Financial planning

From Digipedia

OVERVIEW

Careful financial planning is essential to the success of a project and time should be spent identifying and costing all the activities and resources that will be involved to deliver and manage your intended service. The financial viability of the work should be considered as part of the risk assessment exercise and thought given to what impact a change in finances will have. This planning is key to establishing a business case for the work and will also inform the overall cost benefit analysis.
There are two types of costs to take into account at the budget planning stage:

Revenue expenditure for costs which are ongoing
Capital expenditure for one-off costs

Revenue expenditure

Typically, revenue expenditure will include staff, software licences, subscriptions to online content, systems maintenance and other office overheads, marketing and sustainability, data storage and migration.

Capital expenditure

This will include the cost of equipment such as computers, digital cameras, other hardware peripherals, software packages, documentation systems, systems design and website design, initial digitisation of materials and other content creation activities.

Preparing the budget

Identify all the cost headings that you are going to need and divide them into capital and revenue using a spreadsheet, then assign budgets to each heading. You will find that the majority of your budget is assigned to staffing and overheads whereas the costs of the digitisation work itself will, in comparison, be modest. Actual costs depend on individual circumstances and the nature of material being digitised.

The timespan that you need to plan for will depend on the nature of the work, but the first financial year should be worked up in detail. After that you will want to establish likely annual running costs, planned development work and remember to build in inflation costs for revenue spend and estimate budgets for any likely future capital expenses such as replacement hardware.

If you are preparing a budget for a bid for a grant, make sure that you comply with all the requirements. For example, for equipment which will cost over a certain amount, you may be required to get quotes from a number of suppliers and show how you decided on the chosen supplier.

When you budget for staff, it is a good idea to add about a third extra to the salary that you are offering as this will be needed to cover employer’s expenses such as National Insurance, pension and recruitment costs. If staff are to be employed for more than a certain length of time, redundancy payment may also have to be budgeted for.

Organisations often have a set percentage per head that is used to calculate the office overheads which should be included in the budget – your finance department will be able to advise. Include an allowance for training for staff, and estimate as accurately as possible the likely travel and subsistence costs that will be involved in any one financial year.

Your organisation may well have contracts with particular suppliers for items such as computer hardware, stationery, data storage so check before you start getting quotes from suppliers. Also think about whether it is more cost-effecetive to lease expensive equipment that you are only going to need for a short period of time. There may also be a requirement to tender for work which costs over a certain amount if you are not planning to do it in house (for example, web design or bulk digitisation work).

Think about where there may be opportunities for income generation as work progresses and consider building an income stream into your budget.

Finally, it is important to have a contingency fund (usually about 10%) in case of emergencies. You may need to draft in extra staff at short notice, for example, or you may have to buy additional hardware or software.

Financing the future

Ensuring that there is budget to sustain your content is something which must be planned for at the outset of any work and there are several approaches which can be considered (although it is likely that most organisations will use a mix of different models rather than only one). Income generation and sustainability are not, of course, the same thing but it may be necessary to generate income in order to provide some or all of the costs of sustaining the service. For example, will your service have to cover all its costs (including data preservation) or will it become part of the organisation’s core business and therefore built into the main budget? The costs involved in sustaining your service will be similar to those for its creation, but how that finance is provided will be what must be agreed.