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Help Sheet

Project Budgeting

General organisational budgeting is covered here.
This helpsheet is written to assist you to develop realistic budgets for your special programs or projects.

Many funding agencies or Philanthropic Foundations want to fund one-off special projects and do not see their role as on-going, paying for your core activities. This creates difficulties, in that you have more difficulty keeping your core activities going, but it makes it even more important that you are able to design and cost individual projects properly.

You will need to have a general plan for the project. If the project is at all complicated, you may want to do this using project planning software such as Microsoft Project. If it's small or simple, do it on paper.

Break the project down into its major phases, and break the phases down into their component activities (if it's a large project, you will want to break the activities down into their component tasks). Work out what needs to be done first, and map out a timeline.

Project Activities

Timeline

Activity 1

Activity 2

Activity 3

Activity 4

Total

Then calculate what these plans will cost.

Staff

Supplies/

Permits/

Insurances

Equipment

Travel/

Catering/

Venue hire

Phone & Post

Publishing

Cont-

ingency

Total

Activity 1

Activity 2

Activity 3

Activity 4

Total

First, estimate your expenditure. You should be able to do this for each activity in the project. Laying it out this way ensures that you do not overlook anything.

Direct costs

This covers the resources that are actually expended on the project services.
  1. Personnel/Staff. Wages and salaries, benefits and payroll taxes of full or
  2. Supplies /permits/insurances. Consumable supplies used for the project, any special permits or licenses, any special insurance coverage that may be needed to cover precious goods or venues being used in ways that their regular insurance does not cover.
  3. Travel. All travel, meal costs and venue hire related to the project are included.
  4. Publications (print and online). Printing, publishing or copying brochures, invitations, reports, books, reprints, website.
  5. Contingency.
    You may be wise to include an item for Contingency. This is usually calculated at 5% of total budget to cover things that occur unexpectedly, for example unavoidable change of venue or replacement of cancelled speakers or poor materials.
    Funders are wary of a miscellaneous column in the budget. This usually signals that the applicants have not thoroughly thought through their actual budget requirements and may have forgotten certain items of expenditure.

Estimating costs

Estimating costs requires some educated guesswork. To help you with this, you should:
  • call for quotes
  • have staff members estimate the amount of time an activity will require
  • compare notes with someone who has done a similar project

Indirect costs

Many organisations run into trouble because they count only direct costs. What other expenses is your organisation going to have to meet to support this project? Your administrator is going to have to organise payments of money, the project people will be taking up space and using equipment, and your CEO will be spending time handling the project.

If you've got spare capacity in all these areas, you may not have any extra expenses; if, on the other hand, you have to add extra, or if you have to cut back on other current activities, then do count them in.
You may itemise these, or you may include a general loading - 15%, say - on your other costs.

Staff

Supplies/

Permits/

Insurances

Equipment

Travel/

Catering/

Venue hire

Phone & Post

Publishing

Cont-

ingency

Total

Activity 1

Activity 2

Activity 3

Activity 4

Total

Income

Estimating income may be simple - the money from the project grant may be set. If you are estimating something more variable, like sales or fees, that will require more thought.
Do not to forget to calculate GST implications for all income transactions.

Profit margin

It is important to see whether you are going to make a profit on the project, break even, or have to throw in some of your own money. Do you come out ahead once indirect costs are added in? Some organisations make the mistake of jumping at anything that promises income, without checking that there is a margin to meet on-costs and indirect costs. This can lead to a financial squeeze further down the track.

Tendering for a project

Tendering involves not only calculating how much the project will cost but also how much your competitors are going to quote. Your tender should be either slightly less than you think your competitors will bid or slightly more than the project will cost, whichever is the higher. Do not follow your competitors down into making a loss. Let them volunteer to lose money.

Monitoring Project Costs

It's important to monitor project costs against the timeline, so that you don't end up having spent all the money before having completed the project. Again, project management software can help you straighten these things out, but you can do without it.

For more useful information on the financial management of a community group consult the Guide for Community Treasurers, which has been produced by Westpac - Australia's First Bank - and Our Community, working together to help community organisations to achieve their goals. Together, we have created a Guide that provides hands-on advice to help you manage your organisation's finances effectively.

In this spirit, Westpac has embraced its responsibility to provide low-cost basic financial facilities for community organisations and has extended this to include a range of discounts and benefits. For more information on how to minimise fees and charges and to save time and money on your banking refer to Banking Solutions for Community Organisations

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