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.