When forecasting your year-end position, be sure to include all year-to-date actual income and expenditure, couple with this any known future income and committed expenditure.
A few tips when collating this information:
- Committed expenditure for staffing should include:
- your latest staffing projections which you know to be accurate having completed your payroll reconciliation.
- all pending corrections, as otherwise these could be missed as they will not be in your actual expenditure. (Consider for a second, you have a 2 month back log of incremental rises, these would not be in your actual expenditure, and neither would they be in your commitments in your original budget profile – a hefty chunk of expenditure to not include in your year-end projection)!
- Budget for future open staffing positions, have details of any contract details pencilled in, not just an amount.
- Collate all data at a nominal code level at the very least, cost centre as well if possible.
When you come to analysing and displaying this information, there are several varying methods and schools of thought.
SBS recommend a tried and tested model where we project year-end balances by nominal code and reporting code, applying calculations differently depending on the detail:
- For staffing items project simply use actuals + commitments to project your year-end position. It is important to see an underspend if it exists, you may need it elsewhere in your budget mid-way through the year. We also recommend that you project within staffing by service term or staff group which are determined by job roles.
- For non-staffing items project the original allocated budget, unless you know for sure that there is a saving OR your actuals + commitments exceed your allocated budget, in which case forecast this figure!
- All budget variances exceeding 5% in either direction from your allocated budget should be justifiable and explained. This will give confidence to the Governors
The impact of not having in place a robust monthly budget monitoring process could result in the school making key decisions based on inaccurate data, potentially spending a surplus only to realise months later it never really existed.
Hopefully, this piece offers you some ideas to implement or provides the reassurance that your budget monitoring process is robust.