But to enable reliable comparisons of actual results to budgets, the preparation of budgets need to be undertaken with care. Hints on developing budgets are:
- It doesn’t matter how big or small your organisation is. It should still have a budget;
- Go back to last year’s budget (if there is one) and see how accurate it was compared to actual results;
- Go back to last year’s actual results and determine when income was received (eg. was it seasonal) and when expenses were incurred (eg. are there a number of expenses that are paid once a year?);
- If there are new programs or expenditures that are to be included, have that relevant person or department prepare a detailed “mini budget” to be included in the budget;
- Determine if there are new events that may affect the budget (eg. capital expenditure);
- Make sure the board sign off on the budget after having thoroughly reviewed the budget.