A guide to third sector trading - WCVA

It’s an idea, but is it business? A guide to third sector trading
1: Getting
started
2: First steps 3: Business
planning
4: Legal and
governance
5: Funding
and
resourcing
6: Financial
controls
7: Managing
growth
8: Management
and
governance
9: Social
enterprise
10: Sources
of support
• Authority for management: Managers need budgets to give
them authority. Once directors have approved the forecasts, the
chief executive officer should be free to implement the spending
decisions that it identifies (assuming that actual progress is more
or less in line with the budget).
What did we know when we wrote the Business Plan?
• If the only budget you’ve got is the work of fiction in your
Business Plan which you used to impress funders, it almost
certainly needs to be updated as soon as possible.
• Perhaps you think it’s cheating to rewrite your financial forecasts
whenever they prove to be wrong? But budget projections are
not intended to be a test of your fortune telling abilities, even if
it feels like that when you write them.
• Any budget model which presents a picture of the development
of your business is going to be useful to some extent. Then
as you produce more versions each one will benefit from the
feedback of your practical experience, and grow gradually closer
to the way your business actually works – giving you more and
more control over it.
Refining the forecasts:
• When you compare your actual income and expenditure,
heading by heading, against your budget projection you will
start to see what works and what does not. This is crucially
important for monitoring sales income.
• It can be extremely useful to introduce refinements, by breaking
income into different types of sales and reporting on each
separately. If you run a catering service, for instance, you need
to have separately itemised totals for daytime cafe takings, for
sales from your sandwich round and for catering at functions
and events. This will tell you both profitability of each activity
and may provide feedback on your marketing strategies.
• You can also refine your expenditure forecasts in the light of
experience and make them more detailed. But don’t forget the
downside: the more information you provide, the greater the
risk that directors will be distracted by less relevant details and
miss the broad brush development of their businesses.
Budget reports: A budget report tracks actual income and
expenditure against earlier forecast, and can be a helpful measure
of progress. Many non-trading third sector organisations use
them too.
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