Note to trainer on operating budget review

In reviewing the Operating Budgets for the specific projects during individual consultations, keep the following questions and observations points in mind.

1. Has the right time frame been chosen?

If the project's productive cycle lasts for three or four months, a monthly review of recurrent costs might not present the activities and expenses tied to them in enough detail. Also, since the Operating Budget can serve as a warning of activities and expenses that have been overlooked, it will be important to have sufficient detail to alert project participants of upcoming problems and cash needs while there is still time to take action.

2. How have capital costs been handled?

If the Operating Budget is going to use depreciation (taking a little each month to cover the deterioration of the machinery over time), then there needs to be some basic understanding among all group members of what that expense is, and how it can be translated into group savings to cover the cost of future equipment purchases.

If depreciation is not used, then a savings plan has to be constructed that fits the cash flow of the project as indicated by the Operating Budget, to cover future equipment purchases.

3. Are all relevant costs included in the Operating Budget?

Try to think of some production, marketing and administrative costs that may have been overlooked. It will rarely be the case that the Volunteer and counterpart will think of all the costs involved in the project on their first attempt. Make sure that this is presented in a constructive way, and remember to encourage them to make the necessary changes themselves.

4. Are all the relevant Revenues included?

Ask if there aren't some hidden revenues from the project that are not included in the revenue section of the chart. This could have a decisive influence on the profitability of the project. Also, this is a good time to have them think of the waste and by products from their project, and ways in which these could become new sources of income for the group.

5. Check the Math!

This tool of financial control and cash flow analysis is only valuable if the arithmetic is right (or at least close). Otherwise, it can misrepresent what is going on in the project, and cause a great deal of confusion, leaving the group open to surprises as well.