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Understanding your numbers

This handy check list of questions has been created to help board members without a background in finance become more confident in engaging with the budgets for their association.

1. Key assumptions underpinning the budget

  • Don’t just take the numbers at face value, what are the assumptions under pinning each line in the budget and do they sound reasonable? Look at last year for comparison and get satisfactory answers for any major variances.
  • Are there any changes (macro/micro) that could impact income/expenditure such as high inflation, a new competitor, new projects / initiatives or a negative report in the media? Are these properly reflected in your budget numbers?
  • What membership renewal rate has been baked into the budget and is that realistic? What strategies are in place to ensure you hit target? If you are dipping below 80% retention (or your benchmark) year on year, what can you do to change this?
  • What other revenue (sponsorship etc.) has been assumed and how achievable is this?


2. The devil is in the detail – get to know the P&L

  • It’s important to spring clean your chart of accounts – just because it was there in previous years, doesn’t mean it needs to be there this year. Review all costs and challenge whether they are still necessary in the coming year.
  • Cost of opportunity – it can be tempting to not want to increase spend on things but consider the opportunity for membership growth, industry profile raising, sponsorship opportunities and resourcing. Working with a partner such as TAS may feel like an additional cost for your association but what opportunity does that investment create for you? New contacts, increased expertise, more time and knowledge, reduced risk and increased opportunity to grow.


3. What is the cost of acquisition and your investment in retention?

  • It costs five times more to recruit and acquire new customers than it does to retain your existing ones.
  • Ensure you are constantly reviewing your offering and sense checking satisfaction of your members. Assessing what’s available from competitors will also help inspire you to stay fresh and current!


4. Financial health – income review

  • What’s the overall health of the association like? Assets vs liabilities?
  • Any debtors? If so, what’s the strategy to reduce those?
  • Liquidity of assets and cash available for operational needs
  • Solvency
  • Are cash reserves well invested or depreciating in value?


5. Cashflow

  • Have you investigated what the budget results mean for your organisation in terms of future cash-flows? Key questions may include:
    • Will we be solvent throughout the next 12 months or do we need to adjust the budget to remove any solvency risk?
    • Based on the budget will we have surplus funds we can invest to obtain additional income? If so how much and who will be responsible?
  • Finally – has the budget been properly approved and signed off by the Board?


6. Reporting

  • Are you meeting regularly to review results?
  • How did last month perform vs budget? Are you still on track to hit target or should a reforecast be considered?
  • Are you investigating variances from budget and getting satisfactory answers? If you are “over-performing”, why? Is it sustainable?

 

If you have any questions or concerns about the financial performance of your association, TAS have an entire team of qualified accountants who would be happy to help. Contact us here.

If you are interested in learning about your responsibilities in financial reporting for your association, we invite you to take a look at our 1-hour, online and on-demand course on ‘Finance Fundamentals’ specifically designed for association directors and executives. Use code BIRTHDAYBASH to redeem 10% off any courses until 31 October 2024. Click here to find out more.

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