Drafting a budget for an association: step by step
Why a budget?
Without a budget it is impossible to determine whether an expense is justified. "We still have money in the account" is not financial policy. A budget compels the board to consider all income and expenditure, set priorities and cushion against unforeseen shortfalls, because they always occur.
Moreover, a budget is often mandatory: grant funders and municipalities require it, and at an association you present the budget to the General Members' Meeting. See also organising the AGM.
Step 1: Income
Start by listing all expected income:
- Rental income: based on last year, plus/minus expected growth
- Membership income: current membership base × average contribution
- Subsidies: only budgeted if the grant has already been awarded or there is a realistic chance of it
- Events and activities: ticket sales, donations, sponsorship
- Other income: interest, sale of materials, etc.
Step 2: Expenditure
Note all fixed and variable expenditures:
- Fixed costs: rent, energy, insurance, telephone/internet
- Staff and volunteer costs: allowances, training, education
- Maintenance and fittings: repairs, cleaning costs, small purchases
- Activities: costs of events, materials, external speakers
- Communications: website, printed materials, newsletter
- Governance: meeting costs, subscriptions, accountant/bookkeeper
- Contingency: set up a provision of 5–10% of total expenditures
Step 3: Bringing income and expenditure into balance
If expenditures exceed income, you have a negative balance. That is structurally unsustainable. Possible solutions: cut costs, seek additional income (sponsorship, extra activities, subsidies) or dip into reserves, but only as a conscious and temporary measure. Also read about extra sources of income for community centres.
Step 4: Monitoring throughout the year
A budget that you prepare in January and only review in December has little value. Compare the actual income and expenditure with the budget at least quarterly. This is called budget monitoring; read more about it in budget monitoring for associations.
Tip: use last year as a baseline
The simplest method is to take last year as a starting point and then adjust for known changes (higher energy prices, planned renovations, a new event). Always compare last year's budget with the actual figures; that shows where you systematically over- or under-budgeted.