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.
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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.
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