Writing budgets is fairly easy; it involves common sense, a logical approach and simple mathematical skills like addition and multiplication. The following steps guide you through producing a budget:

• The first stage of drawing up a budget is planning and making decisions about what your group will do next year.
• Next you should write down all the likely expenditure categories you will need. This is a shopping list of all the items you need for your project or organisation. Do not forget items you may need to set up your project, The expenditure budget may be further divided into a capital budget, which is the cost of buying fixed assets, such as computers and vehicles, and a revenue budget, which relates to daily costs, such as postage, rent or electricity.
• Now make a list of potential sources of income such as membership, subscriptions, grants, donations etc.
• You now need to fill in the figures for each heading and work out how much you need. Some costs can be calculated with precision, for example, annual rent. Others can be researched for example by talking to similar groups in your building about their annual heating costs. While others are more a matter of estimation – such as photocopying and transport costs.
• It is important to try to be as accurate as possible, so it is worth taking time out to research costs by talking to people in similar organisations or getting catalogues for equipment and stationery.
• Keep clear notes on how you reach figures, so that you can explain them if necessary.
• Do the same exercise for each income source and estimate how much income they will bring in.
• You should now get other people’s opinion on the budget to identify any expenditure items or income sources that have been overlooked or are superfluous. The figures and assumptions should be revised as necessary
• Next think about what you will do if your income is less than your expenditure. You should identify what could be scaled down or changed if your organisation’s income is reduced.
• Finally the budget should be approved by the management committee.

When planning budget for activities and services you need to ensure that they are fully costed so that the direct costs of the project or service and a relevant share of the overheads are included. This ensures Full Cost Recovery. Further information on the principles of Full Cost Recovery can be found in the resources section.

When looking at funding sources, you should take time to look at the funders’ guidelines and ensure they are reflected in your budget. Different funders have different rules on funding, and it’s important to understand what they are. For example, the Big Lottery Fund has set allowances for year-on-year inflation of up to 3%.