club best practice manual
unit 1 oFF-field: Big picture
• section 5 financial budgeting
Budget
A budget is the estimate of the club’s income and expenditure for the next financial period, in line with
planning for that period. The budget is the process of allocating resources to implement the annual
plan and defines your club’s objectives in financial terms.
Budget preparation should begin some months before the end of the current financial year. It should
not be set in stone but, along with the strategic direction, be revised regularly to adapt to a changing
environment. For this reason, a process that enables early review and budget revisions if necessary is
advised.
In simple terms, budgeting is an important part of each club’s planning and management processes. This process helps to identify what the club needs to do to achieve its financial goals of achieving,
maintaining or improving the net surplus position through increasing revenue or reducing or prioritising
expenditure.
Budget Advantages
•
Your club’s objectives are clearly defined in financial terms.
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Priorities for action are allocated.
•
Performance measures are defined.
•
Early warning of problems is given so that corrective actions may be started.
Budget Evaluation
•
Actual figures must be compared with budget to evaluate performance.
•
Managers are expected to explain variations between budgeted and actual results, both positive
and negative variances.
•
Budgets are more realistic when prepared in consultation with employees who will work with it.
This process helps ensure the manager sets realistic but challenging targets.
Budget Techniques and Methods
Budgets are generally presented in a similar format to the annual statement of income and expenditure.
This allows for quick and easy comparisons between the budgeted and actual figures. A wide range of
approaches or methods are used in preparing budgets:
A common sense approach to preparing a budget involves starting with the actual figures for the
previous period and evaluating each item of income and expense to estimate any changes.
•
Incremental budgeting relies on applying a percentage increase (eg 10%) to the figures for the
previous accounting period.
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New Zealand Rugby Union • P: 04 499 4995 • F: 04 499 4224 • 1 Hinemoa Street • Harbour Quays • PO Box 2172 • Wellington
club best practice manual
unit 1 oFF-field: Big picture
• section 5 financial budgeting
•
Zero-based budgeting occurs when each item is calculated anew in order to fully justify all items
of income and expenditure.
•
Priority-based budgeting involves analysing activities across the organisation, followed by
evaluating and ranking them in priority order.
Priority-Based Budgeting
To prioritise income and expenditure, the following classification needs to be considered:
•
Confirmed (high priority) – These are directly linked to the club opening the doors, eg percentage
of subscriptions, medium to long term sponsorship, power, auditing/accounting fees, percentage
of on-field costs (jerseys, medical kit etc).
•
Expected (medium priority) – Linked to what is likely to occur, eg remaining percentage of
subscriptions, new or one-year sponsorship arrangements, stationery, printing, postage etc.
•
Variable (low priority) – Can be classified as the ‘nice-to-do’ or ‘cream’ expenditure, where this is
not critical for the day-to-day running of the club, eg end-of-year trophies, preseason camps away,
gaming grants, interest received, fundraising, donations etc.
Cash Flow Forecast
A cash flow forecast is an estimate of cash receipts and cash payments, and the resulting cash position
for a certain period of time. This includes all cash receipts and payments, eg purchase and sale of
assets, loan draw-downs or repayments. A cash budget is prepared for the following reasons:
•
Will assist with overall planning.
•
Management can see when its commitments are due and make sure that money is available at
this time.
•
Periods when your organisation has excess funds will be revealed and short-term interest-bearing
investments can be made.
•
Budgets are an important form of control, and a cash flow can provide information about financial
performance.
•
Adjustments for seasonal fluctuations can be made.
•
Liquidity – can pay invoices when they are due
•
Weaknesses in debt collection policies can be revealed.
•
Periods when there will be shortages of funds will be revealed and steps taken to manage this,
eg arrange an overdraft or break a term deposit.
produced and distributed by
New Zealand Rugby Union • P: 04 499 4995 • F: 04 499 4224 • 1 Hinemoa Street • Harbour Quays • PO Box 2172 • Wellington
club best practice manual
unit 1 oFF-field: Big picture
• section 5 financial budgeting
Preparation of a Cash Flow Worksheet
Figures for a cash flow forecast are based on past experiences and the budget for the period. For
example, most clubs know their high and low months for subscriptions, how quickly accounts receivable
pay their debts, what their normal wages bill is, and other normal operating expenses. Monitoring of Cash Flows
Cash flow monitoring enables problems or opportunities to be forecast as they occur. This is one of
the most important management tasks undertaken in clubs today and the updated cash flow forecast
should be tabled at every Board meeting. It is vital that management know the club has sufficient funds
to meet any expenditure, before that expenditure goes ahead.
Historical information – As the budgeting process for the coming year should begin well before the end
of the current financial year, management will not have a full year’s historical information available. However, the latest actual financial performance to date, compared with the full current year budget, will
provide a basis on which to start. Ideally, there should be a column for the new budget to be written in
so it can be easily compared with the current year’s budget.
Income – Before your club can allocate funds to the various cost centres, it must first have some idea of
the funds that will be available to it. All sources of income must be reviewed to realistically determine
the likely amount for the budget year. Any income that is not reasonably certain should not be regarded
as available.
Preparation – By now, any individual budget-holders should know what they have to achieve in the
coming year, how they will do it, and probably how much money they have to do it with. The budget
costings should be done on the same basis as your club’s financial accounts. That is, accrual versus
cash basis and GST inclusive/exclusive.
Historical data is provided as a guide but budget-holders should take a fresh look at each item of
expenditure and ask themselves whether or not it is necessary and if it could be done in a more efficient
way.
Phasing – The annual budget should be phased into monthly budgets, with income and expenditure
slotted into the months they are expected to occur. Monitoring of actual versus budget will then be
done for each month as well as the year to date. It is from this information that the cash flow forecast is
developed.
Revision – As stated earlier, the budget should be regarded as a living document and revised regularly
as circumstances change, particularly during the second half of the financial year. The original
budget approved by the board should be retained as a reference point. Major revisions to the budget
throughout the year should be subject to negotiation and the approval documented.
produced and distributed by
New Zealand Rugby Union • P: 04 499 4995 • F: 04 499 4224 • 1 Hinemoa Street • Harbour Quays • PO Box 2172 • Wellington
club best practice manual
unit 1 oFF-field: Big picture
• section 5 financial budgeting
4.2Historical Financial Accounts
How can I obtain this information?
Background
This purpose of this document is to simply illustrate how historical information can be sourced for your
Rugby Club. This information has been provided by the club, as they must send their annual reports to
the New Zealand Companies Office as a requirement of being an incorporated society. With the growth
of the internet, anyone can now access these public reports from the Companies office website
(www.companies.govt.nz). Rationale
Obtaining and analysing the club’s historical financial data can be beneficial for many reasons. Some
primary reasons include:
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Make key financial decisions based off historical financials
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Identify gaps in income vs expenditure
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Assess the clubs historical financial performance
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Identify trends in income and expenditure
•
Monitor and compare income and expenditure against other clubs
•
Creating an annual budget for the upcoming year
Process
To obtain the club’s data, follow these steps. (Note: the website requests Company information – just
input the club’s details instead.)
produced and distributed by
New Zealand Rugby Union • P: 04 499 4995 • F: 04 499 4224 • 1 Hinemoa Street • Harbour Quays • PO Box 2172 • Wellington
club best practice manual
unit 1 oFF-field: Big picture
• section 5 financial budgeting
1.
Go to the Companies Office website (www.companies.govt.nz).
2.
Click on ‘Search the Register’, then click on ‘Register Search’
3.
There are three ways to search the Companies Register
•
Quick Search – Enter at least the first three characters of the company name. The more you
input the more specifically the database will search for the company name and will automatically
update. Once you have found the name then double click on the company in the results box.
Note: the name which you have inputted may vary from the ‘Companies name’
produced and distributed by
New Zealand Rugby Union • P: 04 499 4995 • F: 04 499 4224 • 1 Hinemoa Street • Harbour Quays • PO Box 2172 • Wellington
club best practice manual
unit 1 oFF-field: Big picture
• section 5 financial budgeting
•
Standard Search – Enter a company number and then click the search button.
•
Keyword Search – Enter keyword(s) within the company name and then click the search button. Note this method is quite often the slowest and will require additional selection or resubmitting
another search name. It is strongly recommended not to use this search method as it is quite
often the longest and the least successful.
4.
Once you have identified and selected the company you were requiring, the website will illustrate
key organisational details and information (present and historical).
produced and distributed by
New Zealand Rugby Union • P: 04 499 4995 • F: 04 499 4224 • 1 Hinemoa Street • Harbour Quays • PO Box 2172 • Wellington
club best practice manual
unit 1 oFF-field: Big picture
• section 5 financial budgeting
•
Down the page, the historical financials are kept in ‘Documents Registered’. To open any files,
simply double click on all items coloured. To view any file, simply double click and the item will
open into Adobe Acrobat (which is viewing software for scanned items). Note: If your computer does not have this software package there is a path at the bottom of the
page to download Acrobat, free of charge.
5.
When the stored document is opened, it is a scanned copy of the file which was sent through to
the Companies Office.
Visit www.nzrugbynet.co.nz for more information.
Download and tailor documents and templates for your club.
produced and distributed by
New Zealand Rugby Union • P: 04 499 4995 • F: 04 499 4224 • 1 Hinemoa Street • Harbour Quays • PO Box 2172 • Wellington