Under and Overspending
When you first set up your campaign budget, you’re likely going to have a lot of placeholder numbers for expenses. We like to say in budgeting that “zero is the most inaccurate number,” so something is always better than nothing when creating your budget. However, once you start spending money, your actual spending will likely differ from those placeholder numbers.
Let’s look back at our example from the introductory article. You budgeted $300 for in-house literature printing, but it ballooned to $500. You may be tempted to enter the amount you actually spent into your budget and call it a day, but you’re missing a crucial step: reconciliation!
Not only will you want to enter in your actuals when updating your budget, but you also want to change your past budgeted amount from $300 to $500 so your projections reconcile with your actual printing amount.
You overspent by $200 for the month. Your total budget size just went up, which changes your cash on hand (COH) and budget gap. This should prompt you to ask some questions and consider the effect this has on your budget:
- Was your overspending just a blip or do you need to adjust your budget moving forward too?
- Can you absorb this extra expense because you have a surplus?
- Do you need to update fundraising projections?
- Do you need to cut from another line item or department to make up for this unexpected overspending?
While the example above is a relatively small amount, you can imagine the implications for larger expenses like paid media and polling.
Let’s say you budgeted $20,000 in March for a poll, but the poll ended up getting bumped a month. You may be tempted to leave that budgeted in March, but that leaves your $20,000 in limbo as it won’t be factored into your future projections. This limbo can cause an inflated COH that you won’t actually have, since your budget is no longer taking into account an expense that you may still plan to spend. Instead of leaving the expense in March, you should move that budgeted expense to April. This makes sure it’s being accounted for in your budget and your future COH is calculated accurately.
This same process applies for underspending. If you underspend, you now have extra money that you can reassign elsewhere. Perhaps that poll only ended up costing $17,000. Now you have $3,000 to spend without changing your budget size. Perhaps you decide to apply that towards closing your budget gap.
Reconciling for under- and over-spending may not seem like a priority, but adjusting your budget accordingly right as expenses happen ensures an accurate COH and budget gap. This information is critical as you get closer to election day and are making tough budgeting decisions.
Reconciliation is easy in Warchest with our reconciliation alerts. Request a demo today!