Model income and expenditure budget

This page explains a sample budget showing income and expenditure.

The trustees should be aiming to balance income and expenditure or plan for a surplus or deficit.  The income and expenditure budget below is an example of the information they need to achieve this. 

Total income and expenditure budget for Environ Alliance Trust

• Staff costs are separately disclosed because they can represent up to 60% of total expenditure and need careful monitoring.
• Total running costs will include both direct costs of projects and an element of organisation-wide costs.
• The budgeted surplus or deficit should correspond to the target identified at the initial planning stages.

Rows

• Full year budget represents the original budget or plan, compiled six months before the start of the year and approved by the board approximately two months before the start of the year
• This month variance represents the difference from the original plan for the current month.  These figures allows for the examination of current month activities in income and expenditure terms.
• Year to date variance represents the accumulated difference from the original plan.  These figures enable the examination of six-month figures for income and expenditure, and therefore serve as a guide to the feasibility of the year-end financial goals.
• Last forecast, this forecast, variance to last forecast allow amendments to be made to the original budget, to reflect changing circumstances since it was approved.
• Variance to budget enables the effect of changing assumptions on the original plan or budget to be monitored. 

Interpretation

• The original budget planned for a surplus of £23,122 to be taken to reserves
• At the end of the six-month period the organisation is forecast to make a reduced surplus of £14,255
• The reduction occurs because the current forecast for total income to the end of the year is £511,777, compared with the original budget of £547,270
• In response to the revised income forecast, the organisation has been cutting non-salary costs, as is evident in the reduction of the running costs budget from the original £267,493 to £226,258.

Action

The trustee board should examine the possibility that income will further decline and the effect this might have on the work programme of the charity. The trustee board should investigate the reasons why income has declined:

• Have earned income targets been met?
• Has a grant application fallen through?

Where next?

Read more on budget planning.