Cash Flow and budgeting

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The budget of a company is compiled annually. A finished budget usually requires considerable effort and
can be seen as a financial plan for the new financial year. While traditionally the Finance department
compiles the company's budget, modern software allows hundreds or even thousands of people in the
various departments (operations, human resources, IT etc) to contribute their expected revenues and
expenses to the final budget.
If the actual numbers delivered through the financial year turn out to be close to the budget, this will
demonstrate that the company understands their business and has been successfully driving it in the
direction they had planned. On the other hand, if the actuals diverge wildly from the budget, this sends
out an 'out of control' signal and the share price could suffer as a result.A budget deficit occurs when an
entity (often a government) spends more money than it takes in. The opposite is a budget surplus which
is the crucial goal of fiscal year.

AIESEC connection
A budget depicts what you expect to spend (expenses) and earn (revenue) over a period of time. It´s
useful for projecting how much money you'll need for a project or activity you or your LCs want to run.
They also help track whether you're on plan or not. It´s measure reflecting fiscal performance of year plan
and defines the contribution of Reserves creation.

Most of the issues in AIESEC are caused either by lack of knowledge or lack of systematic and strategic
thinking of the leadership of the organisation. At the same time, just because the plans are not reflected
100% to the budgets, a lot of Countries end up compromising their ambition and achievement because
there is no budget. Nowadays app.95 % of AIESEC entities are manging budget what is quite satisfactory
but majority concentrates on quarterly upadate where we see space for improvemennt.

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Budget is a tool which shouldn´t restrict the LC/MC plan but support it in a full way. It should reflect
actions the entity wants to take to move forward in order to achieve the goals and also the respective
CSFs of Balanced Scorecard.

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$ ! MASTER BUDGET, AIESEC in HONG KONG, 2006/2007

- Version 3, Updated on 1st Aug, 2006
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! Foreign Exchange Rate
1 Hong Kong Dollar = 1 (Currency)

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Total
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Revenues

Exchange Program
4010 SN Revenue $24,250.00 4.0%
• % !1 !- 4020 TN Revenue $188,125.00 31.4%

Fund Raising
• 678/ 9 $0.00 0.0%
• ! 2 4130 ER Partnership $170,000.00 28.4%
4140 External Funding $40,000.00 6.7%
4160 National Sponsor Donations $30,000.00 5.0%
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Administration
4210 Advertising Revenue $10,000.00 1.7%
4"5 2 "
Other Income
4410 Interest Income $100.00 0.0%
4420 Investment $29,472.50 4.9%
668/: ; !;3
9# $0.00 0.0%

National Fees
4510 AI Fee $55,980.25 9.3%
4520 Membership Fee $34,931.15 5.8%
4530 Travel Cost Sharing Fee $5,865.96 1.0%
4540 Strategic Meeting Travel Fund Contribution$780.54 0.1%
4550 AP Fund $9,708.78 1.6%

Total Revenues $599,214.19 100.0%

Revenues of Master Budget, AIESEC in Hong Kong

 Cash Flow and budgeting
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-Global Library of Actions:

http://www.aiesec.net/members/clubs/globallibraryofactionscommunity/file-
storage/file?file%5fid=49276802

-AIESEC in Singapore:

http://www.aiesec.net/members/globalfinancialmanagement/file-
storage/index?folder%5fid=33158698

-Global Financial Management Community

http://www.aiesec.net/members/globalfinancialmanagement/file-
storage/index?folder%5fid=55208613

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AIESEC in UK, Romania, Poland, US, Canada, Czech Republic, Switzerland, India, Hong Kong,
Brazil, Colombia, Sweden and Denmark
 Cash Flow and budgeting

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 Cash Flow and budgeting
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Cash Flow plan or „budget“ determines the cash flows of the committee per specific period. If the CF plan
reveals the deficit, the committee must change the timings of its expenses and make sure incomes are
received earlier to ensure that there is enough available cash to meet the financial obligations of the
MC/LC. Preparing a cash budget is relatively simple and will prevent insolvency in the committee. The
smaller projected unit of time is the more precise CF is and offers higher relevance in financial
mangement. Proper CF plan incorporates the reserve (mostly at level of 7% or 10% depending on risk
preference) to mirror inaccurate estimations or emergency situation.

According to Budget Survey ´05, 40% of AIESEC entities don´t have a Cash Flow/Liquidity plan what is
quite alarming and may contribute (along with unsatisfied revenue generation porcesses) to financial
insolvency. Cash Flow plan implementation is more than recommended in next term.

Proposed timeplan:

Data input:
• All validated cash flows are transferred to new CF plan from previous periods
• All functional or project related cash flows are calculated acc. to current plans
• Responsible persons interviewed and incorporated into process of creation
• Rate inflows by level of certainity- be sure Inflows are overreaching outflows at every level
of certainty
Cash Flow forecasting and reserve incorporation
Cash flows adjustments based upon plan corrections or adjustments
Final CF projection and final approval
CF plan responsibility set
Regular Update on monthly basis

Advanced CF models

In business conditions economists incorporated the aspect of time to project Cash flows properly and
accept the different value of „money today and tomorrow“. The idea behind is that one currency unit has
bigger value today than same absolute value in the future. To compare different values in a different
moment at time we use Discounted models when discounting the future money values to present by
casual discount rate, i.e. common interest rate that may be adjusted by taxation or inflation impacts.

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Discounted Cash Flows are used mostly for Project feasibility purposes to compare flows from different
project periods or to calculte Internal rate of returns IRR.

TERM 2006/2007 Starting projections April May …. End

Outflows (excl. Reserve) 1 185 390,00 102 134,40 82 244,50 … 1 285 890,00
Reserve 82 977,30 7 149,41 5 757,12 … 90 012,30
Outflows 1 268 367,30 109 283,81 88 001,62 … 1 375 902,30
Inflows 1 925 500,00 77 025,00 20 314,00 … 1 745 500,00
CF (excl.reserve) 740 110,00 -25 109,40 -61 930,50 … 459 610,00

Total CF 657 132,70 -32 258,81 -67 687,62 … 369 597,70

Monthly CF
Outflows
500 000,00
Inflows
400 000,00 Total CF

300 000,00

200 000,00

100 000,00

0,00
1 2 3 4 5 6 7 8 9 10 11 12
-100 000,00

-200 000,00

Annual Operational CF plan,LC Ostrava AIESEC in the Czech Republic

Cash Flow and budgeting