Budgeting

This is a high level overview of how to create and maintain the budget at Free Geek.

• Before starting a new budget, make certain the books are caught up as far as possible. In some cases, transaction lag for a while, and to get a "complete" picture of a month you will need to enter a few estimated transactions into the books.
• During the budgeting process you will likely spot odd things that (when investigated) turn out to be based on mistakes in the books. These mistakes will require fixes and then regeneration of the charts that are used to predict future income and expenses. In other words, this is an iterative process.
• Basic steps are:
  1. Catch up on data entry
  2. Enter any estimated transactions
  3. Reconcile all accounts
  4. Generate a "budget report" and get the numbers into a spreadsheet. We'll call this spreadsheet the central repository.
     • This is actually a fairly detailed monthly breakdown of actual expenses over a period of time.
     • The process for creating this is a bit cumbersome and takes time, so make sure that all of the above is done before starting this step.
  5. Create charts from data in the central repository. These can be fairly detailed reports. Circulate them among people who understand the income and expenses being reported on. Ask them to comment on them and collect these comments.
  6. Based on the comments, create projections for the future (in the central repository). This requires making assumptions. Record those assumptions.
  7. Share the projections with other staff members and adjust them. For larger, more important line items, you can create optimistic, pessimistic, and medium scenarios for comparison.
  8. Build informal consensus on the projections. Focus on the people whose work is directly related to the line items you're looking at. This requires explaining the assumptions, etc.
  9. Simplify everything. Reduce the number of lines so that we don't overwhelm people with too much information. Also create a version that shows the fewer lines in quarters rather than months. This is the draft budget. That's what we present to people as a "starting" point.
     • Note that there may be optimistic, pessimistic, and medium versions.
  10. Once people see the draft budget(s) they will want to revisit all the assumptions they made. What they say will depend mostly on what the net income or loss is quarter by quarter.
  11. Once all the numbers have stabilized, re-check everything on this list. Double check. Triple check.
  12. The board gets a simple version of the budget, showing only the few lines, broken down by quarter. But be prepared to pull out whatever information they might ask for (as needed).