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When undertaking a new project or planning the continuation of existing work, you should set a budget in advance of starting the work.
The main areas of expenditure and the types of costs in those areas, you should think about when setting a budget are:
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People – salaries, national insurance, pensions, advertising, recruitment, temporary staff costs (if cover will be needed due to holidays or illness), volunteer expenses and training
- Premises – rent, rates, insurance, equipment, security, heating, lighting and maintenance
- Operating costs – computers and software, vehicle running and depreciation, stationery, telephone and other bills
- Slow start costs – often new projects need to build up business so their income is smaller at the beginning
- Cash flow costs – if your expenditure varies from month to month, but you have a steady income throughout the year, you may have cash flow problems. You should therefore include the costs of covering any cash flow gap. Also remember that when starting a project from scratch it may take time to get going, and so, income might be lower in the early months
- Launch costs – publicity material, if you don’t publicise your work, how are people going to find out about it?
Full Cost Recovery
If your organisation runs several projects, you will need to ensure that you attribute the full costs of each project to each project’s budget. This is a potentially complicated process, but in simple terms it means that you ensure that you budget for all your costs, including overheads, from the range of projects you operate. To give an example, if you rent a building which is used for two projects, you should split the rent costs between the two projects on a justifiable basis. This might be the percentage of the floor area used by each project, or the proportion of time project each occupies the building for. If this process is used for all costs, an organisation will ensure that it has budgeted for 100% of its costs.
ACEVO offer more information on Full Cost Recovery. Click here to find out more: www.fullcostrecovery.org.uk/
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