Calculating Budget

Building a Budget

Budgeting…

  • Helps you better understand the bottom line of your program.

  • Is important to make informed decisions. 

  • Helps you manage spending so that you can plan for program improvements.

  • Supports planning for your own salary, benefits and retirement needs.

Budgets are not set in stone. Budgets are plans that are created before a fiscal year begins. They should be used as a point of comparison throughout the year against what is actually happening. This way, you will be able to see when changes to your original plan (budget) are happening and decide if action needs to be taken to avoid or stay ahead of potential problems.

Building a Budget: Process and Considerations

1

Pull Records

Pull financial reports for the past few years, if possible. If you do not have access to these reports, have a trusted financial person total all the revenue and expenses for at least the last fiscal year.

2

Compare

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Has the tuition you have collected been consistent from year to year? If not, why not? 


Have your expenses remained consistent from year to year? Have there been significant changes? If so, why?


Have you been able to pay yourself a salary each year? Pay for health care insurance? Contribute to your retirement savings?

Over time, has your program made money? Lost money? Broken even?

Compare the line items of similar financial reports (for example, 2 years of income statements). Take notice of any significant changes from year to year in the same line items. Ask yourself the following questions:

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3

Identify

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Are there any children who will not be returning in the upcoming fiscal year? Do you already have children to fill open spaces? Will there be any time when those spaces will be unfilled and you will not collect tuition?


Will the number of children you serve who receive subsidies change in the coming year?


Do you receive any income other than tuition (for example, grants, donations, contributions of materials)? If so, can you rely on receiving this income again in the coming year? 


What is the financial impact that these changes will have on your program?  


Do you need to take action because of these changes?

Identify any changes to the operations of your current program that you expect will impact the budget for the upcoming fiscal year. Ask yourself the following questions:

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4

Build a Budget

Build a budget (including revenue and expenses) based on the operations of your current program. Include any of the changes that you expect in the upcoming fiscal year. Do not include new goals or initiatives in this budget yet.

What you learned from reviewing the historical information.
 

What you know will change in the coming year.

Calculate the budget amount for each income and expense line item based on the following:

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b 

5

Review

Do not create a budget that you do not have a history of achieving. For example, do not budget for 90 percent full-time enrollment when historically you have never achieved more than 80 percent.

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Review the bottom line of the current program budget. Does it balance? Do you need to go back and make changes in order to balance the current program budget? 

6

Identify New Goals

Do you want to work toward increasing your level on your state’s quality rating and improvement system?


Do you need to purchase new equipment or materials for the program?


Do you want to participate in more professional development opportunities?


Do you need to make improvements to your home for your program?


Is there additional revenue associated with any of these goals or initiatives?


What are the costs associated with each of the goals or initiatives?

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Identify any new goals or initiatives that you have for the upcoming fiscal year. What are the financial resources that these new goals will either generate (revenue) or require (expense) in order to implement? Write them down for each goal or initiative so that you can consider each one individually. Ask yourself the following questions:

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7

Build into Budget

Review the bottom line of the budget after any new goals or initiatives have been added. If the budget does not balance, determine why. If the budget shows a loss, think about ways you can fund it. If needed, revise budget expectations (revenue and expenses). Remember to be realistic. Do not overestimate revenue or underestimate expenses just to balance the budget on paper.

Once you have balanced the bottom line of your current program budget, look at each of your new goals or initiatives. Are there any that you can afford to implement? If so, build them into the budget.

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