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Section 6 – How to build a budget

Target audience : Management committee

What is a budget?

A plan to show how much money an organisation is expecting to receive and how much they will need or be able to spend in a given period e.g. a financial year.

What is its purpose?

The purpose of a budget is to be able to plan the activities of the organisation for the year ahead, co-ordinate these plans through the periods of the budget and control the different aspects of the budget, for example how much is being spent on equipment.

Management committees should use this document as a starting point when framing or reviewing the budget for their organization.

A budget is split into receipts (income) and payments (expenditure).  Below is a detailed list of the different categories in each section.  This is only a guide and not exhaustive.

Type Description
Receipts
Fee income The amount of income that is expected to be received from places sold

NEG (nursery education grant)

 

The amount of income that is expected to be received from South Gloucestershire Council in respect of Nursery Education Grant funded for 2, 3 and 4 year olds.

Fundraising

 

The amount of money the setting hopes to raise through fundraising activities

Bank interest

 

The amount of bank interest that is expected to be earned.

 

Grants Any grants that the setting expects to receive in the financial year, e.g. Capital Conversion grant.

Other

 

Any other income that the setting is expecting to receive, e.g. if meals are charged separately
 Payments
Salaries The gross cost to the setting of employing all its staff.
NI employers contribution The amount of National Insurance that the setting has to pay to the Inland Revenue.
Pension contribution The amount that the setting pay towards staff pensions
Contingency

An amount set aside as an emergency and to cover redundancy payments.

Recommendation:

  • The minimum amount of Statutory Redundancy payment due to all staff.
  • Between 3 – 6 months sickness cover e.g.) the cost of a relief worker
  • An amount of rent equal to the notice period required for the setting
Redundancy An amount set aside based on the statutory amount payable to each member of staff and reviewed annually.
Rent/lease The cost of rent/lease payable.
Heat/light/power The cost of domestic fuel that the setting will consume.
Water/rates/refuse The amount payable.
Repairs and maintenance An amount set aside for general repairs and maintenance to the premises.
Cleaning materials / uniforms An amount set aside for the staff uniforms and cleaning materials.
Play equipment over £500 Purchase of single items of equipment costing over £500
Play equipment under £500 Purchase of single items costing under £500
Consumables Materials for the Setting that will be used, for example, paper, pens etc.
Food The cost of food purchased.
Baby essentials The cost of specific baby products e.g. nappies
Consumables (office) The amount spent on office consumables e.g. ink cartridges
Telephone The amount payable for a telephone line, internet line and call charges in the financial year.
Postage The amount of postage used in the financial year e.g. letters sent to parents and for payment of invoices times first class postage rate.
Membership fees The amount of subscriptions payable to membership bodies.
Insurance The amount of insurance premium payable e.g. public liability Insurance
Recruitment costs The cost of recruiting new members of staff e.g. advertising
Training and development The cost of staff training.
Advertising / Publicity The cost of advertising the setting e.g. a newspaper advert.
Payroll  The amount paid to the company that produces the payroll for the setting.
Registration fee The amount of registration fees payable e.g. Ofsted
Audit fee The amount payable for an accountant to audit the accounts of the setting.
Bank charges The annual cost of account running fees payable to the bank.
Other payments Any other payments due in the financial year.