Budgeting for Beginners

 

As a sophomore, early into the fall semester, I was excited to take on the responsibility of treasurer for my small fraternity. The first bank statement came in the mail and after ripping it open, an overdraft notice was staring back at me. Little did I know what I truly got myself into.

I reached out to the old treasurer, whose only help came in the form of a plastic expanding file stuffed with an odd assortment of loose papers and receipts… there were no budgets, no books, and most definitely no how-to manual.

At this point, it didn’t matter why the past treasurer had been disorganized. Sure, it was frustrating and made my job more difficult, but in order for the future success of my fraternity, I had to focus on creating a concrete financial system.

Hopefully, you weren’t left in a similar situation as myself. But if you were, it’s good to start with understanding the basics of planning a budget.

Even if your past treasurer had been a rockstar by reviewing your group’s financials with you and had organized all receipts and paperwork to their respective category, it never hurts to have a quick refresher!

Here is SOS’s Quick Five-Step Process on Budgeting for Beginners:   

 

1. Determine the Goals of your Student Organization.

First and foremost, sit down with your fellow officers and figure out your goals for the academic year. Ask yourselves and your members, “What does your organization hope to accomplish?”  

After determining a list of objectives, it’s important to rank them in a hierarchy according to their proximity to your organization’s overall mission.

Creating a list of priorities ensures funds are allocated to the most essential aspects of your organization first with leftover funds trickling down the hierarchy.   

Your organization should only ever be allocating funds to things that will help achieve your listed goals. If you or another officer can’t explain how an expenditure helps accomplish a goal than it shouldn’t be funded.

 

2. Review your Organization’s Sources of Income.

Most likely, your organization has several avenues of income, rather that be:

• Membership Dues
• Fundraising
• Donations
• and/or University Funding

Talk to past officers, your university’s student association, your department’s administration, and your current advisor to make sure your organization has exhausted every possible source of revenue.

My philosophy has always been that an extra few hundred dollars can go a long way, so never pass up an opportunity!

Important Note: Be aware of the timeline of receiving that income. By being firm on deadlines for members to pay dues, for fundraisers to be completed, and(or) for university funding paperwork to be submitted, your timelines will be more accurate and so will your budget.

 

3. Review Financial Reports From Previous Years

We can learn a lot from the past, and previous financial reports are no exception!

By reading previous budget reports you can learn things like :

• How does the organization’s financial system work?
• What did previous officers prioritize (ultimately what were their goals)?
• What were the organization’s previous sources of income?
• Where did previous officers lose money or make financial mistakes? ( Examples: unanticipated expenses; under-estimating costs)
• How did previous officers come across financial success? (Examples: Repeatedly following through on great events under budget; Finding new sources of revenue.)
• Where did previous officers take risks and how did it affect the organization? (Example: Using Credit; Accruing debt; Not sticking to financially related deadlines)

Using historical data from past financial reports is also a great way to estimate current or projected budgets. For example, if reports show that your organization has had around 80 members over the past three years, chances your organization will have 80 members this year unless your group makes a major change in their marketing strategy.

If your organization doesn’t have reports or any written historical data, you can still get answers to the questions above by having conversations with past members, officers, and advisors.  But now that you understand the importance of keeping accurate financial records, make sure to avoid following in the footsteps of past treasurers and remember to document everything!

Read here on how to create financial records!

 

4. Estimate Your Expenses and Do Your Research!

When you and your fellow officers are estimating costs, always try to obtain real dollar amounts on items, even if it’s just a quick Google search. Underestimating leads to unanticipated expenses and over-spending. Overestimating leads to misallocation of funds and can take the focus away from other goals that could have been achieved.  

When it comes to major costs, shop around to obtain at least three quotes. Don’t be afraid to negotiate with vendors by using other vendors quotes. Try to utilize discounts for nonprofits or bulk purchases. You can even ask vendors if they would like to sponsor events!      

The more detail and thought that goes into a budget, the few chances of surprises your group will have to deal with later.  

 

5. Subtract Your Reserve Fund (10% or more)

When it comes to our personal finances, we’re told it’s smart to keep an emergency fund for unexpected issues(i.e. car failure, injury, broken laptop). Shouldn’t the same be true for student organizations?

No matter how much we plan, our variables are not set in stone. Budgets, expenses, and income are ever changing, and issues will arise that were unforeseen. Prepare for the risk by creating a reserve fund.

Provision at least 10% of your organization’s income for emergency expenditures. If this fund is still around by the end of the year, it’s up to your organization to decide if the money should roll over into the next academic year or to spend the funds on an end-of-the-year party or to achieve a last-minute goal!   

 

Other things to keep in mind:

Banking Fees

Be aware of your bank’s fee structure. Speak with a banking associate to understand how to avoid banking costs. Some banks require that checking accounts maintain a minimum balance at all times. If you fall below this balance your bank may be obligated to change maintenance fees.

Wholesale Membership

If an officer already has a Costco or Sam’s membership, it may be ideal for your organization to obtain bulk items from these wholesale stores at their discounted price. (Example: Snacks; Paper Plates; Plastic Utensils and Cups; Office Supplies/Equipment; printing)