7 Common Budgeting Mistakes Chapters Make
Establishing your chapter’s budget can be an incredibly powerful tool for success, but it can also quickly become a train wreck if your chapter isn’t careful. Here are seven common mistakes that chapters make so your chapter can avoid them.
Starting from the Top – Chapters that start from the top typically take the total expected revenue and then invite officers and committees to take slices from the pie as they see fit. If they expect to have 50 members and each member pays $500 in dues, then they take the $25,000 and divvy it out. The error here is the lack of accountability and deliberate thought put towards using the chapter’s financial resources effectively. Instead, consider starting from the bottom by having each officer/committee create their own budget, detailing what exactly they need funds for, and how much. This not only helps officers/committees set measurable goals, but it also helps when it comes time to potentially make cuts to specific events/items rather than whole budgets.
Planning and Praying for the Best – It is unlikely that every member of your chapter will pay all their dues every single year until time stops. Unexpected situations come up, members depart in friendship, and sometimes members just get behind. Chapters should always ensure their budgets are accounting for some of this missed revenue by creating a safety buffer, such as planning for only 90% of dues to come in. This allows the chapter’s operations to weather those unexpected situations a bit better.
Not Saving Anything – Much like your personal budget, it’s usually wise for the chapter to have some savings in case of an emergency and unexpected cost. What if the rental price for the formal venue goes up? What if jerseys for the intramural players increases suddenly? What if your candidate retreat only accounted for 25 candidates but a great recruitment means there are now 50? Having some reserves set aside can help mitigate these. But beware of…
Saving Too Much – A member’s dues paid today should go towards that member’s experience, not the experience of someone five years from now. In your personal life, you’d invest your savings which makes sense because your money starts working for you as you add to it, but chapters don’t have investment accounts. This means that increasing the chapter’s savings every year without a cap means they’re saving for something that may never come.
Not Keeping Records – Keeping receipts and records of income and expenses doesn’t just help the next group of officers, it helps your chapter negotiate for fair prices. Consider this anecdote from several years ago. A screen-printing business near campus holds a near-monopoly on producing shirts for fraternities. No one saves receipts because they’re just t-shirts, right? But come to find out, the business has bet that chapters do poor transitions and so they arbitrarily hike their prices after every election cycle because the next guy won’t know any better. As they say in the social media world, always bring receipts.
Accounting for Cash Flow – Very few chapters have every member pay all their dues on the very first day of class. In fact, many chapters collect dues throughout the semester at certain times. This means that budgeting for 70% of your expenses at the start of a semester when only 50% of revenue will be collected is setting yourself up for failure. This can be addressed by ensuring your chapter’s budget tracks cash flow to ensure that bills can be paid on time and when there are funds to pay them.
Not Involving the Chapter – Much like recruitment, a chapter’s financial success depends on the efforts of every member of the chapter, whether they realize it or not. A budget shouldn’t be decided by the entire chapter, but it should be presented to the entire chapter and explained in detail. Go a step further by allowing for some questions and answers and be prepared to remind the members that while the committees are responsible for creating the budget, the entire chapter deserves to know the ins and outs of how their dues are being stewarded by the officers.