How to budget effectively for the coming financial year

It's that time of year again when budgets have to be set for the new financial year. We examine how best to plan them

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In times of economic uncertainty, the processes of budget-setting and cost control are crucial.

A top-down approach to budgeting applies a blanket increase to the previous year’s budget. It is simple and straightforward to apply. However, some costs might be better pegged to a previous year's total.

A bottom-up approach assumes a zero budget for each department which is updated via justification from budget-holders. This process may be time-consuming but ensures that budgets are tight, fully justified and supportive of the school. It works by setting a budget cycle that can be understood and easily communicated (assuming your financial year is April-April):

December: distribute blank budget request sheets to all budget-holders, asking for budget requests (with justification) as well as any anticipated staffing changes for the forthcoming academic year.

End January: all budget sheets returned and entered into the financial budget model. The result should be reviewed with the head, who amends/comments where necessary. By this time, quotes have been requested from external suppliers such as insurance brokers, utility providers etc. If a teachers’ pay increase has not yet been agreed, take a sensible estimate and apply it individually to each member of staff to generate a reasonably scientific annual salary budget.

Late February: the budget is completed (for independent schools, any fee increase is agreed and presented to governors for approval).

March: the budget is presented to governors for final formal approval.

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