All league administrators should have a budget in place before taking a single registration. The budget should estimate revenue and expenses and separate them as individual line items. Estimate revenue low and expenses high in order to provide for some margin of error. Once the budget is set, keep the spending within the budget unless there is additional revenue that might justify additional spending.
A budget serves as all of the following:
- Operations guide: A budget will dictate how to operate a league based on anticipated revenue and expenses. It will explain how the organization is divided by roles and how they operate.
- Financial plan: Sound budgeting will keep finances in order and identify any areas where you can fine-tune spending or save money. It should show sources of revenue and allocated expenses.
- Communications device: A budget provides an understanding for others in a league or the overall organization as to the forecasted revenue and the plan to allocate funds for expenses. It helps stakeholders understand why only certain funds are used for certain expenses.
The purpose of a budget is to allocate resources to achieve financial goals and objectives. If a league or organization is large enough to be separated into departments, each department will have its own budget with the total contributions to the organization’s annual operating budget. A budget should be divided into line items that reflect every aspect of an operation:
- Staffing and referees
- Rent/lease/ownership expenses
- Operating supplies
- Jerseys and uniforms
- Repair and maintenance
- Background screening
- Facility improvements
Budget categories are based on the league’s operation and should be flexible and monitored regularly. Here are five ways to manage a budget and finances:
Breakeven: Find the breakeven point to determine how much revenue you have to bring in to sustain the league. If the only source of revenue is participant registrations, then simply figure out how many participants are needed to run the program. If you have significant revenue in sponsorships, concession sales, etc., include that so you are not dependent on participation alone.
Cost recovery: Similar to the breakeven, cost recovery goes one step further and shows exactly how the total expenses were recovered, based on the revenue brought in. To determine cost recovery, separate all revenue and all expenses. Then divide the total revenue by the total expenses. Hundred-percent cost recovery means you broke even. Anything higher than that means the league made money. Anything less means it lost money and will need to subsidize losses with additional revenue sources.
Expense tracker: Track every league expense to the penny. It can be as simple as entering items onto a spreadsheet. This will help keep track of all funds and ensure you stay within the budget. If you control the league’s bank account, you can reconcile expenses to the account. Tracking expenses will also force you to fine-tune spending and identify places to save money when needed.
Cash-handling: Anytime you are taking in cash, or managing any finances for that matter, more than one person should be involved for accountability and for checks and balances. Decide who is allowed to take cash, determine how it is to be counted, and decide where it goes. If possible, consider going “cash free,” or work toward it.
Contingency: Contingency is more for those who have complete control over league funds, such as a non-profit Little League or Pop Warner team. A larger organization, such as a government agency or larger YMCA association, generally will not have control of this at the league level as they have their own finance departments. If yours is a smaller operation, always have some type of contingency or savings fund. Take a small portion of each registration and put it in a contingency. If things go south or there’s an unexpected expense, it can be handled without being detrimental to the program. As this fund increases, you can also use it for items like scholarships or capital improvements.
All youth sports programs, regardless of the size of the organization, should have some level of budgeting and financial management. Having a plan to manage finances will ensure you can run a viable program.