Five Tips for Successful Budgeting

CFC has many tools in its toolbox to assist electric distribution cooperatives prepare an annual budget. CFC budgeting experts Marcelo Moraes and Trevor Barnett joined CFC moderators to discuss recommendations and tips for successful budgeting at your cooperative.

CFC members can watch a replay of the September 28 Extra Credit Education Series webinar, “Five Tips for Successful Budgeting,” to learn five actionable recommendations for improving your budgeting process, how to communicate and track progress across your cooperative and through the year and tips for using the CFC BudgetPro tool to make the process easier.

Five Actionable Cooperative Budgeting Tips

1. Engage all areas of the cooperative. The budget is a comprehensive coordination of future resources and expenditures across the cooperative, so it is important to engage each area of the cooperative to participate in developing the budget. This not only allows for better forecasting and understanding, but also reinforces accountability. To engage each area of the cooperative, consider each part of the budget as assignable.
2. Include thoughtful details and realistic expectations. The first year of your long-term strategic financial forecast may also be the budget year, so consider strategic goals and positioning for future years’ success when developing the budget. Consider bucketing expenditures and revenue into “controllable” and “non-controllable” costs to help engage the board of directors in budget conversations. When setting expectations on projects completed in the budget, challenge whether the timing and cost are too aggressive by reviewing previous years’ budgets to actual performance. Lastly, it is a good idea to consider any future accounting changes ahead of developing the budget, for example, changing to departmental or activity-based accounting.
3. Ensure assumptions are well documented. The budget is a living document, part history, part future scenario planning and it should reflect actions in anticipation of identified risks and opportunities, instead of only trends. It is often referred to, may be updated frequently and is a focus of continuous improvement. It is important to document assumptions included in the budget. It is also a good idea to document scenarios that were considered but not included in the budget.
4. Communicate the budget and track progress. Engaging all areas of the cooperative in budget conversations should not stop once the budget is approved. Consider ways to communicate budget to actual results throughout the year, it will drive accountability and help contributors prepare and improve their future budget estimates. Keep in mind that the best way to communicate budget results will vary with different audiences.
5. Use a structured process and easy-to-use budgeting tool. Plan in advance for the budget and use a purpose-built budgeting tool that allows you to focus on the quality of budget inputs, instead of the model itself. CFC has a dedicated team of finance consultants with cooperative-specific tools to assist you in preparing and reporting budget results. If you are interested in exploring CFC BudgetPro (Excel-based) or would like to discuss your existing budget process, please e-mail BudgetProModel@nrucfc.coop.

Don’t miss upcoming Extra Credit Education Series and Financial Series webinars. Log in to the CFC Member Website to register or watch a replay.