financial year, particularly as it will frame the club’s activities to come, including how it will achieve any strategic goals for that year.
Select the right budgeting approach
Will your budget be ‘zero-based’ or based on last year’s performance? Zero-based budgeting starts from scratch and might work best for a new or substantially re-jigged club, while basing the budget on previous performance involves using the experience of past financial statements and incorporating assumptions about the year to come.
Monitor
Monitoring the budget regularly (at every management committee meeting for e.g.) helps you to proactively manage the club’s finances before an issue becomes critical and to understand trends as they emerge. Scenario planning can be helpful to consider different possibilities such as significant decreases in revenue or unexpected expenses.
Your financial statements offer a comparison between what you planned for (budgeted) and what is actually happening. They act as a place marker on your financial map and indicate when you are on the right path or when you have veered off it.
Sometimes this veering off is due to unforeseen circumstances, like a fuel price increase that blows your travel budget, or perhaps it indicates that something in the budget process wasn’t accurate. Either way, this regular progress report allows the management committee to make any planning adjustments necessary to ensure you reach your budget destination in good shape.
UQ Sport reinvests all profits into services, facilities, and programs, and is supported by funding from the Student Services and Amenities Fee (SSAF) to benefit UQ students.
UQ Sport Ltd is a division of UQ Holdings.
