From “Zero Based” Program Budgeting to Easily Understood Financial Reporting Jim Peters, RCE, CAE, e-PRO www.JimPete

1. From “Zero Based” Program Budgetingto Easily Understood Financial ReportingJim Peters, RCE, CAE, e-PROwww.JimPetersStrategist.com

2. Why Program Budgeting? • Most Effective Management Tool • Keeps your Directors informed • Tells Members where their money is going • Helps to Prioritize programs and Services • Helps get rid of Sacred Cows

3. What If? • Failure to manage finances effectively - • A major reason AEs/EVPs/CEOs get fired

4. What is Program Budgeting? • Assigning True costs to all Programs • Includes Direct costs and Staff costs

5. First Things First - “A”, “B” & “B1” Cash Budgets More Easily Understood • Develop Timeline – See Exhibit “A” • Prepare Line Item Budget – Exhibit “B” • Budget conservatively for 2008 and 2009 • Assign Allocations to each Line Item “B1” • Break out non-Program Line Items “B1” • Determine General Administration Program Costs “B1” • Establish Fixed Expenses “B1” • Determine Administrative Overhead “B1”

6. Budgeting Sample Timeline Ex. “A”

7. Tracking Staff Time - Ex. “C” • List all Programs and Services • Prepare Basic Staff Time Tracking Sheet • For first year - Estimate hours for each Program • Begin tracking staff time on a weekly basis • Computer tracking most effective - • Excel Spreadsheet Program

8. Ex. C1

9. Ex. C2

10. Determining Staff Hourly Costs Ex. “B2” • Add General Administrative & Fixed Expenses • Add Total Staff Hours • Use 2,000 hours per year per staff member • Divide Expenses by Number Staff Hours • = Cost per hour per Staff Member • Usually $30 - $50 per hour per staff member, depending on location

11. Preparing the Program Budget Ex. “D” • Programs/Activities • Show non-Program Income and Expense • Columns for: • AllPrograms/Activities • Direct Cost • Staff Cost & Overhead • Total Cost

12. Preparing the Program Budget Ex. “D” • Columns for: (Continued) • Income • Net profit or (Loss) • Cost per member of Dues $$ • Program/Activity

13. Using the Program Budget • Helps Prioritize Programs and Services • Tool to Get Rid of Sacred Cows • Keeps Members informed • Helps determine what to include in Base Dues • Justifies the Value of Programs/Services • Open Communication to all

14. Questionable Ex. “E” Programs/Services To get rid of “Sacred Cows” • Use Program Analysis Form • Leadership to Decide • Dues Based or Fee Based • Or Eliminate

15. Ex. “E”

16. Directors Have a Hard TimeUnderstanding Financial Statements • Recognize that we are in a time of transition after 5 – 6 spectacular years • Budget Numbers may be Growing or Shrinking – relate directly to membership numbers • AE needs to have finger on the pulse • Easily understandable Financials make it easy for Directors to make quick decisions • You need to be prepared to cut back when income figures are not on track

17. Statement of Financial Position Exhibit “F” • Keep it Simple • Take Figures from Accounting Program, ie Quickbooks/Peachtree • Compare month end figures to month end figures for same month the previous year • Are total Assets up or down?

18. Statement of Financial Position Exhibit “F”

19. Preparing Monthly Budget Reports • Use Your Monthly Accounting Report and Budget to prepare month end reports • Prepare using Excel Spreadsheet • Track Income and Expense • Critical columns to include are: • Budget Breakout • Total for each Category • Year to Date Breakout • Total Year to Date for each category • % of budget collected or spent • Comparison $ with same period previous year

20. Monthly Budget Report and Comparison Exhibit “G”

21. More Help with Program Budgeting See article “Better Budgets” in 2003 Spring issue of “REALTOR® Association Executive “ magazine. All Excel templates can be found at http://www.realtor.org/eomag.nsf/pages/budgets (Revised)

22. Questions