Budgets are both long- and short-term prospective planning tools. To maximize a budget’s usefulness, monitoring systems should be in place to assess financial sustainability and the need to adjust the budget, if necessary. Section 4.4 of this module discusses how to assess financial sustainability.

Clinics should have two separate budgets: (1) an operating budget and (2) a capital budget. Projecting cash flow is another important component of the budget-development process.

Operating Budget

The operating budget estimates expenses involved in achieving goals for the coming year, leaving some margin for the unexpected. Likewise, all revenue should be estimated. (For more information about estimating expenses, see module 3, section 3.1. For more information about estimating revenues, see module 2, section 2.2.) The previous year’s statement of activities (revenue and expense statement) is a good starting point that can be adjusted for inflation and changes in programming or funding. (See section 4.3 of this module for more information about statements of activities.) It is a good idea to develop a multi-year budget for longer-term assessment of financial sustainability and for planning. The interactive budget planning spreadsheet (click on toolbox icon) shows a sample multi-year budget. Developing a multi-year budget is important because major changes in revenue and expenses may occur beyond the current year; for example, a clinic’s grant or lease may end, or a clinic may need to replace equipment.

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