Preparing the budget
Oct 1, 2000 12:00 PM, Ron Bartlebaugh
A budget consists of many individual line item expenditures. Some typical line items for an engineering department budget would include maintenance and repair, travel, training, utilities, freight, postage, dues, subscriptions, supplies, fees for outside services such as HVAC maintenance or consulting engineers, insurance, salaries, benefits, and capital equipment purchases. All line items combine together to create a chart of accounts for the department. The chart of accounts should be created with input from the department head and in cooperation with the station's business department. An individual budget for each station should be created in situations of multiple station ownership.
The expense of each budget line item needs to be predicted over a twelve-month period on a month-by-month basis. For line items that remain the same every month, an entry of equal value should be contained within the budget for each month. Other expenses incurred during a particular month should be entered by line item as a planned expense for that month. Some expenses may need to be posted in equal or variable values over several months, dependent upon the project size and the terms of payment of a particular contract.
Within the lines Line items such as salaries, benefits, insurance, and, to a certain degree, utilities, can be budgeted in equal monthly amounts over the twelve-month period. However, adjustments for short and long months in relation to payroll would need to be made as well as adjustments for utility usage during the months when utility costs are driven by climatic conditions unique to a specific geographic area. Travel expenses can be closely predicted by planning ahead regarding trade shows and/or seminars that one or more people from within the department may be attending. A good travel agent can be invaluable in helping to predict hotel and airline costs far in advance of an event. Training can often be combined with the travel line, or vice versa, when traveling to a seminar. Monthly amounts for dues and subscriptions should total the annual amount to be spent for dues paid to professional organizations and for subscriptions to publications, including FCC rules.
The maintenance and repair and supply line items, aside from salaries, benefits, and capital equipment, may be two of the larger line items within the engineering department budget. These line items typically cover parts and materials necessary for the day-to-day maintenance and repair of each individual station. Items ranging from electronic components to tower maintenance parts and labor are typically included within the maintenance and repair line. Other items for this line may include replacement tubes, modules, blowers, and other major repair items. By estimating the longevity of major parts such as tubes and blowers, one can more accurately plan for these rather costly expenditures.
Major purchases Capital equipment purchases are those costing more than a certain dollar value and may be depreciated by the organization over a time period of a year or longer. The established dollar value may vary from operation to operation depending on accounting methods used. Typical items that may be considered capital equipment expenses may include consoles, computer equipment, transmitters, antennas, and some test equipment. Supplies and parts purchased for a major project may also be included in the capital expenditures instead of being budgeted under the operating budget.
It is good business practice to fund equipment depreciation. This funding may take many shapes and forms, again depending upon the accounting principles in use at a particular station. Equipment depreciation funding simply means that a pre-determined amount of money is to be set aside every year into an account to be used for equipment replacement. Equipment depreciation funding may be included as a line item within the engineering department budget or it could be managed as a totally separate line item located elsewhere within the overall station operating budget.
Salaries and benefits are numbers that will almost always be entered into the budget by the station's management. The planned use of consulting or contract engineers needs to be posted into the budget on the month or months that the expenditure is to take place. As an example, if a contract engineer provided services in June, the invoice for those services would normally become due in July so the predicted expense would be posted under professional fees for July.
It is difficult to plan for the unexpected. It is always a good idea to include a contingency line item in every engineering budget for unforeseen emergencies. Five percent of the total engineering budget is a good rule of thumb for devising a contingency line number, however the final decision for the amount of this line item should be between the station management and the engineering department head.
Constructing and operating from a well-defined budget makes good business sense and is well worth the investment of time and energy. Always be sure to follow widely accepted accounting practices and maintain accurate records.