Early and Late Spending
As we’ve shown in our earlier blog posts, campaign budgeting is uniquely difficult. To accurately gauge where you stand and where you’re going requires reconciling the budget no matter when those expenses take place. Let’s take a deeper look at reconciling for early and late spending in the scenarios below.
Early Spending
Your campaign needs to have a physical location. Unless the candidate is in-kinding their guest bedroom, you’re likely paying rent at the beginning of each month for that location. What happens to your budget if you pay rent early?
Let’s say that you’ve budgeted $1,800 a month to rent. This month you decide to get things off the books early and write January’s rent check on December 28th. This money is entered as a disbursement and you mark it off your to-do list.
But wait!
Your budget gap just increased, and you’re now projected to go into the red. What just happened here?
Well, you never reconciled for an early expense and now you’re caught in a double-counting trap. Let’s break it down…
Before you paid your rent early, the rent budget for next year was $21,600.00 (12 months of $1,800 a month). If we narrow the date range to today forward in the budget, we can see that we still have $21,600 left-to-spend.
Paying your rent early in December results in $1,800 which was spent outside of that $21,600 budgeted for rent.
$1,800.00 + $21,600 = $23,400
(Money already spent on rent) (Money we still have in the budget to spend) (Total projected)
Unless we reconcile, our budget is off. The best practice here is to remove the $1,800 on January 1st (remember: we paid that $1,800 early on December 29th), resulting in:
$1,800.00 + $19,800 = $21,600
(Money already spent on rent) (Money we still have in the budget to spend) (Total projected)
Now you’re back on track! Reconciling to adjust for early expenses will help you avoid double-counting, and result in the most accurate campaign budget possible. Be sure to reconcile early expenses as often as you are checking the budget.
Late Spending
Reconciling for late expenses is just as important as reconciling for early ones. Within your budget, you have a series of projected expenses assigned to different dates.
Suppose you are setting up your budget, and add a media expense of $30,000.00 on October 1st. The rest of your budget is predicated on spending that money on October 1st. Your budget gap is calculated at exactly $0 (a perfectly balanced budget, great job!).
October 1st comes around, and you end up not paying that media expense quite yet – maybe you’re waiting for some other wires to clear, or it’s just not a great day to send out money for whatever reason. You still plan to pay your $30,000 invoice, but not quite yet.
Now it’s October 2nd, and you look at your budget gap: it is a $30,000 surplus! What magnificent news, right? Wrong.
Unless reconciled, your $30,000 media expense that was supposed to be spent on October 1st is no longer being accounted for. Just as it’s important to reconcile early expenses, it’s just as vital to reconcile late ones too. We need to move that $30,000 that we originally budgeted to spend yesterday to a future date. That way, the rest of our budget knows that we are still going to spend that money.
Learn more about campaign budgeting and sign up for a demo today!