Budgeting for Beginners Judy Shaw

Transcription

1 Judy Shaw Judy Shaw Agenda 1. Introductions 2. What is a budget? 3. Setting the budget 4. Getting member buy-in 5. Wrap-up 2 CHF Canada Workshop 1

2 Seven reasons you want a budget 1. A budget is a plan 2. A budget is a gauge 3. A budget gives you control 4. A budget anticipates expenses 5. A budget keeps you focussed 6. A budget reduces stress 3 Seven reasons you want to understand your co-op s budget 1. So you can feel confident the co-op is well managed 2. So you can learn more about the co-op 3. So you know how your housing charges are spent 4. So you don t have to worry about the future of your co-op home 4 CHF Canada Workshop 2

3 Seven reasons you want to understand your co-op s budget 5. So you know when repairs will get done 6. So you can make informed decisions 7. Because of your fiduciary duty 5 Who is responsible for the budget? Management task drafting the budget, reporting about performance, purchasing Governance task adopting the budget, monitoring the results, following the budget when making decisions 6 CHF Canada Workshop 3

4 What is a budget? A plan of where your money will come from and what you will have to pay for A tool that sets goals for a future period allows actual results to be compared with the goals 7 What is an operating budget? Plan for a year Covers everyday expenses What is a capital budget? Plan for a year (or more) Covers replacements of building parts and equipment that can not be paid for from one year s revenue 8 CHF Canada Workshop 4

5 What is an operating budget? An annual plan of how much your revenue will be where your revenue will come from how much your expenses will be what your expenses will be what your bottom line will be 9 Let s back up and talk about the words Revenue Also called income It s the money coming into the co-op Expenses What the co-op has to pay for Things the co-op buys Services the co-op receives It s the money going out of the co-op 10 CHF Canada Workshop 5

6 More terms Fixed costs Costs that don t change over the year Discretionary costs Expenses that can be cut without impacting the co-op business Variable costs Costs that go up or down as the amount of product or service is used 11 Just one more slide of words Reserve fund contribution A monthly operating expense to be set aside for future repairs and replacements Bottom line Revenue expenses Surplus Revenue is more than expenses 12 CHF Canada Workshop 6

7 sorry one more Loss Expenses are more than revenue Balanced budget Expenses = revenue 13 Setting the budget 14 CHF Canada Workshop 7

8 The key concepts Generally: Costs will increase every year Most of your costs are fixed CHF Canada Workshop 8

9 The key concepts Generally: Revenues must increase to cover the cost increases The increase in revenue must be done through an increase in housing charges 17 The key concepts Generally: You must save for the future Maximize revenue Set realistic expenses 18 CHF Canada Workshop 9

10 Start with the things you know At your tables, decide which costs are fixed. Use the description of each budget line on the handout CHF Canada Workshop 10

11 Variable costs At your tables, decide which costs are variable. Use the description of each budget line on the handout. 21 CHF Canada Workshop 11

12 Discretionary costs At your tables, decide which costs are discretionary. Use the description of each budget line on the handout. 23 CHF Canada Workshop 12

13 What to do with revenue? Using the comments for revenue lines, at your tables decide what you would do with housing charges in the budget CHF Canada Workshop 13

14 Other things to consider Co-op history Trends Quotes Annual plans Budget BCA Regulator Current contracts 27 Getting the members buy-in The Board as a united front The Board to take ownership Clear presentation to the members with handouts Don t need to present line-by- line 28 CHF Canada Workshop 14

15 Presenting the budget to the members Don t forget to remind members of the basic equation Income expenses = surplus (deficit) 29 Presenting the budget to the members Choose the right person to present the budget, someone who: can explain complex items so they seem simple can talk in plain language rather than accountant s language can answer members questions. 30 CHF Canada Workshop 15

16 Presenting the budget to the members Use graphics to help your presentation Include notes on key items or where you think members will have questions one or two pages should be enough 31 A housing charge increase Explain why the increase is necessary Costs are increasing Explain why you think it is possible to have the increase Little turnover in market units Little vacancy loss Rents are similar in similar buildings in the area 32 CHF Canada Workshop 16

17 Use a simple format Expenses Budget for year Maintenance $74,137 Utilities $157,592 Administration $68,809 Mortgage $735,660 Property taxes $80,000 Reserve allocation $53,216 Total expenses $1,169,414 \33 How is it working for your co-op? How does your co-op present budgets to the members? Does your presentation help to get member buy in? 34 CHF Canada Workshop 17

18 Don t just put the budget on the shelf 35 Don t let the budget gather dust Take time to compare your operating results with your budget every month Review the budget when making spending decisions Only spend what you planned to Make adjustments if necessary 36 CHF Canada Workshop 18

19 Final thoughts Start the budget process early Most of your costs are fixed and can t be cut Work hard to get member buy in Use the budget 37 Any final questions, comments or ideas we haven t discussed yet? Evaluations please! 38 CHF Canada Workshop 19

20 39 Getting Workshop Materials CHF Canada Website: Resources AGM Website: Events AGM Conference App CHF Canada Workshop 20

21 C O - O P E R A T I V E H O U S I N G F E D E R A T I O N O F C A N A D A What is a budget? Budgeting for beginners A plan of where your money will come from and what you will have to pay for. A tool that sets goals for a future period and allows results to be compared with goals. Remember there are different kinds of costs Fixed, variable and discretionary. Most of the co-op s costs are fixed and can not be cut. Most of the housing charges go to cover the fixed costs. Key points Costs usually go up Housing charges must go up to over costs You must save for the future Budget tips Set realistic expenses Maximize revenue Try to balance the budget Where to get information Annual plans Regulator, municipality, current suppliers News Unit inspections, technical reports, quotes, current contracts and building condition assessment Year-end projections, last audit Budgeting for beginners CHF Canada Workshop

22 C O - O P E R A T I V E H O U S I N G F E D E R A T I O N O F C A N A D A Get member buy in Directors are united Board takes ownership Easy-tounderstand presentation Charts and graphs Choose the right person to present Be prepared for questions Don t present line-byline Good handout Remind the members of the basic equation Revenue Expenses = Surplus or Deficit Don t leave the budget on the shelf You did all that work to set the budget! Use it to monitor your finances every month, and every time you are making a financial decision. Budgeting for beginners CHF Canada Workshop