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Once the action plan is set up, the next step is to prepare the budget of your project.

The budget must show the costs on one hand, i.e. the projected expenditure, and on the other hand the expected income. It must be balanced, that is to say that the total  expected income should equal the total expenditure.

Costing

It is essential to calculate in advance all the costs of the project in order to avoid any surprise that could be catastrophic. There are two types of costs: operational costs and management costs.

Operational costs

These are the costs of carrying out the various planned activities. You calculate the cost of each activity and you make the total. Then you should classify the expenditure into various cost categories, for example:

• Transport: travel, transport equipment, vehicle rental, vehicle repair
• Materials and equipment: Purchases of equipment and supplies, equipment rental, maintenance and repair
• Human Resources (assigned to a particular activity): salaries, benefits, training, meeting, insurance.
• Food and accommodation

Management costs

These are the costs of project management which cannot be related to a particular activity. For example:

• Costs of administrative staff (secretarial, accounting): Salaries and allowances
• Operating expenses: office supplies, telecommunications / internet, photocopying and printing, bank charges, seat (electricity, water, Supplies), insurance, etc..

Care must be taken not to inflate too much management costs by trying to affect as many costs as possible to particular activities foreseen in the Action Plan.

Revenues

The budget must show the various revenues that are designed to meet the costs.

It is also important to note the contributions of the beneficiaries (in-kind donations and volunteer services). Potential donors will appreciate that you have successfully raised capital through various activities such as a raffle, a show, etc..

You may classify the various income in categories such as :

•  Own revenues
• Gifts and benefits in kind
• Grants

It should be emphasized that the budget – which is a forecast document – must present a balance between spending and revenues. By definition, a budget can not show a deficit. A possible deficit must be covered by grants sought.

If balancing the budget seems too difficult, it is then necessary to reduce costs.

Cash flow plan

Alongside the budget, it is useful to establish a cash flow, that is to say a timetable showing the need for cash you have, month by month, based on your action plan, to meet operational costs and management costs.

Even if you’re sure to balance the budget at the end, there can be at times a gap between the money you have in the kitty and the expenses you face. This must be anticipated in order to find solutions: a reserve fund, special loans, overdraft accepted by the bank, etc..