Table of Contents
Executive Summary
A Credit Union Accountant is responsible for various aspects of the business. Typically, the Chief Executive Officer or Accountant is responsible for making the major financial decisions within a company. With that being said, one of the key components that I will need to work through at my job is preparing and explaining the budget. This paper will focus on the key components of a budget.
This paper will also highlight what credit union budgets should include and what to avoid. The desired outcome of this paper is to fully understand the process and components that goes into making a budget. Preparing a credit union budget is slightly more difficult than doing a regular corporate budget. The credit union financial statements itself is a light more tricky to interpret at times. By doing this project, I hope to overcome any difficulty by doing through research. At the end of this paper, I hope to be able to complete my organization’s budget on my own.
Introduction
Working at a credit union as given me endless opportunity to see money management at it’s finest. Budgets are typically known to aid society with managing money. Budgets are not just for personal use; all businesses need to have a budget in order to properly maintain the organization. The overall goal of a budget is to balance ones finances and meet a specific objective. Credit Unions need to form strategic plans before they can create a budget.
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Throughout this paper, we will look at the process and each individual item that needs to going into creating a budget. The overall goal of this paper will be to properly work through how to create a budget suited for a credit union. It is important to work through this process ahead of time due to the fact that I will be in charge of preparing it in the future. The purpose of this paper will be to gather all the relevant information needed to work through this matter.
To work through this project, 5 budget-related articles were thoroughly analyzed. Literature Review Due to the plethora of information on budgeting and its processes, the findings had to be further narrowed down to four categories. The four major categories are inclusive of the following: Implications, Corporate, Personal, Christian and Ethical Worldview.
This paper will focus on the implications of budgeting on the financial sector. This paper will also look at how budgeting works at my credit union and also what it looks like on a personal level. Lastly, the paper will also look at how budgets fit in with Christian and Ethical Worldview.
Implications
One of the main reasons to do a credit union budget is to properly manage the organization’s money. A budget also monitors performances and meet the organizations objective. Another implication of a budget is that it acts as a forecast to plan for the future and at the same time serves as a motivational tool for the staff. In addition, in order to implement the budget there are a couple things one needs to work through.
First, we would need to consider what the projected sales would look like for that period. Credit Union’s aren’t like other businesses, especially when it comes to sales. Sales for a credit union consist of trying to get more loans on the books and get more members in the credit union. Credit Union projected sales would be to get more loans on the books.
One would not want to overestimate, especially when it comes to projected sales, because if you do, it can surely bring about harm to your organization. Throughout the budgeting process one would need to figure out what the direct and fixed cost would be for the year. Direct cost would be more along the lines of the cost of materials and other components that are needed to make the product. A credit unions fixed cost and overhead can be rent, wages, office furniture, and even benefits. Those are some of the things that one needs to consider when planning a budget and choosing what to allocate to cost.
Furthermore, when implementing a budget for a credit union, there are a couple key steps that need to be thoroughly considered before putting that budget into effect. The key steps that I would personally need to take when coming up with my company’s budget, are inclusive of the following: Making time, looking at previous years, and being realistic. In order to do the budget, I would need to make time to do it. In other words, one cannot make a budget in a day at east not for a credit union. I would need to set aside plenty of time to do the budget. I would need to invest a lot of time to come up with a comprehensive budget.
Another part of my process is to come up realistic figures. I would need to look at last years budget and see if it should stay the same or do major changes. Due to the fact that it will be my first time coming up with a budget, I will need to seek help. I will have to involve the right kind of people, in order to get it done properly. I would need to seek assistance from various managers in different departments.
Cost, Revenues and Cash Flow will need to be included into the credit union’s budget. I would also need to consider actual income and actual expenditures when doing the budget. Corporate In order to do a corporate budget, one must consider the company’s strategic plan. The budget has to be aligned with the company’s strategic plan. A few things that need to be analyzed for the corporation are inclusive of the following: Revenue projections, fixed and variable costs, target profit margin and the business goals. One has to keep all those factors in mind when building a budget. Broad approval is needed before the budget can go into effect.
When preparing my credit union’s budget, I will need to classify and group items into the correct section of the budget. Interest Income would be the first overall heading when doing the budget. Items that would fall under interest income would be inclusive of the following: Interest on loans, real estate loans, mortgage loans, home equity, line of credit loans, overdraft loans, consumer loans, auto leasing loans, investments, special certificate, jumbos and asset balancing accounts.
Those are some of the items that would be listed under interest income on the credit union’s budget. The next major category that I would include on the budget would be interest expense. The following would be line items under interest expense on the budget: dividend shares, regular shares, club accounts, checking accounts, money market accounts, Ira, and loan term certificates. After both categories are calculated, the difference would be the net interest income. The step would be to take away the provision for loan losses from the net interest income. After that is computed the next step to doing the budget would be to calculate the non-interest income.
Non Interest Income would include fee income, other operating income and non-operating gains or losses. The next category would be the non-interest expense. Under the non-interest expense, I would list the employee compensation, employee benefits, loan services, annual meetings, office occupancy and advertising. The difference between the non-interest categorizes would then need to be computed. Below is the format that I would use to do the company’s budget.
Personal, Christian and Ethical Worldview
Creating my company’s budget would be one of the greatest projects that I would have to take on in the coming years. I have worked through several personal budgets, but creating a budget that would fit the organization would be more challenging. The personal components of this budget would be to gather the necessary information needed then the additional processes that I would have to work through in order to get this budget completed. I will need to take with our CEO and other management officials in order to get the data needed to complete this project. It is often said that one would need to have a personal budget before doing a corporate budget.
Having a personal budget is the key to financial success. Additionally, at times it is hard to be a Christian in the business world. Christians are often put in positions were they must make business decisions that at times don’t help others but only help the company. Personally, I believe that we are called to be good stewards in this world. By being a good steward, this involves making good, firm ethical decisions. I would not want to work for a company that is actively deceiving others.
Credit Union’s are member based. They are founded and ran by its members. They are there to help the community and others in need. By creating a credit union’s budget, it gives me the inside assess to male sure that my job is functioning and reporting ethically. When preparing a budget it needs to be realistic, especially if the company is a publicly traded. As Christian we ought to be following the teachings of God and as such we have to be ethical in our workplace.
Being a Christian includes having an ethical worldview. While working through this budget I intend to properly report and record my findings to the best of my ability. All in all, the Bible talks about managing money properly. There are several biblical teachings about how to properly manage ones finances. The Bible also takes about investing and those who choose to do nothing with the money given to them. There are a couple things that Christians need to think about when budgeting. By having a budget it serves as a great way to give back to God.
A budget creates a well need breathing room so one can properly function in society. A budget helps everyone help plan for the future. It gives everyone hope, something to look forward to. A budget also helps you set a good example for your family. It acts as a good foundation for stewardship. It shows that you are taking control of the things God as given you and are properly allocating it to various areas of your life. Budget leaves a legacy and teaches ones kids about financial responsibility.
Conclusion
To culminate, throughout this paper we analyzed the processes that I would need to take when creating a budget for my credit union. A credit union’s budget is a bit different from other organizations’ budget. A credit union’s source of income is completely different from other companies. One needs to understand how a credit union works and how it reports its finances before attempting to do a credit unions budget. I learnt that there are several steps that need to be implemented from behind the scenes before one can start the budget.
In order to effectively create a budget, I will need to seek help from management. I will need to get the company’s past budgeting records and other financial statements in order to successful do the upcoming budget. I learned that there are several types of budgets and several ways to do a budget, however, the budget needs to be in cohesion with the companies strategic plan. The company’s goals and its missions have to be inline with the budget.
One cannot simply through numbers into a budget and hope they are right. A budget needs to be properly thought through and should have solid figures to back it up. Another thing that I will have to do once I complete the budget is to get the board to approve the budget. Our credit union’s board of directors needs to approve the budget before we start the next fiscal year.
I will also need to start the budgeting process half way through the current year, in order to give myself adequate time to complete the next year’s budget. All in all, by doing this paper, it has allowed me to work through the budgeting processes in order to do my company’s budget in the future. There are several key components that goes into creating a budget which all has to be done in a timely manner. Doing my company’s budget will be challenging but this paper has definitely helped me to think through those.
References
- Weaver, S. C., & Weston, J. F. (2001). Finance and accounting for nonfinancial managers. New York: McGraw-Hill.
- Walther, J. H. (2002). The straight talk of money: Making finance, budgets and knowledge work together. The Bottom Line, 15(2) doi:10.1108/bl.2002.17015baa.001
- Stowe, D. L., & Stowe, J. D. (2018). Credit union business models. Financial Markets, Institutions & Instruments, 27(5), 169-186. doi:10.1111/fmii.12102
- Feroz, E. H., Kim, S., & Raab, R. L. (2003). Financial statement analysis: A data envelopment analysis approach. Journal of the Operational Research Society, 54(1), 48-58. doi:10.1057/palgrave.jors.2601475
