March 28, 2024

Finance for cultural organisations: Honing a budget



Published May 15, 2023, 1:20 p.m. by Jerald Waisoki


When it comes to finance, cultural organisations face a unique set of challenges. On the one hand, they often have limited resources and must make do with what they have. On the other hand, they must be able to justify their expenditures to both donors and the public.

Fortunately, the EU-Eastern Partnership Culture and Creativity programme can help. This programme provides financial support to cultural organisations in the form of grants and loans. It also offers advice on how to best use these funds.

One of the most important aspects of financial management for cultural organisations is creating and sticking to a budget. This can be a difficult task, as there are often many competing demands for funds. However, it is essential in order to ensure that the organisation has enough money to cover its expenses and that donors are happy with how their money is being spent.

The first step in creating a budget is to identify all of the organisation's income and expenses. This can be done by looking at past financial records or by estimating future costs. Once all of the income and expenses have been accounted for, it is time to start allocating funds.

The best way to do this is to create a priority list. What are the most important things that the organisation needs to spend money on? What can be put off until later? By prioritising expenses, cultural organisations can make sure that they are spending their money in the most efficient way possible.

Once a budget has been created, it is important to monitor it closely. This means keeping track of all income and expenses and making sure that they match up with the budget. If there are any discrepancies, they should be addressed immediately.

The EU-Eastern Partnership Culture and Creativity programme can help cultural organisations hone their financial management skills. By providing financial support and advice, the programme can help organisations to better use their limited resources. As a result, they will be able to better serve their communities and fulfil their missions.

You may also like to read about:



Honing a Budget

Preparing a budget is one thing

but honing it so that it is as accurate as possible –

that’s another.

You can’t predict the future 100%.

But you can have a contingency

and you can share the risk with other people.

The good news is there are ways of minimising the risks

so that the difference between the budget and the reality

doesn’t compromise the quality of the project.

Here are some top tips.

Income.

Firstly, work out the minimum that you need to cover the project.

Agree with your colleagues whether all of this money

is coming from your organisation

or whether some of it is coming from your partners.

If so, how much.

Compare the mix of grant funding

and other income sources

to similar projects of this type

that your organisation or partners have done before.

Work out when the income will come to your organisation.

Will it happen during the project

or can you raise some of it before you start?

For example,

if this is about grant funding,

how much can you win before you start?

If it’s about ticket sales,

what are the advance sales that you can make of those?

If several parties are responsible for different bits of the income,

please agree it in advance

as to who is responsible for which bits.

And, of course, the amount of each.

Does each partner have a target for these income types

and how are you going to track their progress?

Costs.

Are there any costs that you need to incur

before you win the project funding,

the grant, the income.

And if so,

what happens with those?

Will you pay somebody back later?

Is it a fixed cost? So, for example,

if someone is responsible for bringing in sponsorship,

are they getting paid as a percentage of the funds raised

or a fixed fee?

When you’re working with people outside of your organisation,

for example, artists,

then the way that you are going to agree that

is you are going to negotiate the numbers of days,

the day rate that you are willing to pay

and that they are willing to accept,

and it’s worth putting this into a contract.

When you’ve got costs like travel, accommodation,

meals, etc.,

you might also want to agree

either a fixed amount that covers all of those

or a maximum that you’ll pay

for one night’s hotel stay

or that you’ll only pay for economy class flights.

So, again, set it in advance

so that people know what the rules are.

What you’re looking for here is to reduce the unexpected.

So, when you’re working with partners,

again you want to divide up the costs

and agree who is responsible for which ones

and where the liabilities lie.

Again, where possible, I would put this in writing.

When you’re contracting externally,

for example, for lighting equipment,

the best practice is to go and obtain three quotes

and either pick the one with the lowest price

or pick the one with the lowest price

for the quality that you are looking for.

And the purpose of having three quotes

is so that you can demonstrate

that you’ve gone looking for the best answer.

You know I talked about hidden costs.

Well, again, one for the checklist

is to make sure that you’ve included those:

the electricity,

the phones, the stationery, etc.

Last but not least,

I recommend putting in a contingency figure

which is somewhere around 3–7%

of the total project costs.

Now, funders will vary

as to what level of contingency they’ll accept

so you might find that you have to give way a little.

But nonetheless it’s worth having

a budget for the unexpected.

Budgeting when another organisation is involved.

Not all projects are run by a single organisation.

It’s quite common for there to be a series of partners involved.

In these circumstances one thing you need to be really clear on

is who is the lead organisation

and how do their liabilities differ

from the other partners.

If individual partners are responsible

for finding match-funding

then these might be brought

straight into the project of that one partner

rather than into the overall project pot of money.

Irrespective of how a project is cashflowed,

you’re going to need to agree the timetable of payments.

This is particularly important when dealing with small organisations

because their funding overall tends to be more fragile.

So it can make a huge difference if payments are delayed.

What are in-kind costs

and how do you take account of them in a budget?

You might hear colleagues talking about ‘in-kind’.

So let’s go over what these costs are

and where you fit them into a budget.

When goods or services are provided as in-kind,

what it means is

you’re not going to hand over hard cash for them.

But, equally,

you need to find a way to account for them

because it’s a value and a contribution

that’s been made to the project.

It’s also quite often used as match

for various grant funding types.

So what types of things might be provided as in-kind?

Here’s a few examples.

An organisation might be providing a room

or spaces in which the project is happening.

You might have volunteers who are giving their time

and that could be volunteers who are responsible

for opening the doors and turning the lights on

or it could be your trustees.

There might be things that are being lent to a project

by a third party supplier

that again you want to recognise in a budget as a whole.

How do you ascribe a value to this type of contribution?

In some cases a funder will have a rate card

and that will describe the skill level

and the value they ascribe to it.

In other circumstances

the best way of describing it

is to say what would you have paid for it

if it had cost you cash.

So the question that you are asking is:

‘Is there a role for in-kind contributions

in this project or budget

and, if so, how do you recognise those?’

So now you can:

estimate with greater accuracy;

work out how much contingency you might need;

allocate a budget across different partners

in the same project;

work out whether in-kind is appropriate;

and demonstrate that you’ve sourced

the best cost for the deliverable.

For each video I’ve prepared a set of extra materials,

reading lists, suggested articles to read.

You will find these below the video.

Resources:

Similar videos

2CUTURL

Created in 2013, 2CUTURL has been on the forefront of entertainment and breaking news. Our editorial staff delivers high quality articles, video, documentary and live along with multi-platform content.

© 2CUTURL. All Rights Reserved.