It’s time to have a little conversation about an awkward topic: Your association’s money. With 2018 just around the corner, have you been contemplating what changes you should make to your budget for next year?
While each association’s budget needs are going to differ, there are some key standards that typically remain the same across the board. Take a look at these five rules you should consider below!
1. Income Review
Before you can even begin the process of budgeting, you’ve got to know how much money you’re working with. The best way to keep on top of this is by keeping your various forms of income (dues, non-dues, event registration, sponsorships, etc) tracked in one place.
You can do this manually with various softwares or by using an association management software to automate the process for you. Either way, we suggest taking a look over your previous year's budget (monthly, quarterly, and yearly) to see if there are any forms of income that you might be forgetting.
2. Fixed Costs
Some things never change and that can also apply to your budget! This rule asks you to consider what costs you HAVE to pay every month, quarter, or year that won’t change over the short-term future.
A rule of thumb is that fixed costs typically apply to your association’s core needs: Rent, insurance, loan payments, salary, etc. These expenses are essentially non-negotiable and need to be some of the first costs addressed in your association.
3. Variable Expenses
It’s important to remember that you can’t always predict all of your costs. Your variable expenses will vary depending on the activity level in your association, which can change depending on the quarter or season.
Some examples of variable costs can include: Raw materials, labor, utilities, employee bonuses, shipping costs, etc. For an association, it’s key that these expenses in particular are carefully tracked as they can easily get out of hand (or lost!) without supervision.
4. Big Spends
Show me the money! Most associations have at least one event every year that takes up a chunk of their budget. We think you should try to view this expense as a separate entity entirely as it doesn’t always fall into the fixed or variable category.
In addition, these costs will drastically vary in cost depending on the size and importance of the event: Speakers, food and beverage, location, labor, etc. One big tip here is to be really thoughtful about categorizing the costs and see where you can save or where you need to splurge.
5. Zero Technique
If there is one tip we really hope you take to heart, it’s this one: If you have extra money sitting at the end of your budget (great job!), allocate it somewhere or it will disappear! Money management requires thoughtfulness and this means telling those funds where to go.
The zero technique essentially asks you to take your income and subtract the following sections: fixed costs, variable costs, and big spends. If you happen to have extra funds at the end of that review, then it’s time to share some of the love. Look over each section and see if you have a category that could benefit from additional money. With this technique, you’ll know just what to do with it!
For any membership organization, raising non-dues revenue is an essential part of overall success. But people are cautious about spending extra money, particularly in an uncertain economy, and your association might be feeling some of that pain. If your organization is struggling to raise extra funds, don’t worry – we can help. Take a look at our Ultimate Guide to Non-Dues Revenue!